<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21386
T R Financial Corp.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 11-3154382
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1122 Franklin Avenue, Garden City, New York 11530
(Address of principal executive offices) (Zip code)
</TABLE>
(Registrant's telephone number, including area code) (516) 742-9300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing for the
past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
As of March 5, 1997, there were 8,806,244 shares of the Registrant's common
stock outstanding. The aggregate market value of the Registrant's common stock
(based on closing price quoted on March 5, 1997) held by non-affiliates was
approximately $249,091,412.
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1996 are incorporated by reference into Items 1, 5, 6, 7
and 8 of Part II hereof and Item 14 of Part IV hereof.
(2) Portions of the definitive Proxy Statement for the Registrant's 1997 Annual
Meeting of Stockholders are incorporated by reference into Items 10, 11, 12
and 13 of Part III hereof.
<PAGE> 3
PART I
ITEM 1. BUSINESS
General
T R Financial Corp. (the "Registrant" or the "Company"), headquartered in Garden
City, New York, is a bank holding company incorporated on February 12, 1993
under the laws of the State of Delaware and is registered under the Bank Holding
Company Act of 1956, as amended ("BHCA"). The Registrant was organized for the
purpose of owning all of the outstanding capital stock of Roosevelt Savings Bank
(the "Bank"). On June 29, 1993, the Bank completed its conversion from a New
York State chartered mutual savings bank to a stock form of ownership, and the
Registrant completed the sale of 11,362,000 shares of common stock at $9.00 per
share. The Registrant's operations commenced on June 29, 1993 and consist
principally of the operations of the Bank.
The Bank was organized in 1895 as a New York State chartered mutual savings bank
and became a New York State chartered stock savings bank on June 29, 1993. The
Bank's deposits are insured by the Bank Insurance Fund ("BIF"), as administered
by the Federal Deposit Insurance Corporation ("FDIC"), up to the maximum amounts
permitted by law.
The Bank is a community-oriented financial institution offering traditional
deposit and loan products. The Bank's loan products include one- to four-family
residential, commercial real estate, multi-family residential and other loans.
The Bank also invests in a variety of securities, which include mortgage-backed
securities, short- and intermediate-term investment grade debt securities
(including U.S. Government obligations and federal agency securities) and other
marketable securities.
The Bank services its customers from 15 full service banking facilities located
in the New York City Boroughs of Brooklyn and Queens and the State of New York
Counties of Nassau and Suffolk, including its principal office in Garden City.
These areas comprise the Bank's primary deposit gathering area. The Bank's
lending market covers the wider geographic area of the greater New York
metropolitan area and surrounding counties.
The Bank, which represents the only direct subsidiary of the Registrant, has 11
subsidiaries, none of which accounted for a significant portion of the
Registrant's consolidated assets, nor contributed significantly to the
Registrant's consolidated results of operations, at or for the year ended
December 31, 1996. The Registrant and its wholly-owned direct subsidiary, the
Bank, and the Bank's subsidiaries are collectively referred to herein as the
"Company."
At December 31, 1996, the Registrant had consolidated assets of $3.26 billion,
deposits of $2.34 billion and stockholders' equity of $204.0 million. The
Registrant's consolidated revenues are derived principally from interest from
its loan and securities
-2-
<PAGE> 4
portfolios. Part II of this report contains a more detailed discussion of the
Registrant's financial condition and results of operations.
Market Area & Competition
The Bank has been, and intends to continue to be, a community oriented financial
institution offering a variety of financial services to meet the needs of the
communities it serves. The Bank maintains 15 full service banking facilities
which are located in and around the New York metropolitan area. Of its 15
banking facilities, six are located in Nassau County, four are located in the
New York City Borough of Queens, three are located in Suffolk County and two are
located in the New York City Borough of Brooklyn.
The greater New York metropolitan area has historically benefited from having a
large number of corporate headquarters and a diversity of financial service
industries. The New York counties of Nassau and Suffolk have also continued to
benefit from a large developed suburban market, well educated employment base
and a diversity of industrial, service and high technology businesses. After a
prolonged period of decline, which was marked by layoffs in the financial
services and defense industries and corporate relocations and downsizings, the
economy in the greater New York metropolitan area performed well during 1996.
The financial markets topped the prior year's performance, corporate earnings
increased and inflation and unemployment rates remained low. With the financial
markets reflecting stability and growth during 1996, the current business cycle
has increased property demands, lowered levels of supply and increased rental
rates. As a result, the greater New York metropolitan area experienced its
lowest vacancy rates in a decade at 9.5%. Rental rates for the region increased
for the third straight year, with primary rates for commercial properties
currently at $29.85 per square foot.(1)
The regional economic improvements were also evident in the Long Island market,
which showed declining vacancy rates and improved employment levels. The overall
vacancy rate at the end of 1996 was 13.4%, the lowest level for Long Island
since 1988. Long Island reported 12,900 job gains during 1996 and as of October
1996 an unemployment rate of 3.7%, the lowest rate in 6 years.1
The office building vacancy rate in Brooklyn for 1996 was 8.9% due in part to
the limited supply of space. Leasing activity for the year was 302,792 square
feet. Office rental rates for "A" class buildings was $25.00 per square foot,
while "B" quality space was $18.71 per square foot. Activity is expected to be
good for 1997 with several new prospects coming on line. Activity was also
favorable in the Queens market. During the third quarter of 1996,
- --------
(1) "New York Area Year End Market Report," Cushman & Wakefield, 1996.
-3-
<PAGE> 5
87 properties were sold or leased representing 1.8 million square
feet.(2)
The residential real estate market in the greater New York metropolitan area was
also favorably impacted during 1996 by increased demand for housing during this
period of low unemployment and generally stable interest rates. In much of New
York City, the market has been robust. The number of homes sold in Queens
increased by 2.6% while the number of homes sold on Staten Island increased
almost 12%. While similar figures were not reported for Brooklyn, brokers are
reporting stronger sales for 1996(3). In Nassau County, the number of home sales
increased 7.7%, with the average sales price increasing 1.4%. In Suffolk County,
the number of homes sold increased 12.2%, with the average sales price
increasing 2.8%(4).
The Bank faces significant competition both in making loans and in attracting
deposits. The Bank's market area has a high density of financial institutions,
many of which are branches of significantly larger institutions which have
greater financial resources than the Bank, and all of which are competitors of
the Bank to varying degrees. The Bank's competition for loans comes principally
from commercial banks, savings banks, credit unions, savings and loan
associations and mortgage banking companies. Its most direct competition for
deposits has historically come from savings and loan associations, savings
banks, commercial banks and credit unions. The Bank faces additional competition
for deposits from short-term money market funds and other corporate and
government securities funds, as well as from other financial institutions such
as brokerage firms and insurance companies. Competition may also increase as a
result of the lifting of federal restrictions on the interstate banking
operations for financial institutions.
Lending Activities
Loan Portfolio Composition. The Bank's loan portfolio consists primarily of
conventional fixed rate mortgage loans and adjustable rate mortgage ("ARM")
loans secured by one- to four-family residences and, to a lesser extent,
commercial real estate loans, multi-family residential loans and other loans. At
December 31, 1996, the Bank had total loans of $1.72 billion, of which $1.36
billion, or 78.91%, were one- to four-family residential mortgage loans,
including co-op loans. Of the one- to four-family residential mortgage loans,
including co-op loans, outstanding at that date, 37.7% were ARM loans and 62.3%
were fixed rate loans. At
- --------
(2) "Brooklyn, Queens, Nassau, Suffolk Real Estate Report," Greiner, Maltz
Co., Inc., Third Quarter 1996.
(3) "In Much of the City, A Robust Market," The New York Times, March 16,
1997.
(4)"Activity Report December 1996," Long Island Multiple Listing Service,
1996.
-4-
<PAGE> 6
December 31, 1996, commercial real estate loans totalled $208.7 million, or
12.13% of total loans, multi-family loans totalled $24.3 million, or 1.41% of
total loans, construction and land development loans totalled $12.3 million, or
0.72% of total loans, and the Bank's other loans, primarily consisting of a
variety of consumer loans and automobile leases, totalled $117.5 million, or
6.83% of total loans.
The types of loans that the Bank may originate are subject to various federal
and state laws and regulations. Interest rates charged by the Bank on loans are
affected principally by the demand for such loans, the supply of money available
for lending purposes and the rates offered by its competitors. These factors
are, in turn, affected by general economic conditions, monetary policies of the
federal government, including the Federal Reserve Board ("FRB"), legislative and
tax policies and governmental budgetary matters.
The following table sets forth the composition of the Bank's loan portfolio in
dollar amounts and in percentages of the total loan portfolio at the dates
indicated.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------- -------------------------
Percent Percent Percent
of of of
Amount Total Amount Total Amount Total
---------- ------- ---------- ------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family. $1,156,944 67.26% $ 973,086 68.22% $ 819,502 68.29%
Co-op (1) ..................... 200,462 11.65 137,972 9.67 71,307 5.94
Multi-family .................. 24,324 1.41 23,745 1.66 25,390 2.12
Commercial .................... 208,689 12.13 214,208 15.02 236,305 19.69
Construction & land
development ................. 12,309 0.72 5,147 0.36 1,000 0.08
---------- ------- ---------- ------- ---------- -------
Total mortgage loans 1,602,728 93.17 1,354,158 94.93 1,153,504 96.12
---------- ------- ---------- ------- ---------- -------
Other loans:
Student loans ................. 2,649 0.15 3,029 0.21 5,699 0.47
Consumer loans (2) ............ 23,909 1.39 18,342 1.29 14,757 1.23
Automobile leases ............. 86,527 5.03 46,285 3.25 21,845 1.82
Loans on savings
accounts ..................... 3,345 0.20 3,373 0.24 3,243 0.27
Overdraft loans ............... 696 0.04 706 0.05 680 0.06
Property improvement
loans ........................ 153 0.01 107 0.01 66 0.01
Business loans ................ 222 0.01 332 0.02 256 0.02
---------- ------- ---------- ------- ---------- -------
Total other loans ............. 117,501 6.83 72,174 5.07 46,546 3.88
---------- ------- ---------- ------- ---------- -------
Total loans ................... 1,720,229 100.00% 1,426,332 100.00% 1,200,050 100.00%
---------- ======= ---------- ======= ---------- =======
Less:
Unearned discounts,
premiums and deferred
loans fees and costs,
net ......................... 4,047 2,758 2,710
Allowance for possible
loan losses ................. 14,370 13,267 12,045
---------- ---------- ----------
Net loans ................... $1,701,812 $1,410,307 $1,185,295
========== ========== ==========
<CAPTION>
At December 31,
---------------------------------------------------------
1993 1992
------------------------- -------------------------
Percent Percent
of of
Amount Total Amount Total
---------- ------- ---------- -------
(Dollars in thousands)
Mortgage loans:
<S> <C> <C> <C> <C>
One- to four-family. $ 693,303 64.54% $ 534,718 56.24%
Co-op (1) ..................... 76,925 7.16 86,426 9.09
Multi-family .................. 26,392 2.46 27,827 2.93
Commercial .................... 238,605 22.21 250,729 26.37
Construction & land
development ................. 1,671 0.16 3,101 0.33
---------- ------- ---------- -------
Total mortgage loans 1,036,896 96.53 902,801 94.96
---------- ------- ---------- -------
Other loans:
Student loans ................. 5,219 0.49 4,777 0.50
Consumer loans (2) ............ 14,648 1.36 19,204 2.02
Automobile leases ............. 13,138 1.22 18,703 1.97
Loans on savings
accounts ..................... 3,456 0.32 3,843 0.40
Overdraft loans ............... 727 0.07 810 0.09
Property improvement
loans ........................ 26 0.00 87 0.01
Business loans ................ 64 0.01 509 0.05
---------- ------- ---------- -------
Total other loans ............. 37,278 3.47 47,933 5.04
---------- ------- ---------- -------
Total loans ................... 1,074,174 100.00% 950,734 100.00%
---------- ======= ---------- =======
Less:
Unearned discounts,
premiums and deferred
loans fees and costs,
net ......................... 1,590 2,331
Allowance for possible
loan losses ................. 13,760 11,145
---------- ----------
Net loans ................... $1,058,824 $ 937,258
========== ==========
</TABLE>
(1) Consists of loans secured by shares representing interests in individual
co-op units that are generally owner-occupied.
(2) Consists primarily of home equity loans.
Loan Originations, Purchases, Sales and Servicing. The Bank originates and
purchases both ARM and fixed rate loans, the amounts of which are dependent upon
customer demand and market rates of interest. During 1996, the Bank originated
or purchased a total of $412.9 million of real estate mortgage loans. Beginning
in 1995, the Bank expanded its loan origination activities in its general
lending area through wholesale correspondent loan programs with
-5-
<PAGE> 7
area mortgage bankers for the purchase of whole loans. The Bank also utilizes
loan origination programs with area mortgage brokers for originations of
mortgage loans. To a lesser extent, the Bank sells loans that it originates for
the secondary market to the Federal National Mortgage Association ("FNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC") and other secondary market
purchasers. The amount of loans retained by the Bank is based upon market
conditions and the Bank's funding requirements. The Bank may sell one- to
four-family mortgage loans on a case-by-case basis. The Bank generally sells all
loans without recourse and retains the servicing rights on such loans sold. As
of December 31, 1996, the Bank was servicing approximately $137.6 million of
loans for others. The Bank is generally paid a fee of 0.25% to 0.375% of the
outstanding principal balance for servicing loans sold. For the year ended
December 31, 1996, the Bank's loan servicing fee income totalled $556,000.
Loan Maturity and Repricing. The following table shows the maturity schedule for
principal or period of repricing of the Bank's loan portfolio at December 31,
1996. Loans that have adjustable rates are shown as being due in the period
during which the interest rates are next subject to change. The table does not
include estimated principal prepayments of $16.2 million.
<TABLE>
<CAPTION>
At December 31, 1996
-------------------------------------------------------------------------------------
Mortgage Loans on Real Estate
-------------------------------------------------------
One- to Construction
Four- Multi- and Land Other Total
Family(2) Family Commercial Development Loans(3) Loans
---------- ------- ---------- ----------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due(1):
Within one year .... $ 183,197 $ 5,416 $ 59,654 $12,309 $ 60,208 $ 320,784
---------- ------- -------- ------- -------- ----------
After 1 year:
1 to 2 years ..... 180,184 730 38,572 -- 29,299 248,785
2 to 3 years ..... 189,874 992 27,966 -- 13,206 232,038
3 to 5 years ..... 326,454 1,612 31,872 -- 3,125 363,063
5 to 10 years .... 403,339 6,811 22,868 -- 3,245 436,263
Over 10 years .... 67,750 8,763 22,401 -- -- 98,914
---------- ------- -------- ------- -------- ----------
Total due after
1 year .......... 1,167,601 18,908 143,679 -- 48,875 1,379,063
---------- ------- -------- ------- -------- ----------
Total amounts due $1,350,798 $24,324 $203,333 $12,309 $109,083 1,699,847
========== ======= ======== ======= ======== =========
Non-accrual loans .... 12,120
Deferred loan fees and
costs, net 4,215
Less:
Allowance for possible
loan losses............ (14,370)
----------
Total loans, net..... $1,701,812
==========
</TABLE>
(1) Does not include non-accrual loans.
(2) Includes co-op loans.
(3) Net of unearned discount.
-6-
<PAGE> 8
The following table sets forth, at December 31, 1996, the dollar amount of all
fixed rate loans contractually due after December 31, 1997, and all adjustable
rate loans repricing after December 31, 1997.
<TABLE>
<CAPTION>
Due after December 31, 1997
---------------------------------------------
Fixed Rate Adjustable Rate Total
---------- --------------- ----------
(In thousands)
<S> <C> <C> <C>
Mortgage loans (1):
One- to four-family(2)........ $782,429 $385,172 $1,167,601
Multi-family.................. 17,463 1,445 18,908
Commercial real estate........ 58,314 85,365 143,679
Construction and land
development................. -- -- --
Other loans(1).................. 48,875 -- 48,875
-------- -------- ----------
Total loans..................... $907,081 $471,982 $1,379,063
======== ======== ==========
</TABLE>
(1) Does not include non-accrual loans.
(2) Includes co-op loans.
One- to Four-Family Mortgage Loans. The Bank offers first mortgage loans secured
by one- to four-family residences, including townhouses, condominium and co-op
units, located in its general lending area. The Bank offers such loans as fixed
rate mortgage loans and ARM loans with maturities of 10 to 30 years. Loan
originations are generally obtained through the Bank's correspondent mortgage
banker and broker programs as well as from existing or past customers and
members of the local communities located in the Bank's general lending area.
Except as to loan amount, one- to four-family residential mortgage loans are
generally underwritten according to FNMA and other agency guidelines. At
December 31, 1996, 78.9% of the Bank's loans consisted of one- to four-family
mortgage loans, including co-op loans. At such date, one- to four-family
mortgage loans, including co-op loans, comprised $6.6 million, or 52.3%, of
non-performing loans.
The Bank originates one- to four-family mortgage loans without employer
verification of the borrower's level of income if the borrower's stated income
is considered reasonable for the position held. These loans involve a higher
degree of risk as compared to the Bank's other fully underwritten one- to
four-family mortgage loans as there is a greater opportunity for borrowers to
falsify or overstate their level of income and ability to service the
indebtedness. Additionally, these loans are not readily saleable in the
secondary market either as whole loans or when pooled or securitized. As a
result, the Bank may not be able to sell such loans in the future through
established programs in the secondary market. Management, however, does not
believe that such inability will have a material adverse impact on the liquidity
needs of the Bank, as the Bank may obtain funds, if necessary, from competitive
deposit products, Federal Home Loan Bank of New York ("FHLB") advances, FHLB
overnight and one month line of credit facilities or repurchase agreements, as
well as from internally generated sources. See "Sources of Funds" for additional
information
-7-
<PAGE> 9
regarding the Bank's primary sources of funds. With respect to such limited
income check loans, the Bank has heightened its review and verification of the
borrower's assets, limited the maximum loan-to-value ratio on such loans to no
more than 75% and charged higher origination fees. During 1996, the Bank
originated $39.4 million of limited income check loans, or 10.3% of total one-
to four-family mortgage loan originations.
The Bank currently offers ARM loans secured by one- to four-family residential
properties, including townhouses, condominium and co-op units, that adjust as
follows: loans adjusting every one, three or five years, loans adjusting in the
seventh year and then converting to three-year ARM loans and loans adjusting in
the tenth year and converting to five-year ARM loans. The Bank offers these
products with a conversion feature on the one- and three-year products which
allows the borrower to convert after the first year to a fixed rate of interest
for the remaining term of the loan. The maximum loan amount for which this
feature is offered is $500,000. ARM loans that the Bank originates for retention
are currently offered with terms of up to 30 years with 95% loan-to-value
financing up to $300,000. The Bank also offers ARM loans in excess of $300,000
up to $1,000,000 and up to 80% of the lower of the appraised value or sales
price of the property. Currently, the repricing rates on ARM loans fluctuate
based upon a 275 basis-point spread above the average yield on United States
treasury securities, after the initial rate is adjusted to a constant maturity
which corresponds to the adjustment period of the loan (the "U.S. Treasury
constant maturity index") published weekly by the FRB. The repricing rates are
generally subject to limitations on interest rate increases of a 2% adjustment
per period and an aggregate adjustment of 6% over the life of the loan. For the
year ended December 31, 1996, the Bank originated $130.8 million of one- to
four-family residential ARM loans. At December 31, 1996, 37.7% of the Bank's
one- to four-family residential mortgage loans, including co-op loans, consisted
of ARM loans.
The volume and types of ARM loans originated by the Bank have been affected by
such market factors as the level of interest rates, competition and consumer
preferences. During 1996, the demand for fixed rate loans remained strong as
market interest rates remained stable during the year. Cyclical decreases in
market interest rates, however, would decrease the demand for ARM loans in favor
of fixed rate loans. Although the Bank will continue to offer ARM loans, there
can be no assurance that in the future the Bank will be able to originate a
sufficient volume of ARM loans to increase or maintain the proportion that these
loans bear to total loans.
The retention of ARM loans, as compared to fixed rate residential mortgage
loans, in the Bank's loan portfolio helps reduce the Bank's exposure to
increases in interest rates. However, ARM loans generally pose credit risks
different from the risks inherent in fixed rate loans, primarily because as
interest rates rise, the underlying payment of the borrower will rise, thereby
increasing the potential for default. In order to minimize risks, borrowers of
one-year ARM loans are qualified at the higher of the maximum adjusted rate at
the first adjustment or the FNMA minimum
-8-
<PAGE> 10
qualifying rate. The Bank has not in the past, nor does it currently, originate
ARM loans which provide for negative amortization.
The Bank currently offers monthly and bi-weekly fixed rate mortgage loans with
terms of 10 to 30 years secured by one- to four-family residences, including
townhouses, condominium and co-op units. Interest rates charged on fixed and
adjustable rate mortgage loans are competitively priced based upon market
conditions. The Bank originates fixed rate loans for retention in its portfolio
with loan-to-value ratios of up to 97% of the lower of the appraised value or
sales price of the secured property for one-family primary residences up to FNMA
loan limits of $214,000 on purchase transactions only. Also, on two-family
primary residence purchase transactions, the maximum loan-to-value ratio is 95%,
up to FNMA loan limits of $274,550. On one- and two-family purchases and non-
cashout refinances, the Bank offers 90% financing up to $300,000 and up to 80%
financing to $1,000,000 on 10-year and 15-year terms with monthly and bi-weekly
payments and 20-year terms with bi-weekly payments. On three- and four-family
purchases and non- cashout refinances, the Bank offers 80% financing up to FNMA
and FHLMC limits for fixed rate terms from 20 to 30 years. On shorter term fixed
rate loans (10 year, 15 year monthly/bi-weekly and 20 year bi-weekly) the Bank
offers up to 80% financing to $1,000,000. The maximum financing on cashout
refinance transactions on fixed rate terms from 20 to 30 years up to $300,000 is
75% for one- and two-family residences and up to FNMA limits for three- and
four-family residences. Additionally, cashout refinances are available on
10-year, 15-year monthly/bi-weekly and 20-year bi-weekly loan products, with the
maximum financing being 75% to $1,000,000. On co-op purchase transactions, the
maximum financing is 80% on 10- year and 15-year monthly/bi-weekly fixed rates
and 20-year bi-weekly loan products. On refinance transactions, the maximum term
on a fixed rate loan is 20 years. Fixed rate loans that the Bank originates for
sale are made under specific investor guidelines. For the year ended December
31, 1996, the Bank originated $250.8 million of fixed rate one- to four-family
residential mortgage loans. During the fourth quarter of 1996, the Bank approved
a program to originate "B" quality mortgage loans. "B" quality loans pose
additional credit risk compared to the Bank's "A" loans, and the Bank charges
higher rates or origination fees on these loans, requires larger equity or
downpayments compared to "A" paper program loans and limits the origination to
owner-occupied property only. For the year ended December 31, 1996, there were
no originations under this program.
During 1996, the Bank purchased through its correspondent banker program one-
and two-family Federal Housing Administration ("FHA") government insured loans.
These loans carried a maximum loan-to-value ratio of 97.75%, exclusive of the
up-front mortgage insurance premiums. The maximum loan amounts on one- and
two-family transactions are $160,950 and $205,900, respectively. Total purchases
for 1996 were $1.9 million.
The Bank generally requires private mortgage insurance on all one- to
four-family, condominium or co-op mortgage loans with a loan-to-
-9-
<PAGE> 11
value ratio greater than 80%. An origination fee is generally not charged on
one- to four-family primary residence full income verification mortgage loans.
Mortgage loans in the Bank's portfolio generally include due-on-sale clauses,
which provide the Bank with the contractual right to deem the loan immediately
due and payable in the event that the borrower transfers ownership of the
property without the Bank's consent. It is the Bank's policy to enforce
due-on-sale provisions within the applicable regulations and guidelines imposed
by New York State law and secondary market purchasers.
The Bank also originates second mortgage loans secured by one- to four-family
and condominium owner-occupied residences. The underwriting standards and
procedures applicable to these loans are the same as for the Bank's one- to
four-family first mortgage loans. As of December 31, 1996, second mortgage loans
totalled $5.4 million, or 0.3% of total mortgage loans on real estate.
Multi-Family Lending. The Bank originates fixed rate and adjustable rate
multi-family loans which are secured by apartment buildings and mixed use
(commercial and residential) properties generally located in the greater New
York metropolitan area and surrounding counties. The Bank, however, in the past,
originated loans secured by multi-family properties located outside its general
geographic lending area. These "out-of-area" multi-family loans generally are
insured by the FHA. At December 31, 1996, the Bank had 34 multi-family loans
outstanding totalling $24.3 million, or 1.4% of total loans.
Multi-family loans are currently made with adjustable terms of five years to
maturity or provide for an interest rate adjustment at least every five years,
and fixed rate loans with maturities generally not exceeding 15 years. These
loans are generally made in amounts up to 75% of the appraised value of the
secured property, based on an appraisal performed by Bank personnel or an
outside independent appraiser, and are limited generally to a minimum amount of
$300,000 and a maximum of $5.0 million. Larger loans may be made from time to
time. In making such loans, the Bank bases its underwriting decision primarily
on the net operating income generated by the real estate and its ability to
support the debt service. Currently, the Bank requires the net cash flow
generated by the property to provide for the Bank's debt service plus an
additional 25%. Affordable multi-family loans generally have higher
loan-to-value ratios and lower debt service coverage ratios. The Bank also
considers the financial resources and income level of the borrower, the
borrower's experience in owning or managing similar property, the marketability
of the property and the Bank's lending experience with the borrower. The Bank
also generally requires personal guarantees on all multi-family loans. At
December 31, 1996, the Bank's three largest multi-family loans, all of which
were FHA insured, consisted of a $2.5 million first mortgage loan, originated in
1979, secured by eleven 3 story garden apartments (187 units) located in
Virginia Beach, Virginia; a $2.1 million first mortgage loan, originated in
1979, secured by a 144- unit garden apartment building located in Wayne,
Michigan; and a $2.0 million first mortgage loan, originated in 1979, secured by
a
-10-
<PAGE> 12
144-unit garden apartment building located in Kingston, New York. As of December
31, 1996, these loans were performing in accordance with their terms.
Commercial Real Estate Lending. The Bank originates loans secured by commercial
real estate properties generally located in the greater New York metropolitan
area and surrounding counties. The properties securing such loans generally
consist of office buildings, shopping centers, light industrial buildings and
other properties used solely for business purposes. Commercial real estate loans
generally carry adjustable interest rates with terms up to 15 years, with the
initial rate based upon market conditions and adjustments based on a spread of
2% to 3% above the FHLB borrowing rate for corresponding terms or short-term
fixed rates generally not exceeding five years. The Bank generally originates
commercial real estate loans as balloon repayment loans with maturities or
interest rate adjustments of three or five years and amortization schedules of
15 to 30 years. These loans are made in accordance with the same terms and
underwriting standards that apply to the Bank's multi-family loans. The average
loan size for the Bank's commercial real estate loans outstanding at December
31, 1996 was approximately $593,000.
The Bank's three largest commercial real estate loans as of December 31, 1996
consisted of first and second mortgages totaling $3.6 million secured by
industrial buildings located in Suffolk County, New York; a $3.6 million
mortgage loan, modified during 1996, secured by industrial buildings located in
Suffolk County, New York; and first and second mortgages totaling $3.4 million
secured by a shopping center located in Nassau County, New York. As of December
31, 1996, the two industrial mortgage loans were performing within their terms.
The shopping center loans were in default and foreclosure proceedings have
commenced.
The Bank's largest concentration of loans-to-one-borrower at December 31, 1996
consisted of nine loans secured by nine commercial real estate properties
located in the New York City Boroughs of Brooklyn and Queens and in Nassau
County. As of December 31, 1996, the outstanding balance of these loans totalled
$9.3 million and, as of such date, all such loans were performing in accordance
with their terms. At December 31, 1996, the Bank's concentration of such loans
did not exceed its internal $28.7 million loans-to-one-borrower limitation,
which is the lesser of 1% of assets or 15% capital.
Loans secured by commercial real estate properties generally involve a greater
degree of risk than residential mortgage loans. Because payments on loans
secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be subject, to a greater extent, to adverse conditions in the real estate
market or economy. Additionally, market declines in real estate values have been
more pronounced with respect to commercial real estate. The Bank has minimized
these risks by originating such loans on a selective basis, although the Bank
plans to increase commercial real estate originations going forward.
-11-
<PAGE> 13
Construction and Land Development Loans. The Bank originates construction and
land development loans generally for the construction of commercial and light
industrial buildings, apartment buildings, one- to four-family residential
properties and condominium developments located in the Bank's general lending
area. These loans may generally be made in amounts up to $5.0 million. At
December 31, 1996, advances on construction and land development loans totalled
$12.3 million, or 0.7% of total loans. In addition, construction and land
development loans had unadvanced amounts of $33.9 million. At December 31, 1996,
the three largest construction loans, including unadvanced amounts, were a $13.6
million loan to finance the construction of a 438 unit senior co-op apartment
project located in Nassau County, New York; an $8.5 million loan to finance the
construction of a 216 unit senior garden apartment project located in Suffolk
County, New York; and an $8.5 million loan to finance the construction of 58
affordable two-family homes in a subdivision located in Brooklyn, New York. The
Bank generally requires firm end-loan commitments and personal guarantees on all
construction and land development loans. Advances are made to borrowers as
phases of construction of the property are completed. Construction and land
development loans involve a greater degree of risk than other real estate loans
due to the fact that the underwriting of such loans is based on an estimated
value of the developed property, which can be difficult to ascertain in light of
uncertainties inherent in such estimations.
Consumer and Other Lending. The Bank originates other loans for business,
personal, family or household purposes, which generally consist of home-equity
loans, student loans, overdraft loans, commercial lines of credit and personal
lines of credit. These loans may generally be made in amounts up to $50,000 with
terms up to 15 years for secured loans, and in amounts up to $10,000 with terms
up to four years for unsecured loans. The Bank also originates loans and
purchases leases originated by an unrelated third party which are secured by
automobiles and are reviewed by the Bank's underwriting personnel. As of April
1, 1997, the Bank will no longer be purchasing such automobile leases from the
unrelated third party. See page 16 of the 1996 Annual Report to Stockholders for
more information. As of December 31, 1996, consumer and other loans, net of
unearned discounts, totalled $109.2 million, or 6.4% of total loans. The Bank
offers credit cards to its customers through a third party financial institution
and receives an origination fee and transactional fees for processing such
accounts, but does not underwrite or finance any portion of the credit card
receivables.
Loan Underwriting. For all loans originated by the Bank, upon receipt of a
completed loan application from a prospective borrower, a credit report is
ordered, certain other information is verified and, if necessary, additional
financial information is requested. An appraisal of the real estate intended to
secure the proposed loan is required and is currently performed by staff
appraisers or independent appraisers who are approved by the Bank's Board of
Directors. The Bank requires title insurance on all mortgage loans, except for
certain consumer loans, secured by real
-12-
<PAGE> 14
estate. For first mortgage loans, borrowers must obtain hazard insurance.
Borrowers may also be required to obtain flood insurance prior to closing. In
the case of first mortgage loans, borrowers generally are required to advance
funds on a monthly basis together with each payment of principal and interest to
a mortgage escrow account from which the Bank makes disbursements for items such
as real estate taxes and private mortgage insurance premiums, if required.
Environmental Issues
The Bank encounters certain environmental risks in its lending activities. Under
federal and state environmental laws, lenders may become liable for costs of
cleaning up hazardous materials found on property serving as security for bank
loans. In addition, the existence of hazardous materials may make it unfeasible
for a lender to foreclose on such property. Although environmental risks are
usually associated with loans secured by commercial real estate, risks also may
be substantial for loans secured by residential real estate if environmental
contamination makes such property unsuitable for use. This could also have a
negative effect on property values. The Bank attempts to control its risk by
training its appraisers, inspectors and underwriters to be cognizant of signs
indicative of environmental hazards. In addition, since 1991 the Bank has
generally required a Phase I Environmental Report, conducted by a qualified
environmental engineer, for all newly originated and renewed commercial real
estate loans. It is the Bank's policy not to make loans secured by properties on
which a potential environmental hazard is indicated in the Phase I Environmental
Report. With respect to residential loans, FNMA guidelines require that
appraisals for single family residences on which the Bank lends include comments
on environmental influences. No assurance can be given, however, that the values
of properties securing loans in the Bank's portfolio will not be adversely
affected by unforeseen environmental risks, although the Bank is unaware of any
environmental issues which would subject it to any material liability at this
time.
Delinquent Loans and Foreclosed Assets
The Bank's collection procedures applicable to one- to four-family mortgage
loans include a late notice being sent at the time payment is over 15 days past
due. A default letter is sent at the time the payment becomes 30 days past due.
Telephone contact is initiated and continued at this time. A third letter is
sent after the 45th day of delinquency if no favorable response is received. If
payment remains uncollected, a demand for satisfaction is sent by the 60th day.
If contact is made with the borrower at any time prior to foreclosure, the Bank
attempts to obtain full payment or work out a repayment schedule with the
borrower to avoid foreclosure. Most loan delinquencies are cured within 90 days
and no legal action is taken. Foreclosure notices generally are sent when a loan
is 90 days delinquent.
The Bank's collection procedures applicable to commercial real estate and
multi-family loans are generally similar to those
-13-
<PAGE> 15
discussed above; however, if an agreeable resolution of the delinquency is not
reached, a notice of intent to foreclose is generally sent after the 45th day of
delinquency, and the matter is generally referred to the Bank's attorneys after
the 60th day of delinquency.
With respect to delinquent payments regarding other loans, delinquency letters
are sent to borrowers at the end of 15 and 30 days and monthly thereafter, as
needed. Any overdraft account over 60 days delinquent is frozen. In the event
such loans become delinquent 120 days or more, the account is generally charged
off and legal action is pursued.
The Bank generally continues accruing interest on all delinquent secured loans
until either foreclosure proceedings have been commenced or the loan is 120 days
past due and continues to accrue interest on all delinquent unsecured loans
until the loan is 90 days past due. The Bank reverses any accrued interest upon
foreclosure when the outstanding loan balance exceeds 90% of the appraised value
of the property.
The following table sets forth information regarding all non-accrual loans,
loans which are 90 days or more delinquent but on which the Bank is accruing
interest and foreclosed real estate at the dates indicated. If all non-accrual
loans had been performing in accordance with their original terms and had been
outstanding from the earlier of the beginning of the year or origination, the
Bank would have recorded interest income of $1.2 million, $1.1 million and $2.7
million for 1996, 1995 and 1994, respectively, as opposed to $584,000, $88,000
and $236,000, which was included in interest income for such years,
respectively.
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans................. $11,964 $17,067 $35,534 $34,234 $36,202
Non-accrual other loans.................... 156 164 116 232 624
------- ------- ------- ------- -------
Total non-accrual loans and
restructured loans.................... 12,120 17,231 35,650 34,466 36,826
------- ------- ------- ------- -------
Mortgage loans 90 days or more
delinquent and still accruing............ 446 1,425 289 2,936 1,030
Other loans 90 days or more
delinquent and still accruing............ 63 46 59 72 100
------- ------- ------- ------- -------
Total non-performing loans(2)........... 12,629 18,702 35,998 37,474 37,956
------- ------- ------- ------- -------
Non-performing securities(1)............... - - 350 350 429
Other real estate owned(1)................. 3,264 6,547 6,535 7,077 14,777
------- ------- ------- ------- -------
Total non-performing assets............. $15,893 $25,249 $42,883 $44,901 $53,162
======= ======= ======= ======= =======
Non-performing loans to total
loans(2)................................. 0.74% 1.31% 3.01% 3.49% 4.00%
Non-performing assets to total
assets(2)................................ 0.49% 0.87% 1.67% 2.24% 3.31%
</TABLE>
(1) Net of related allowance for possible losses.
(2) Non-performing loans excludes loans which have been restructured and are
accruing and performing in accordance with the restructured terms.
Restructured, accruing loans totaled $5,297,000, $6,391,000, $6,251,000,
$4,813,000 and $14,405,000 at December 31, 1996, 1995, 1994, 1993 and 1992,
respectively.
-14-
<PAGE> 16
At December 31, 1996, all restructured loans were performing in accordance with
their terms.
At December 31, 1996, other real estate owned totalled $3.3 million, net of a
$169,000 reserve. Other real estate owned at December 31, 1996 consisted of 2
parcels of undeveloped land with an aggregate carrying value of $1.9 million,
and one- to four-family residential properties, including co-op units, with an
aggregate carrying value of $1.5 million. The Bank generally conducts appraisals
on all properties securing loans in foreclosure and foreclosed real estate
annually and, if necessary, charges-off any declines in value at such times.
It is the Bank's general policy to dispose of properties acquired through
foreclosure or deeds in lieu thereof as quickly and as prudently as possible in
consideration of market conditions and the condition of such property, with the
exception of properties held by the Bank's subsidiary, BSR, Inc. ("BSR"), which
generally are rented and offered for sale upon lease termination, and property
held by the Bank's subsidiary, Roosevelt Land Corp., for which the Bank is
attempting to obtain subdivision zoning approval for vacant land. At December
31, 1996, there were no properties in BSR and signed contracts were in place for
the sale of the vacant land.
Potential problem loans, as of December 31, 1996, not reflected in the balance
of non-accrual loans, loans 90 days past due and accruing interest or
restructured loans consisted of seven commercial real estate loans aggregating
approximately $3.7 million. These loans are experiencing late payments due
generally to vacancies or cash flow problems of the borrower.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained through provisions for
possible loan losses based on management's evaluation of the risks inherent in
its loan portfolio and delinquency trends in its loan portfolio and the national
and regional economies. The Bank's policy sets forth the procedures for
reviewing the adequacy of the allowance for possible loan losses and maintaining
the allowance at an appropriate level given the risk characteristics of the
Bank's loan portfolio. The Bank relies principally on the ongoing, comprehensive
analysis of the Bank's loan portfolio in determining the adequacy of the
allowance for possible loan losses. The evaluation also includes a system of
ranges and percentages as a supplemental measure for reviewing the adequacy of
the allowance for possible loan losses.
The following table sets forth the Bank's allowance for possible loan losses at
the dates indicated. The balances below represent general loan loss reserves and
are not allocable to specific loans in the Bank's portfolio.
-15-
<PAGE> 17
<TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year................ $13,267 $12,045 $13,760 $11,145 $7,337
Provisions for possible loan losses......... 1,400 3,050 2,250 6,100 8,050
Loans charged off:
One- to four-family....................... 243 684 712 484 507
Co-op..................................... 148 113 175 155 214
Multi-family.............................. -- -- 98 11 ---
Commercial................................ 57 2,095 3,178 2,651 2,912
Construction and land development......... -- --- --- 158 782
Other..................................... 90 127 184 408 563
------- ------- ------- ------- ------
Total loans charged off................. 538 3,019 4,347 3,867 4,978
Recoveries:
Mortgage loans............................ 199 1,128 271 230 160
Other..................................... 42 63 111 152 576
------- ------- ------- ------- ------
Total recoveries........................ 241 1,191 382 382 736
------- ------- ------- ------- ------
Balance at end of year...................... $14,370 $13,267 $12,045 $13,760 $11,145
======= ======= ======= ======= =======
Ratio of net charge-offs during the
year to average gross loans
outstanding during the year............... 0.02% 0.14% 0.34% 0.35% 0.46%
Ratio of allowance for possible loan
losses to total gross loans
outstanding at the end of the year........ 0.84 0.93 1.01 1.28 1.18
Ratio of allowance for possible loan
losses to non-performing loans at the
end of the year........................... 113.79 70.94 33.46 36.72 29.36
</TABLE>
The allowance for possible loan losses at December 31, 1996, 1995, 1994, 1993
and 1992 is allocated as follows:
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------
1996 1995 1994
-------------------- --------------------- ---------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Category Category Category
To Total To Total To Total
Amount Loans Amount Loans Amount Loans
------- --------- ------- ---------- ------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loan Category
Mortgage loans:
One- to four-family............... $ 6,167 67.26% $ 3,006 68.22% $ 2,163 68.29%
Co-op............................. 1,002 11.65 496 9.67 532 5.94
Multi-family...................... 159 1.41 - 1.66 298 2.12
Commercial........................ 6,434 12.13 9,211 15.02 8,831 19.69
Construction and land
development..................... 62 0.72 - 0.36 - 0.08
Other loans......................... 546 6.83 554 5.07 221 3.88
------- ----- ------- ----- ------- -----
Total............................. $14,370 100.00% $13,267 100.00% $12,045 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
-16-
<PAGE> 18
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------
1993 1992
------------------------ -------------------------
Percent of Percent of
Loans in Loans in
Category To Category To
Total Total
Amount Loans Amount Loans
------ ----------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan Category
Mortgage loans:
One- to four-family............ $ 3,700 64.54% $ 2,672 56.24%
Co-op.......................... 1,140 7.16 884 9.09
Multi-family................... 170 2.46 151 2.93
Commercial..................... 7,900 22.21 6,585 26.37
Construction and land
development.................. 60 0.16 90 0.33
Other loans.................... 790 3.47 763 5.04
------- ----- ------- -----
Total....................... $13,760 100.00% $11,145 100.00%
======= ====== ======= ======
</TABLE>
Securities Activities
The policies of the Registrant and the Bank with respect to investments in
securities are set by their respective Boards of Directors. These policies
dictate that investment decisions will be made based on the safety of the
investment, liquidity requirements and potential return on investments.
Authority is delegated to certain officers to carry out the investment policies.
The current policies permit investments in various types of securities including
U.S. Treasury obligations, securities of various federal agencies,
mortgage-backed securities, banker's acceptances of other Board approved
financial institutions, investment grade corporate debt securities, commercial
paper, federal funds and equities. The Bank previously purchased public utility
debt securities and Canadian debt securities, but during the past five years has
not purchased such securities; however, the Bank and/or Registrant may in the
future purchase such securities. The Registrant and the Bank currently do not
participate in hedging programs or interest rate swaps and do not invest in
non-investment grade bonds or high risk mortgage derivatives. Furthermore, the
Registrant and the Bank do not engage in any material derivative instrument
transactions falling under the scope of Statement of Financial Accounting
Standards ("SFAS") No. 119, "Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments."
The Company adopted SFAS No. 115, "Accounting for Investments in Certain Debt
and Equity Securities," as of December 31, 1993. SFAS No. 115 requires
securities classified as available for sale to be recorded at estimated fair
value, with changes in the net unrealized gains or losses of available for sale
securities reported, net of tax, as a separate component in stockholders'
equity. The adoption of SFAS No. 115 had no impact on 1993 net income. On March
31, 1995, the Company transferred certain
-17-
<PAGE> 19
mortgage-backed securities from available for sale to held to maturity. On
December 15, 1995, in connection with a one-time opportunity permitted by the
Financial Accounting Standards Board and regulatory agencies, the Company
transferred certain securities from held to maturity to available for sale.
Additional information regarding these securities transfers appears on page 13
of the Registrant's 1996 Annual Report to Stockholders in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Interest Rate Sensitivity" and is incorporated by reference herein.
Securities classified as held to maturity are stated at amortized cost (unpaid
principal in the case of mortgage-backed securities), adjusted for amortization
of premiums and accretion of discounts, as the Company has the intent and
ability to hold these securities until maturity. Premiums and discounts on these
securities are recognized in interest income using the level-yield method over
the period to maturity, adjusted in the case of mortgage-backed securities for
anticipated prepayments. Marketable equity securities, bonds and other debt and
mortgage-backed securities to be held for indefinite periods of time, including
securities that management intends to use as part of its asset/liability
strategy, or that may be sold in response to changes in interest rates, changes
in prepayment risk or other similar factors, are classified as available for
sale and recorded at estimated fair value.
The Company follows a policy of reserving for specific securities when, in the
opinion of the Company's management, the securities may have experienced a
decline in value that is other than temporary. Since the Company's adoption of
SFAS No. 115, both the available for sale and the held to maturity securities
portfolios that appear on page 34 of the Registrant's 1996 Annual Report to
Stockholders have experienced substantial volatility in estimated fair values,
which has been directly attributable to changes in market interest rates. As of
December 31, 1996, the gross unrealized losses in the held to maturity and
available for sale portfolios are considered by management of the Company to be
temporary.
The Bank's policies permit purchases of U.S. Treasury and federal agency
securities with maturities of five years or less for trading, up to a limit of
2% of its assets and, in the past, the Bank has purchased such securities for
trading. As of December 31, 1996, the Bank did not have any open positions in
its trading portfolio.
The following table sets forth certain information regarding the amortized cost
and estimated fair values of the Company's securities held to maturity and FHLB
capital stock:
-18-
<PAGE> 20
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------------
1996 1995 1994
------------------------ -------------------- ---------------------
Estimated Estimated Estimated
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---------- ---------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY, NET:
Bonds:
U.S. government obligations......... $ --- $ --- $ --- $ --- $157,441 $153,968
Federal agencies.................... 6,000 5,926 14,424 14,432 34,416 31,932
Public utilities.................... 1,001 947 1,050 1,021 1,076 928
Municipal bonds..................... 6,921 7,102 7,962 8,208 8,434 8,032
Industrial and financial bonds...... 39,710 39,690 75,131 75,048 121,097 118,440
Canadian bonds...................... - - 225 243 336 363
---------- ---------- -------- -------- -------- --------
Total bonds....................... 53,632 53,665 98,792 98,952 322,800 313,663
Mortgage-backed securities:...........
FNMA, net(1)........................ 98,178 96,258 109,281 109,210 110,907 99,863
GNMA, net........................... 755,479 764,530 533,301 553,292 346,347 333,179
FHLMC, net(1)....................... 98,737 100,211 111,347 115,630 47,706 43,950
CMO, net(1)......................... 2,906 3,038 2,902 3,113 --- ---
---------- ---------- -------- -------- -------- --------
Total mortgage-backed securities.. 955,300 964,037 756,831 781,245 504,960 476,992
---------- ---------- -------- -------- -------- --------
Total held to maturity, net..... $1,008,932 $1,017,702 $855,623 $880,197 $827,760 $790,655
========== ========== ======== ======== ======== ========
FHLB capital stock(2)............... $ 33,390 $ 33,390 $ 33,603 $ 33,603 $ 31,260 $ 31,260
========== ========== ======== ======== ======== ========
</TABLE>
(1) Amounts at December 31, 1996 and 1995 include certain securities which were
transferred between securities portfolios during 1995. Additional
information regarding the recorded amounts of these securities appears on
pages 33 and 34 of the 1996 Annual Report to Stockholders in Note (3) of
Notes to Consolidated Financial Statements and is incorporated by reference
herein.
(2) FHLB capital stock is non-marketable and redeemable at par. Accordingly,
amortized cost and estimated fair value of such stock is at par value.
The table below sets forth certain information regarding the amortized cost,
weighted average yields and contractual maturities of the Company's debt
securities held to maturity at December 31, 1996. No amortization payments are
considered with respect to the mortgage-backed securities. No prepayments have
been considered in the calculation of the weighted average years to maturity.
-19-
<PAGE> 21
<TABLE>
<CAPTION>
At December 31, 1996
----------------------------------------------------------------------------
After One Year After Five Years
One Year or Less Through Five Years Through Ten Years
----------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- -------- --------- -------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY, NET:
Bonds:
Federal agencies................. $ --- ---% $ 6,000 4.32% $ --- ---%
Public utilities................. 100 6.10 250 5.87 401 5.53
Municipal bonds.................. 405 5.59 2,905 5.46 1,443 5.84
Industrial and financial bonds... 33,895 6.14 5,171 7.57 644 3.19
------- ------- ------
Total bonds.................... 34,400 6.13 14,326 5.75 2,488 5.10
Mortgage-backed securities......... 690 4.91 6,237 5.36 4,547 5.79
------ ------ -----
Total.......................... $35,090 6.11 $20,563 5.63 $7,035 5.54
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996
------------------------------------------------------------------------------
After 10 Years Total Held to Maturity Securities
---------------------- -----------------------------------------------------
Average
Weighted Remaining Estimated Weighted
Amortized Average Years to Amortized Fair Average
Cost Yield Maturity Cost Value Yield
--------- -------- --------- --------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY, NET:
Bonds:
Federal agencies................. $ --- ---% 2.07 $ 6,000 $ 5,926 4.32%
Public utilities................. 250 5.55 5.80 1,001 947 5.68
Municipal bonds.................. 2,168 5.54 6.68 6,921 7,102 5.57
Industrial and financial bonds... --- --- 1.63 39,710 39,690 6.28
-------- ---------- ----------
Total bonds.................... 2,418 5.54 2.41 53,632 53,665 5.96
Mortgage-backed securities......... 943,826 7.68 24.80 955,300 964,037 7.65
-------- ---------- ----------
Total.......................... $946,244 7.68 23.60 $1,008,932 $1,017,702 7.57
======== ========== ==========
</TABLE>
The following table sets forth certain information regarding the amortized cost
and estimated fair values of the Company's available for sale securities:
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------
1996 1995 1994
---------------------- --------------------- ----------------------
Estimated Estimated Estimated
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
-------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Bonds, debt securities and equities:
U.S. government obligations......... $214,989 $214,585 $178,699 $182,584 $262,413 $257,310
Federal agencies.................... 98,057 97,074 82,318 83,139 --- ---
Public utility bonds................ --- --- 804 795 914 948
Municipal bonds..................... --- --- --- --- 47 46
Industrial and financial bonds...... 4,059 4,126 26,420 27,289 2,989 2,925
Common and preferred stocks......... 19,448 21,661 9,067 10,347 11,163 10,750
-------- -------- -------- -------- -------- --------
Total bonds, debt securities and
equities.......................... 336,553 337,446 297,308 304,154 277,526 271,979
-------- -------- -------- -------- -------- --------
Mortgage-backed securities:
FNMA, net(1)........................ 17,393 17,453 48,717 50,379 36,061 34,256
GNMA, net........................... 60,259 60,552 125,056 128,569 24,384 24,239
FHLMC, net(1)....................... 25,717 26,396 37,546 39,343 89,260 79,797
CMO, net(1)......................... --- --- 8,235 8,551 13,025 12,259
-------- -------- -------- -------- -------- --------
Total mortgage-backed securities.. 103,369 104,401 219,554 226,842 162,730 150,551
-------- -------- -------- -------- -------- --------
Total........................... $439,922 $441,847 $516,862 $530,996 $440,256 $422,530
======== ======== ======== ======== ======== ========
</TABLE>
(1) Amounts at December 31, 1996 and 1995 include certain securities which were
transferred from held to maturity to available for sale. Additional
information regarding the recorded amounts of these securities appears on
pages 33 and 34 of the 1996 Annual Report to Stockholders in Note (3) of
Notes to Consolidated Financial Statements and is incorporated by reference
herein.
-20-
<PAGE> 22
The table below sets forth certain information regarding the amortized cost,
weighted average yields and contractual maturities of the Company's debt
securities classified available for sale at December 31, 1996. No amortization
payments are considered with respect to the mortgage-backed securities. No
prepayments have been considered in the calculation of the weighted average
years to maturity.
<TABLE>
<CAPTION>
At December 31, 1996
--------------------------------------------------------------
After One Year After Five Years
One Year or Less Through Five Years Through Ten Years
------------------- ------------------- --------------------
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- -------- --------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Bonds and other debt securities:
U.S. government obligations...... $11,994 5.63% $197,126 5.77% $ 5,869 6.88%
Federal agencies................. --- --- 87,057 6.33 11,000 6.79
Industrial and financial bonds... --- --- 4,059 8.04 --- ---
------- -------- -------
Total bonds and other debt
securities................... 11,994 5.63 288,242 5.97 16,869 6.82
Mortgage-backed securities......... --- --- 918 7.31 --- ---
------- -------- -------
Total.......................... $11,994 5.63 $289,160 5.98 $16,869 6.82
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996
-----------------------------------------------------------------------
After 10 Years Total Available for Sale Securities
------------------ --------------------------------------------------
Average
Weighted Remaining Estimated Weighted
Amortized Average Years to Amortized Fair Average
Cost Yield Maturity Cost Value Yield
--------- ------- -------- --------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Bonds and other debt securities:
U.S. government obligations...... $ --- ---% 2.01 $214,989 $214,585 5.80%
Federal agencies................. --- --- 4.12 98,057 97,074 6.38
Industrial and financial bonds... --- --- 2.56 4,059 4,126 8.04
-------- -------- --------
Total bonds and other debt
securities................... --- --- 2.72 317,105 315,785 6.01
Mortgage-backed securities......... 102,451 7.40 22.35 103,369 104,401 7.40
-------- -------- --------
Total.......................... $102,451 7.40 6.82 $420,474 $420,186 6.35
======== ======== ========
</TABLE>
Mortgage-Backed Securities Activities. The Bank has historically invested in
mortgage-backed securities as an alternative investment to loan origination. At
December 31, 1996, mortgage-backed securities had a total amortized cost of
$1.06 billion and a total estimated fair value of $1.07 billion. As a percentage
of the Company's held to maturity and available for sale securities portfolios,
the amortized cost of mortgage-backed securities at December 31, 1996
represented 94.7% and 23.5%, respectively.
The Bank's policies permit investment in mortgage-backed securities that are
insured or guaranteed by the FHLMC, FNMA or the Government National Mortgage
Association ("GNMA") and do not allow investments in riskier mortgage derivative
products, such as stripped mortgage-backed securities or residuals.
-21-
<PAGE> 23
Source of Funds
General. Deposits, FHLB borrowings, loans and mortgage-backed securities
repayments and maturities and redemptions of held to maturity securities and the
available for sale securities portfolio are the primary sources of the Bank's
funds for lending, investing and other general purposes. The Registrant's
primary sources of funds are its available for sale securities portfolio and its
dividend sources from the Bank to the extent such payments are permitted by law
or regulation.
Deposits. The Bank offers a variety of deposit accounts having a range of
interest rates and terms. The Bank's deposits consist of passbook savings, NOW,
demand deposits, money market and certificate of deposit accounts. The flow of
deposits is influenced significantly by general economic conditions, changes in
prevailing interest rates and competition. The Bank's deposits are obtained
primarily from the areas in which its banking offices are located. Management
determines the Bank's deposit rates based upon market conditions and local
competition. The Bank has not used brokers to obtain deposits, and relies
primarily on customer service, offering new deposit products, competitive
pricing, marketing and long-standing relationships with customers to attract and
retain these deposits. Certificate of deposit accounts in excess of $100,000 are
not actively solicited by the Bank. Additionally, the Bank currently does not
pay a rate of interest on certificate of deposit accounts in excess of $100,000
that is higher than the rate paid on any other dollar denomination of
certificate of deposit accounts and currently does not offer a negotiated rate
on certificate of deposit accounts.
At December 31, 1996, the Bank had outstanding $160.0 million in certificate of
deposit accounts in amounts of $100,000 or more, maturing as follows:
<TABLE>
<CAPTION>
Weighted Average
Amount Interest Rate
-------------- -----------------
(In thousands)
<S> <C> <C>
MATURITY PERIOD
3 months or less.................................... $ 48,359 5.37%
Over 3 through 6 months............................. 31,932 5.61
Over 6 through 12 months............................ 29,417 5.90
Over 12 months...................................... 50,311 6.30
-------
Total............................................ $160,019 5.81
=======
</TABLE>
The following table sets forth the distribution of the Bank's deposit accounts
at the dates indicated and the weighted average nominal interest rates on each
category of deposits presented. Information with respect to the average balances
and average rates paid on the various categories of deposits appears on page 15
of the Registrant's 1996 Annual Report to Stockholders in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and is
incorporated by reference herein.
-22-
<PAGE> 24
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------------------
1996 1995 1994
------------------------------ ------------------------------- ------------------
Weighted Weighted Weighted
Percent Average Percent Average Percent Average
of Total Nominal of Total Nominal of Total Nominal
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
--------- --------- -------- -------- -------- -------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts..... $ 581,074 24.80% 2.92% $501,467 24.60% 2.74% $ 474,789 27.99% 2.37%
NOW accounts.......... 8,292 0.35 2.97 64,409 3.16 3.13 48,778 2.87 2.87
Demand accounts....... 62,116 2.65 --- 58,641 2.88 --- 55,590 3.28 ---
--------- ------ ---------- ------- ---------- ------
Total................. 651,482 27.80 2.63 624,517 30.64 2.52 579,157 34.14 2.18
--------- ------ ---------- ------- ---------- ------
Money market accounts. 77,229 3.29 2.21 67,163 3.29 3.19 47,810 2.82 2.39
Certificate of
deposit accounts:
$100,000 or more...... 160,019 6.83 5.81 119,422 5.86 6.00 91,503 5.39 5.95
CD's original
maturity of:
6 months and less. 333,907 14.25 5.35 226,392 11.11 5.20 115,569 6.81 4.59
6 to 12 months.... 181,539 7.75 5.48 105,561 5.18 5.59 44,763 2.64 4.90
12 to 30 months... 603,375 25.75 5.64 602,662 29.57 5.79 504,459 29.74 5.43
30 to 48 months... 94,023 4.01 6.04 32,153 1.58 5.48 33,439 1.97 5.27
48 to 72 months... 162,300 6.92 6.29 173,552 8.51 6.48 196,276 11.57 6.71
72 to 96 months... 16,752 0.71 7.41 23,289 1.14 7.01 23,843 1.41 7.04
96 months or more. 27,773 1.19 7.28 31,259 1.53 7.27 31,859 1.88 7.24
IRA & Keogh less
than 3 years.... 35,114 1.50 6.26 32,371 1.59 5.84 27,681 1.63 5.08
--------- ------ ---------- ------- ---------- ------
Total............. 1,614,802 68.91 5.72 1,346,661 66.07 5.83 1,069,392 63.04 5.62
--------- ------ ---------- ------- ---------- ------
Total deposits........ $2,343,513 100.00% 4.73 $2,038,341 100.00% 4.73 $1,696,359 100.00% 4.47
========== ====== ========== ====== ========== ======
</TABLE>
Borrowings and Reverse Repurchase Agreements. Although deposits are the Bank's
primary source of funds, the Bank also utilizes borrowings from the FHLB as an
alternative funding source when economically advantageous. Such advances are
made pursuant to several different credit programs, each of which has its own
interest rate and range of maturities. Management believes that, should FHLB
borrowings not be available in the future, it has other potential available
sources of funds. Additional information regarding the Bank's liquidity appears
on pages 22 and 23 of the Registrant's 1996 Annual Report to Stockholders in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is incorporated by reference herein. At December 31, 1996, the
Bank had $637.8 million of borrowings.
The Bank also may, from time to time, enter into sales of securities under
agreements to repurchase ("repurchase agreements") with Board approved,
nationally recognized investment banking firms. Repurchase agreements are
accounted for as borrowings by the Bank and are secured by designated
securities. The proceeds of these transactions are used to meet cash flow or
asset/liability needs of the Bank. At December 31, 1996, $55.0 million of such
funds were outstanding.
-23-
<PAGE> 25
The following table sets forth certain information regarding borrowed funds for
the dates indicated:
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
FHLB borrowings:
Average balance outstanding ................. $599,843 $600,560 $632,469
Maximum amount outstanding at any month
end during the year ....................... 652,550 652,563 678,700
Balance outstanding at end of year .......... 582,835 594,563 625,200
Weighted average interest rate
during the year ........................... 5.75% 5.71% 5.62%
Weighted average interest rate
at end of year ............................ 5.88 5.74 5.74
Securities sold under agreements to repurchase:
Average balance outstanding ................. $ 7,392 -- --
Maximum amount outstanding at any month
end during the year ....................... 55,000 -- --
Balance outstanding at end of year .......... 55,000 -- --
Weighted average interest rate during
the year .................................. 5.56% -- --
Weighted average interest rate at end
of the year ............................... 5.63 -- --
Total borrowings:
Average balance outstanding ................. $607,235 $600,560 $632,469
Maximum amount outstanding at any month
end during the year ....................... 652,550 652,563 678,700
Balance outstanding at end of year .......... 637,835 594,563 625,200
Weighted average interest rate
during the year ........................... 5.75% 5.71% 5.62%
Weighted average interest rate
at end of year ........................... 5.86 5.74 5.74
</TABLE>
Personnel
As of December 31, 1996, the Company had 355 full-time employees and 139
part-time employees. The employees are not represented by a collective
bargaining unit, and the Company considers its relationship with its employees
to be good.
Subsidiary and Joint Venture Activities
Pursuant to its "leeway investment" authority under the New York Banking Law,
the Bank formed a number of wholly-owned subsidiary corporations for the
purposes of (i) taking "equity interests" in the construction and development of
residential properties on which the Bank was making loans, (ii) acting as a
custodian for documents pertaining to certain mortgage loans sold to FNMA, and
(iii) holding and maintaining properties acquired by the Bank as a result of
foreclosure proceedings or deeds in lieu thereof. As of
-24-
<PAGE> 26
December 31, 1996, the Bank had eleven such subsidiaries, seven of which were
inactive during 1996.
Anaconda Enterprises, Inc. Anaconda Enterprises, Inc. ("Anaconda") is a
wholly-owned subsidiary of the Bank that had been inactive prior to 1994. In
1994, however, this subsidiary was reactivated for the purpose of taking title,
in a foreclosure sale, to a multi-family building located in Wichita, Kansas.
The Bank was a participant in a syndicated loan and the lead lender for the
syndicate. In November 1994, the foreclosed property was sold and distributions
were made to the participants. At December 31, 1996, Anaconda had assets of
$23,000 representing cash balances held in escrow for the participants.
Bellingham Corp. Bellingham Corp. ("Bellingham") is a wholly-owned subsidiary of
the Bank formed in 1992 to enter into a joint venture to acquire a warehouse
facility located in Suffolk County, New York. The joint venture was formed as a
result of the restructuring of a previously restructured $2.5 million loan
originally made by the Bank in 1986 to a partnership for the development of the
property, which became delinquent in 1992. In August 1994, the Bank withdrew its
equity interest pursuant to a restructuring agreement whereby the Bank increased
the loan to $5.2 million at December 31, 1994 and increased its security
position with other commercial properties having an aggregated estimated fair
value of $6.9 million based on 1994 external appraisals. The restructured loan
is current. This corporation is now inactive.
BSR, Inc. BSR, Inc. ("BSR") is a wholly-owned subsidiary formed to hold, operate
and maintain real estate acquired by the Bank as a result of foreclosure or deed
in lieu thereof. As of December 31, 1996, all properties held by BSR had been
sold and BSR had assets of $2,400 representing cash balances.
Roosevelt Service Corporation. Roosevelt Service Corporation is a wholly-owned
subsidiary of the Bank that serves as a custodian of loan documents relating to
certain mortgage loans sold to FNMA.
155 East 33rd Street Corp. 155 East 33rd Street Corp. is a wholly- owned
subsidiary of the Bank formed in 1993 to acquire title to a specific foreclosed
mixed commercial real estate property owned by the Bank. During 1996, the
property was sold for $300,000. The corporation is now inactive.
Roosevelt Abstract Corp. Roosevelt Abstract Corp. ("Roosevelt Abstract") is a
wholly-owned subsidiary of the Bank that was formed in 1988. Roosevelt Abstract
was activated in February 1993 to hold two foreclosed parcels of vacant land
located in Suffolk County, New York, which were sold in January 1994. This
corporation is now inactive.
Roosevelt Land Corp. Roosevelt Land Corp. ("Roosevelt Land") is a wholly-owned
subsidiary of the Bank formed in 1993 to hold title to a previously foreclosed
parcel of vacant land located in Suffolk County, New York. Roosevelt Land is
engaged in activities to
-25-
<PAGE> 27
develop and sell this land and as of December 31, 1996 had entered into two
separate contracts for sale of the land ($1.0 million each), covering its entire
interest. As of December 31, 1996, this parcel of land had a carrying value and
an estimated fair value of $1.9 million. The closing of the sale is anticipated
to occur during the second quarter of 1997.
The Bank also has additional wholly-owned subsidiaries, Rokings Holding
Corporation, VBF Holding Corporation, Oyster Bay Holding Corporation and Rosouth
Holding Corporation, all of which are currently inactive and through which the
Bank currently has no plans to conduct operations.
Savings Bank Life Insurance
As an issuing bank, the Bank offers Savings Bank Life Insurance ("SBLI") to its
customers up to the legal maximum of $50,000 per insured individual and, as a
trustee bank, offers an additional $500,000 in group coverage per insured under
SBLI's Financial Institution Group Life Insurance policy. The SBLI Department's
activities are segregated from the Bank and, while they do not materially affect
the Bank's earnings, management believes that offering SBLI is beneficial to the
Bank's relationship with its customers and the general public. The SBLI
Department pays its own expenses and reimburses the Bank for expenses incurred
on its behalf.
FEDERAL AND STATE TAXATION
Federal Taxation
General. The following discussion of tax matters is intended only as a summary
and does not purport to be a comprehensive description of the tax rules
applicable to the Bank or the Registrant. For federal income tax purposes, the
Registrant and the Bank file consolidated income tax returns and report their
income on a calendar year basis using the accrual method of accounting and are
subject to federal income taxation in the same manner as other corporations with
some exceptions.
Recent Tax Legislation Regarding Tax Bad Debt Reserves. Prior to the enactment,
on August 20, 1996, of the Small Business Job Protection Act of 1996 (the "Small
Business Act"), for federal income tax purposes, thrift institutions such as the
Bank, which met certain definitional tests primarily relating to their assets
and the nature of their business, were permitted to establish tax reserves for
bad debts and to make annual additions thereto, which additions could, within
specified limitations, be deducted in arriving at their taxable income. The
Bank's deduction with respect to "qualifying loans," which are generally loans
secured by certain interests in real property, could be computed using an amount
based on a six-year moving average of the Bank's actual loss experience (the
"Experience Method"), or a percentage equal to 8.0% of the Bank's taxable income
(the "PTI Method"), computed without regard to this deduction and with
additional modifications and
-26-
<PAGE> 28
reduced by the amount of any permitted addition to the non-qualifying reserve.
Similar deductions for additions to the Bank's bad debt reserve were permitted
under the New York State Bank Franchise Tax and New York City banking
corporations tax; however, for purposes of these taxes, the effective allowable
percentage under the PTI Method is 32% rather than 8% (See "State and Local
Taxation").
Under the Small Business Act, the PTI Method was repealed and the Bank is
considered to be a "large bank," that is, one with assets having an adjusted
basis of more than $500 million. As a large bank, for federal income tax
purposes, the Bank is no longer permitted to make additions to its tax bad debt
reserve. The Bank will be permitted to deduct bad debts only as they occur and
will be required to recapture (that is, take into income) over a six-year
period, beginning with the Bank's taxable year beginning January 1, 1996, the
excess of the balance of its bad debt reserves (other than the supplemental
reserve) as of December 31, 1995, over its "base year reserve," that is, the
balance of its bad debt reserves as of December 31, 1987 (or a lesser amount if
the Bank's loan portfolio decreased since December 31, 1987). However, under the
Small Business Act, such recapture requirements will be suspended for each of
the two successive taxable years beginning January 1, 1996, in which the Bank
originates a minimum amount of certain residential loans during such years that
is not less than the average of the principal amounts of such loans made by the
Bank during its six taxable years preceding January 1, 1996.
Distributions. To the extent that the Bank makes "non-dividend distributions" to
the Registrant, such distributions will be considered to have been made from the
Bank's base year reserve to the extent thereof and then from its supplemental
reserve for losses on loans, and an amount based on the amount distributed will
be included in the Bank's taxable income. Non-dividend distributions include
distributions in excess of the Bank's current and accumulated earnings and
profits, as calculated for federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete liquidation.
However, dividends paid out of the Bank's current or accumulated earnings and
profits will not constitute non-dividend distributions and, therefore, will not
be so included in the Bank's income.
The amount of additional taxable income created from a non-dividend distribution
is an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution. Thus, if the Bank makes a non-dividend
distribution, approximately one and one-half times the amount so used would be
includable in gross income for federal income tax purposes, assuming a 34%
federal corporate income tax rate. (See "Regulation and Supervision" for limits
on the payment of dividends by the Bank). The Bank does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserves.
Corporate Alternative Minimum Tax. The Code imposes a tax ("AMT") on alternative
minimum taxable income ("AMTI") at a rate of 20%.
-27-
<PAGE> 29
Only 90% of AMTI can be offset by net operating loss carryovers of which the
Company currently has none. AMTI is also adjusted by determining the tax
treatment of certain items in a manner that negates the deferral of income
resulting from the regular tax treatment of those items. Thus, the Company's
AMTI is increased by an amount equal to 75% of the amount by which the Company's
adjusted current earnings exceeds its AMTI (determined without regard to this
adjustment and prior to reduction for net operating losses). In addition,
pending legislative proposals would retroactively reinstate the now expired
environmental tax of 0.12% of the excess of AMTI (with certain modifications)
over $2 million imposed on corporations, including the Company, whether or not
an AMT is paid. The Company does not expect to be subject to the AMT and does
not expect that any environmental tax liability will be material.
Elimination of Dividends; Dividends Received Deduction. The Registrant may
exclude from its income 100% of dividends received from the Bank as a member of
the same affiliated group of corporations. A 70% dividends received deduction
generally applies with respect to dividends received from corporations that are
not members of such affiliated group, except that an 80% dividends received
deduction applies if the Registrant and the Bank own more than 20% of the stock
of a corporation paying a dividend. Under pending legislative proposals, the 70%
dividends received deduction would be reduced to 50%.
State and Local Taxation
State and City of New York. The Bank and the Registrant are subject to New York
State franchise tax on net income or one of several alternative bases, whichever
results in the highest tax. "Net income" means federal taxable income with
certain adjustments. The Bank and the Registrant file combined returns. The New
York State tax rate for the 1996 calendar year is 10.755% (including commuter
transportation and other surcharges) of net income. In general, the Registrant
will not be required to pay New York State tax on dividends and interest
received from the Bank or on gains realized on the sale of Bank stock. The Bank
and the Registrant are also subject to a similarly calculated New York City
banking corporation tax of 9% on income allocated to New York City.
New York State passed legislation in August 1996 that incorporated into New York
State tax law provisions for the continued use of bad debt reserves in a manner
substantially similar to the provisions that applied under federal law prior to
the enactment of the Small Business Act discussed above (see "Recent Legislation
Regarding Tax Bad Debt Reserves"). This legislation enabled the Bank to avoid
the recapture of the New York State tax bad debt reserves that otherwise would
have occurred as a result of the changes in federal law and to continue to
utilize the reserve method for computing its bad debt deduction. Similar
legislation regarding the use and treatment of tax bad debt reserves for
purposes of the New York City banking corporation tax was enacted in March 1997.
-28-
<PAGE> 30
State of Delaware. As a Delaware holding company not earning income in Delaware,
the Registrant is exempted from Delaware corporate income tax but is required to
file an annual report with, and pay an annual franchise tax to, the State of
Delaware. This franchise tax approximates $110,000 annually.
REGULATION AND SUPERVISION
General
The Bank is a New York chartered savings bank, and its deposit accounts are
insured up to applicable limits by the FDIC under the Bank Insurance Fund
("BIF"). The Bank is subject to extensive regulation by the New York State
Banking Department ("Banking Department"), as its chartering agency, and by the
FDIC as the deposit insurer. The Bank must file reports with the Banking
Department and the FDIC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions, such as mergers with, or acquisitions of, other depository
institutions and opening or acquiring branch offices. The Banking Department and
the FDIC conduct periodic examinations to assess the Bank's compliance with
various regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which a savings bank can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulation, whether by the Banking Department, the FDIC or
through legislation, could have a material adverse impact on the Registrant and
the Bank and their operations and stockholders. The Registrant is also required
to file certain reports with, and otherwise comply with the rules and
regulations of, the FRB and the Banking Department and of the Securities and
Exchange Commission ("SEC") under the federal securities laws. Certain of the
regulatory requirements applicable to the Bank and to the Registrant are
referred to below or elsewhere herein.
New York Law
The Bank derives its lending, investment and other activity powers primarily
from the applicable provisions of New York Banking Law ("Banking Law") and the
regulations adopted thereunder. Under these laws and regulations, savings banks,
including the Bank, may invest in real estate mortgages, consumer and commercial
loans, certain types of debt securities, including certain corporate debt
securities and obligations of federal, state and local governments and agencies,
certain types of corporate equity securities and certain other assets. A savings
bank may also exercise trust powers upon approval of the Banking Department. The
exercise of these lending, investment and activity powers are limited by
-29-
<PAGE> 31
federal law and the regulations thereunder. See "Federal Deposit Insurance
Corporation Improvement Act of 1991 -- Restrictions Upon State-Chartered Banks."
Under the Banking Law, the Superintendent of Banks of the State of New York (the
"Superintendent") may issue an order to a New York-chartered banking institution
to appear and explain an apparent violation of law, to discontinue unauthorized
or unsafe practices and to keep prescribed books and accounts. Upon a finding by
the Banking Department that any director, trustee or officer of any banking
organization has violated any law, or has continued unauthorized or unsafe
practices in conducting the business of the banking organization after having
been notified by the Superintendent to discontinue such practices, such
director, trustee or officer may be removed from office after notice and an
opportunity to be heard. The Bank does not know of any past or current practice,
condition or violation that might lead to any proceeding by the Superintendent
or the Banking Department against the Bank or any of its directors or officers.
Federal Deposit Insurance Corporation Improvement Act of 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
imposed a number of new mandatory supervisory measures on commercial banks,
savings banks and savings associations. FDICIA also addressed additional sources
of funding for the BIF, which insures the deposits of commercial banks and
savings banks.
Safety and Soundness Standards. FDICIA, as amended by the Riegle Community
Development and Regulatory Improvement Act of 1994, requires each federal
banking agency, to prescribe standards, by regulation or guidelines, relating to
internal controls, information and internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, asset quality,
earnings, stock valuation, compensation, fees and benefits and such other
operational and managerial standards as the agency deems appropriate. The FDIC,
together with the other federal bank regulatory agencies, have adopted safety
and soundness guidelines to implement the FDICIA requirements. The guidelines
establish general standards relating to internal controls, information systems
and internal audit systems, loan documentation, credit underwriting, interest
rate exposure, asset growth, asset quality, earnings and employee compensation.
In general, the guidelines require, among other things, appropriate system and
practices to identify and manage the risks and exposures specified in the
guidelines. The guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the amounts paid
are unreasonable or disproportionate to the services performed by an executive
officer, employee, director, or principal shareholder. In addition, regulations
were adopted to require a bank that is given notice by the FDIC that it is not
satisfying any of such safety and soundness standards to submit a compliance
plan to the FDIC. If, after being so notified, a bank fails to submit an
acceptable compliance plan or fails in any
-30-
<PAGE> 32
material respect to implement an accepted compliance plan, the FDIC may issue an
order directing corrective and other actions of the types to which a
significantly undercapitalized institution is subject under the "prompt
corrective action" provisions of FDICIA. If a bank fails to comply with such an
order, the FDIC may seek to enforce such order in judicial proceedings and to
impose civil monetary penalties.
Restrictions Upon State-Chartered Banks. Section 24 to the Federal Deposit
Insurance Act, as amended ("FDIA"), which was added by FDICIA, generally limits
the activities and investments of state-chartered FDIC insured banks and their
subsidiaries to those permissible for federally chartered national banks and
their subsidiaries, unless such activities and investments are specifically
exempted by Section 24 or consented to by the FDIC.
Section 24 provides an exception for investments by a bank in common and
preferred stocks listed on a national securities exchange or the shares of
registered investment companies if (1) the bank held such types of investments
during the 14-month period from September 30, 1990 through November 26, 1991,
(2) the state in which the bank is chartered permitted such investments as of
September 30, 1991, and (3) the bank notifies the FDIC and obtains approval from
the FDIC to make or retain such investments. Upon receiving such FDIC approval,
an institution's investment in such equity securities will be subject to an
aggregate limit up to its Tier 1 capital. In March 1993, the Bank received
approval from the FDIC to retain and acquire such equity investments subject to
a maximum permissible investment equal to the lesser of 100% of the Bank's Tier
1 capital or the maximum permissible amount specified by the Banking Law.
Section 24 also contains an exception for certain majority owned subsidiaries,
but the activities of such subsidiaries are limited to those permissible for a
national bank or under Section 24 of the FDIA and the FDIC regulations issued
pursuant thereto, or as approved by the FDIC. Banks holding otherwise
impermissible investments that do not receive FDIC approval must submit to the
FDIC a plan for divesting of such investments as quickly and prudently as
possible.
The FDIC has also adopted regulations relating to the activity restrictions of
Section 24. Pursuant to such regulations, insured banks engaging in activities
not permissible for a national bank must seek approval from the FDIC to continue
such activities. Banks intending to engage in activities not permissible for a
national bank must apply for approval from the FDIC to do so. The FDIC will not
approve the activity unless such bank meets its minimum capital requirements and
the FDIC determines that the activity does not present a significant risk to the
FDIC insurance funds.
Prompt Corrective Action. FDICIA also established a system of prompt corrective
actions to resolve the problems of undercapitalized institutions. The FDIC, FRB,
Office of the Comptroller of the Currency ("OCC") and Office of Thrift
Supervision ("OTS") each adopted final rules to require that
-31-
<PAGE> 33
certain supervisory actions be taken against undercapitalized institutions, the
severity of which depends upon the institution's degree of capitalization. The
rules create five categories, consisting of "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." Regulatory action taken will depend on the level
of capitalization of the institution and may range from restrictions on
dividends and other capital distributions to seizure of the institution.
Generally, subject to a narrow exception, FDICIA requires the banking regulator
to appoint a receiver or conservator for an institution that is critically
undercapitalized within 90 days after the institution becomes critically
undercapitalized. FDICIA authorizes the banking regulators to specify the ratio
of tangible capital to assets at which an institution becomes critically
undercapitalized and requires that ratio be no less than 2% of assets. FDICIA
also allows the regulator to downgrade an institution if the institution is
determined to be in an unsafe or unsound condition or to be engaging in unsafe
or unsound practices. Such a downgrading may result in an otherwise "adequately
capitalized" institution with other problems being subject to supervisory
actions as if it were classified as "undercapitalized."
The FDIC's final rule implementing the prompt corrective action section of
FDICIA defines the five capital categories as follows: Generally, an institution
will be treated as "well capitalized" if its ratio of total capital to
risk-weighted assets is at least 10.0%, its ratio of Tier 1 capital to
risk-weighted assets is at least 6.0%, its ratio of Tier 1 capital to total
assets is at least 5.0%, and it is not subject to any order or directive by the
FDIC to meet a specific capital level. An institution will be treated as
"adequately capitalized" if its ratio of total capital to risk- weighted assets
is at least 8.0%, its ratio of Tier 1 capital to risk-weighted assets is at
least 4.0%, and its ratio of Tier 1 capital to total assets is at least 4.0%
(3.0% if the bank receives the highest rating on the CAMEL financial
institutions rating system). An institution that has total risk-based capital of
less than 8.0%, Tier 1 risk-based capital of less than 4.0% or a leverage ratio
that is less than 4.0% (or less than 3% if the institution is rated a composite
"1" under the CAMEL rating system) would be considered to be "undercapitalized."
An institution that has total risk-based capital of less than 6.0%, a Tier 1
risk-based capital ratio of less than 3.0% or a leverage ratio that is less than
3.0% would be considered to be "significantly undercapitalized," and an
institution that has a tangible capital to assets ratio equal to or less than
2.0% would be deemed to be "critically undercapitalized." Generally, under the
rule, an institution that is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized" becomes immediately subject
to certain regulatory restrictions, including, but not limited to, restrictions
on growth, investment activities, capital distributions and affiliate
transactions. The filing of a capital restoration plan, which must be guaranteed
by any parent holding company, is also required. In addition, a "critically
undercapitalized" bank must receive prior written approval from the
-32-
<PAGE> 34
FDIC to engage in any material transaction other than one in the normal course
of business.
Uniform Real Estate Lending Standards. Under FDICIA, the federal banking
agencies are required to adopt uniform regulations prescribing standards for
extensions of credit that are secured by liens on interests in real estate or
made for the purpose of financing the construction of a building or other
improvements to real estate. Under joint regulations adopted by the banking
agencies, all financial institutions must adopt and maintain written policies
that establish appropriate limits and standards for extensions of credit that
are secured by liens or interests in real estate or are made for the purpose of
financing permanent improvements to real estate. These policies must establish
loan portfolio diversification standards, prudent underwriting standards
(including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
interagency Guidelines for Real Estate Lending Policies that have been adopted
by the federal bank regulators.
Annual Independent Audit and Reporting Requirements. The FDIC adopted a final
rule and related guidelines implementing the external audit, audit committee and
management reporting requirements of Section 36 of the FDIA. Each insured
depository institution with $500 million or more in total assets as of the
beginning of each fiscal year must have an audit of its annual financial
statements by an independent accountant in accordance with generally accepted
accounting principles and must file an annual report with the FDIC, its primary
federal regulator and any appropriate state banking agency. For an insured
depository institution that is a subsidiary of a holding company, the
independent audited financial statements requirement of the rule may be
satisfied by audited financial statements of the consolidated holding company.
The annual report required by the rule must contain: financial statements
audited by an independent public accountant; a statement of management's
responsibilities for preparing the annual financial statements, for establishing
and maintaining adequate internal controls and procedures for financial
reporting, and for complying with laws and regulations relating to safety and
soundness that are designated by the FDIC and the appropriate federal banking
agency; a separate assessment by management of the effectiveness of the internal
controls and procedures and the institution's compliance with the designated
safety and soundness laws and regulations; and the independent public
accountant's report on management's assertions concerning the internal controls
and procedures. In addition, an insured depository institution is required to
establish an audit committee comprised entirely of independent outside directors
to review the annual audit findings and reports with management and the
independent public accountant.
-33-
<PAGE> 35
Insurance of Deposit Accounts
Pursuant to FDICIA, the FDIC established a system for setting deposit insurance
premiums based upon the risks a particular bank or savings association posed to
its deposit insurance funds. Under the risk-based deposit insurance assessment
system, the FDIC assigns an institution to one of three capital categories based
on the institution's financial information, as of the reporting period ending
six months before the assessment period, consisting of (1) "well capitalized,"
(2) "adequately capitalized" or (3) "undercapitalized," and one of three
supervisory sub-categories within each capital group. With respect to the
capital ratios, institutions are classified as well capitalized or adequately
capitalized using ratios that are substantially similar to the prompt corrective
action capital ratios discussed above. Any institution that does not meet these
two definitions is deemed to be undercapitalized for this purpose. The
supervisory sub-group to which an institution is assigned is based on a
supervisory evaluation provided to the FDIC by the institution's primary federal
regulator and information which the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's assessment rate depends on the
capital category and supervisory category to which it is assigned. Under the
final risk-based assessment system, there are nine assessment risk
classifications (i.e., combinations of capital groups and supervisory
sub-groups) to which different assessment rates are applied. The capital and
supervisory sub-group to which an institution is assigned by the FDIC is
confidential and may not be disclosed. The Bank's rate of deposit insurance
assessments will depend upon the category and sub-category to which the Bank is
assigned by the FDIC. Any increase in insurance assessments could have an
adverse effect on the earnings of the Bank. The Bank's federal deposit insurance
premiums to the BIF for the year ended December 31, 1996 were $2.0 thousand, as
compared to $2.0 million in 1995.
The FDIA requires that the BIF and the Savings Association Insurance Fund
("SAIF") each be recapitalized until its reserves are at least 1.25% of insured
deposits, and the FDIC is authorized to raise premiums if the fund's reserves
are expected to be at levels less than its required reserve ratio. After a fund
has reached the 1.25% reserve ratio, the assessment rates for that fund can be
reduced. During 1995, the BIF reached the required reserve ratio, and the FDIC
reduced the BIF assessment rates. Effective January 1, 1996, the BIF assessment
rate for "well capitalized" institutions without any significant supervisory
concerns was set at the statutory minimum of $2,000 annually, and the rates for
other BIF-insured institutions ranged from 0.03% to 0.27% of deposits. The SAIF
remained undercapitalized, and it was not then expected to be recapitalized
until 2001. SAIF reserves had not grown as quickly as the BIF reserves due to a
number of factors, including the fact that a significant portion of SAIF
assessments had been used to make payments on bonds (the "FICO bonds") issued
-34-
<PAGE> 36
in the late 1980s by the Financing Corporation to recapitalize the now defunct
Federal Savings and Loan Insurance Corporation. Accordingly, SAIF-insured
institutions continued to pay assessments at rates that ranged from 0.23% of
deposits to 0.31% of deposits.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the "Funds Act")
was enacted into law, and it amended the FDIA in several ways to recapitalize
the SAIF and reduce the disparity in the assessment rates for the BIF and the
SAIF. The Funds Act authorized the FDIC to impose a special assessment on all
institutions with SAIF-assessable deposits in the amount necessary to
recapitalize the SAIF. As implemented by the FDIC, the special assessment was
fixed, subject to adjustment, at 65.7 basis points of an institution's
SAIF-assessable deposits, and the special assessment was paid on November 27,
1996. In view of the recapitalization of the SAIF by the special assessment, the
FDIC reduced the assessment rates for SAIF-assessable deposits. Beginning
January 1, 1997, the schedules of assessment rates for the BIF and the SAIF were
the same, ranging from zero to 27 basis points.
In addition, the Funds Act expanded the assessment base for the payments on the
FICO bonds to include, beginning January 1, 1997, the deposits of both BIF- and
SAIF-insured institutions. Until December 31, 1999, or such earlier date on
which the last savings association ceases to exist, the rate of assessment for
BIF- assessable deposits shall be one-fifth of the rate imposed on SAIF-
assessable deposits. The annual rate of assessments for the payments on the FICO
bonds for the semi-annual period beginning on January 1, 1997 will be 0.0130%
for BIF-assessable deposits and 0.0648% for SAIF-assessable deposits.
The Funds Act provides that the FDIC cannot assess regular insurance assessments
for an insurance fund unless required to maintain or to achieve the designated
reserve ratio of 1.25%, except on those of its member institutions that are not
classified as "well capitalized" or that have been found to have "moderately
severe" or "unsatisfactory" financial, operational or compliance weaknesses. The
Bank has not been so classified by the FDIC. Accordingly, assuming that the
designated reserve ratio is maintained by the BIF and the Bank maintains its
regulatory status, the Bank will pay substantially lower regular assessments on
its deposits compared to those paid in recent years.
The Funds Act also provides for the merger of the BIF and SAIF on January 1,
1999, with such merger being conditioned upon the prior elimination of the
thrift charter. The Secretary of the Treasury is required to conduct a study of
relevant factors with respect to the development of a common charter for all
insured depository institutions and abolition of separate charters for banks and
thrifts and to report the Secretary's conclusions and findings to the Congress
on or before March 31, 1997.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or
-35-
<PAGE> 37
unsound practices, is in an unsafe or unsound condition to continue operations
or has violated any applicable law, regulation, rule, order or condition imposed
by the FDIC. The management of the Bank does not know of any practice, condition
or violation that might lead to termination of deposit insurance. At December
31, 1996, the Bank's capital exceeded the capital requirements imposed by the
FDIC.
Capital Maintenance
The FDIC has issued regulations that require BIF-insured banks, such as the
Bank, to maintain minimum levels of capital. The regulations establish a minimum
leverage capital requirement of not less than 3.0% Tier 1 capital to total
assets for banks in the strongest financial and managerial condition, with a
CAMEL Rating of 1 (the highest examination rating of the FDIC for banks). For
all other banks, the minimum leverage capital requirement is 3% plus an
additional cushion of at least 100 to 200 basis points. Tier 1 capital is
comprised of the sum of common stockholders' equity (excluding the net
unrealized appreciation or depreciation, net of tax, from available for sale
debt securities), non-cumulative perpetual preferred stock (including any
related surplus) and minority interests in consolidated subsidiaries, minus all
intangible assets (other than qualifying servicing rights), and any net
unrealized loss on marketable equity securities. At December 31, 1996, the
Bank's ratio of Tier 1 capital to total assets was 6.07%, which exceeded the
minimum leverage requirement.
The FDIC also requires that banks meet a risk-based capital standard. The
risk-based capital standard requires the maintenance of total capital (which is
defined as Tier 1 capital and Tier 2 capital) to risk-weighted assets of 8% and
Tier 1 capital to risk-weighted assets of 4%. In determining the amount of
risk-weighted assets, all assets, plus certain off balance sheet items, are
multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes
are inherent in the type of asset or item. The components of Tier 1 capital are
equivalent to those discussed above under the 3% leverage requirement. The
components of Tier 2 capital currently include cumulative perpetual preferred
stock, long-term preferred stock, mandatory convertible securities, subordinated
debt, intermediate preferred stock and allowance for possible loan and lease
losses. Allowance for possible loan and lease losses includable in Tier 2
capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the
amount of supplementary capital that may be included in total capital cannot
exceed 100% of Tier 1 capital. At December 31, 1996, the Bank's total capital
and Tier 1 capital to risk-weighted assets was 16.86% and 15.69%, respectively,
which exceeded the FDIC risk-based capital requirements.
FDICIA requires the federal banking agencies to revise their risk-based capital
guidelines to, among other things, take adequate account of interest rate risk.
The federal banking agencies, including the FDIC, have adopted a rule to require
an assessment of an institution's exposure to declines in the economic value of
the
-36-
<PAGE> 38
bank's capital due to changes in interest rates when assessing the bank's
capital adequacy. The new regulations do not codify a measurement framework for
such assessment, nor do they establish any explicit criteria to define whether a
bank has an above "normal" level of interest rate risk. The new regulations
adopted a "risk assessment" approach under which examiners will evaluate a
bank's capital for interest rate risk on a case-by-case basis, with
consideration of both quantitative and qualitative factors. The agencies
subsequently considered and then deferred the adoption of a standardized measure
for establishing an explicit charge for interest rate risk. In May, 1996, the
federal banking agencies jointly adopted a policy statement that set forth
guidelines that each insured bank is to follow in developing its own interest
rate risk management program.
Loans-to-One-Borrower Limitations
With certain limited exceptions, a New York chartered savings bank may not make
loans or extend credit for commercial, corporate or business purposes (including
lease financing) to a single borrower and to certain entities related to the
borrower, the aggregate amount of which would exceed 15% of the Bank's net
worth, plus an additional 10% of the bank's net worth if secured by the
requisite collateral. The Bank currently complies with all applicable
loans-to-one-borrower limitations.
Community Reinvestment Act
Federal Regulation. Under the Community Reinvestment Act, as amended ("CRA"), as
implemented by FDIC and FRB regulations, a bank has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs, nor does it limit a bank's discretion to develop the types of products
and services that it believes are best suited to its particular community. The
CRA requires the FDIC, in connection with its examination of a bank, to assess
the bank's record of meeting the credit needs of its community and to take such
record into account in its evaluation of certain applications by such
institution. The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") amended the CRA to require public disclosure of a bank's CRA
rating and requires the FDIC to provide a written evaluation of a bank's CRA
performance utilizing a four-tiered descriptive rating system. The Bank's latest
CRA rating, received from the FDIC by letter dated September 16, 1996, was a
rating of "satisfactory."
The FDIC and the other federal banking agencies amended their CRA regulations,
generally effective July 1995. Among other things, the amended CRA regulations
substitute for the prior process-based assessment factors a new evaluation
system that rates a bank based on its actual performance in meeting community
needs. In particular, the proposed system would focus on three tests: (a) a
lending test, to evaluate the bank's record of making loans in its
-37-
<PAGE> 39
assessment area; (b) an investment test, to evaluate the bank's record of
investing in community development projects, affordable housing, and programs
benefitting low or moderate income individuals and businesses; and (c) a service
test, to evaluate the bank's delivery of services through its branches, ATMs and
other offices. Small banks are assessed pursuant to a streamlined approach
focusing on a lesser range of information and performance standards. The amended
CRA regulations also clarify how a bank's CRA performance is considered in the
application process.
New York Regulation. The Bank is also subject to provisions of the Banking Law
that impose continuing and affirmative obligations upon a banking institution
organized in the State of New York to serve the credit needs of its local
community ("NYCRA"). The obligations of the NYCRA are substantially similar to
those imposed by the CRA. Pursuant to the NYCRA, a bank is examined annually and
must file copies of all federal CRA reports with the Banking Department. The
NYCRA requires the Banking Department to make an annual written assessment of a
bank's compliance with the NYCRA, utilizing a four-tiered rating system, and
make such assessment available to the public. The NYCRA also requires the
Superintendent to consider a bank's NYCRA rating when reviewing a bank's
application to engage in certain transactions, including mergers, asset
purchases and the establishment of branch offices or automated teller machines,
and provides that such assessment may serve as a basis for the denial of any
such application. The Bank's latest NYCRA rating, received by letter dated
September 16, 1996 from the Banking Department, was a rating of "satisfactory."
Federal Reserve System
Under FRB regulations, the Bank is required to maintain non-interest-earning
reserves against its transaction accounts (primarily NOW and regular checking
accounts). The FRB regulations generally require that reserves of 3% must be
maintained against aggregate transaction accounts of $49.3 million or less
(subject to adjustment by the FRB) and a reserve of $1.5 million plus 10%
(subject to adjustment by the FRB between 8% and 14%) against that portion of
total transaction accounts in excess of $49.3 million. The first $4.4 million of
otherwise reservable balances (subject to adjustments by the FRB) are exempted
from the reserve requirements. The Bank is in compliance with the foregoing
requirements. Because required reserves must be maintained in the form of either
vault cash, a non-interest-bearing account at a Federal Reserve Bank or a
pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets.
Holding Company Regulation
Federal Regulation. The Registrant is subject to examination, regulation and
periodic reporting under the BHCA, as administered by the FRB. The FRB has
adopted capital adequacy guidelines for bank holding companies on a consolidated
basis substantially similar to those of the FDIC for the Bank. The Registrant's
total
-38-
<PAGE> 40
and Tier 1 capital are well in excess of these requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources -- Regulatory Capital Position" included in the
Registrant's 1996 Annual Report to Stockholders on page 23, which is
incorporated by
reference herein.
The Registrant is required to obtain the prior approval of the FRB to acquire
all, or substantially all, of the assets of any bank or bank holding company.
Prior FRB approval is required for the Registrant to acquire direct or indirect
ownership or control of any voting securities of any bank or bank holding
company if, after giving effect to such acquisition, it would, directly or
indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company.
A bank holding company is required to give the FRB prior written notice of any
purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the Registrant's consolidated net worth. The
FRB may disapprove such a purchase or redemption if it determines that the
proposal would constitute an unsafe and unsound practice, or would violate any
law, regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB. Such notice and approval is not required for a bank
holding company that would be treated as "well capitalized" under applicable
regulations of the FRB, that has received a composite "1" or "2" rating at its
most recent bank holding company inspection by the FRB, and that is not the
subject of any unresolved supervisory issues.
The status of the Registrant as a registered bank holding company under the BHCA
does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
In addition, a bank holding company is generally prohibited from engaging in, or
acquiring 5% or more of any class of voting securities of any company engaged
in, non-banking activities. One of the principal exceptions to this prohibition
is for activities found by the FRB to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. Some of the
principal activities that the FRB has determined by regulation to be so closely
related to banking as to be a proper incident thereto are: (i) making or
servicing loans; (ii) performing certain data processing services; (iii)
providing discount brokerage services; (iv) acting as fiduciary, investment or
financial advisor; (v) leasing personal or real property; (vi) making
investments in corporations or projects designed primarily to promote community
welfare; and (vii) acquiring a savings and loan association.
-39-
<PAGE> 41
Under FIRREA, depository institutions are liable to the FDIC for losses suffered
or anticipated by the FDIC in connection with the default of a commonly
controlled depository institution or any assistance provided by the FDIC to such
an institution in danger of default. This law would have potential applicability
if the Registrant ever acquired as a separate subsidiary a depository
institution in addition to the Bank. There are no current plans for such an
acquisition.
Subsidiary banks of a bank holding company are subject to certain quantitative
and qualitative restrictions imposed by the Federal Reserve Act on any extension
of credit to, or purchase of assets from, or letter of credit issued on behalf
of, the bank holding company or its subsidiaries, and on the investment in or
acceptance of stocks or securities of such holding company or its subsidiaries
as collateral for loans. In addition, provisions of the Federal Reserve Act and
FRB regulations limit the amounts of, and establish required procedures and
credit standards with respect to, loans and other extensions of credit to
officers, directors and principal shareholders of the Bank, the Registrant, any
subsidiary of the Registrant and related interests of such persons. Moreover,
subsidiaries of bank holding companies are prohibited from engaging in certain
tie-in arrangements (with the holding company or any of its subsidiaries) in
connection with any extension of credit, lease or sale of property or furnishing
of services.
New York Regulation. In addition to the federal bank holding company
regulations, a bank holding company organized or doing business in the State of
New York may be also subject to regulation under the Banking Law. The term "bank
holding company" for the purposes of the Banking Law, is defined generally to
include any person, company or trust that directly or indirectly either controls
the election of a majority of the directors or owns, controls or holds with
power to vote more than 10% of the voting stock of a bank holding company or, if
the company is a banking institution, another banking institution, or 10% or
more of the voting stock of each of two or more banking institutions. In
general, a bank holding company controlling, directly or indirectly, only one
banking institution will not be deemed to be a bank holding company for the
purposes of the Banking Law. Under the Banking Law, the prior approval of the
Banking Department is required before: (1) any action is taken that causes any
company to become a bank holding company; (2) any action is taken that causes
any banking institution to become or to be merged or consolidated with a
subsidiary of a bank holding company; (3) any bank holding company acquires
direct or indirect ownership or control of more than 5% of the voting stock of a
banking institution; (4) any bank holding company or subsidiary thereof acquires
all or substantially all of the assets of a banking institution; or (5) any
action is taken that causes any bank holding company to merge or consolidate
with another bank holding company. For these purposes, the term "banking
institution" refers to banking institutions located in the State of New York.
Additionally, certain restrictions apply to New York bank holding companies
regarding the acquisition of banking institutions that have been chartered five
years or less and are
-40-
<PAGE> 42
located in smaller communities. Officers, directors and employees of New York
bank holding companies are subject to limitations regarding their affiliation
with securities underwriting or brokerage firms and other bank holding companies
and limitations regarding loans obtained from its subsidiaries. Although the
Registrant is not currently a bank holding company for purposes of New York law,
any future acquisition of ownership, control, or the power to vote 10% or more
of the voting stock of another bank or bank holding company located in the State
of New York would cause it to become such.
Interstate Banking and Branching
In the past, interstate banking has been limited under the BHCA and various
state laws to those states that permitted interstate banking by statute. New
York was one of a number of states that permitted, subject to the reciprocity
conditions of the Banking Law, out-of-state bank holding companies to acquire
New York banks. By 1995, many states had adopted statutes permitting multi-state
bank holding companies. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Interstate Banking Act") was enacted on September 29,
1994. As of September 29, 1995, the Interstate Banking Act permits approval
under the BHCA of the acquisition by a bank holding company that is adequately
capitalized and adequately managed of a bank outside of the holding company's
home state regardless of whether the acquisition is permitted under the law of
the state of the acquired bank. The FRB may not approve an acquisition under the
BHCA that would result in the acquiring holding company controlling more than
10% of the deposits in the United States or more than 30% of the deposits in any
particular state.
In the past, branching across state lines was not generally available to a state
bank, such as the Bank. Out-of-state branches are authorized under the Banking
Law, but similar authority does not exist generally under the laws of many other
states. The Interstate Banking Act permits, beginning June 1, 1997, the
responsible banking agencies to approve merger transactions between banks
located in different states, regardless of whether the merger would be
prohibited under state law. Accordingly, the Interstate Banking Act will permit
a bank to have branches in more than one state. A state may "opt in" to the
provisions of the Interstate Banking Act prior to June 1, 1997, and a state may
"opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation before that date.
Before any bank acquisition can be completed, prior approval thereof may also be
required to be obtained from other agencies having supervisory jurisdiction over
the bank to be acquired, including the respective state's banking department.
See "Acquisition of the Holding Company."
The Interstate Banking Act will facilitate the consolidation of the banking
industry that has taken place over recent years and will allow the creation of
larger, presumably more efficient, banking
-41-
<PAGE> 43
networks. The effect of the Interstate Banking Act on the Bank, if any, is
likely to occur as banking institutions, state legislators, and bank regulators
respond to the new federal regulatory structure. The states will have to
establish appropriate corporate law, tax and regulatory structures to adjust to
the growth of new interstate banks.
Acquisition of the Holding Company
Federal Restrictions. Under the Federal Change in Bank Control Act ("CBCA"), a
notice must be submitted to the FRB if any person (including a company), or
group acting in concert, seeks to acquire 10% or more of the Registrant's shares
of Common Stock outstanding, unless the FRB has found that the acquisition will
not result in a change in control of the Registrant. Under the CBCA, the FRB has
60 days within which to act on such notices, taking into consideration certain
factors, including the financial and managerial resources of the acquiror, the
convenience and needs of the communities served by the Registrant and the Bank,
and the anti-trust effects of the acquisition. Under the BHCA, any company would
be required to obtain prior approval from the FRB before it may obtain "control"
of the Registrant within the meaning of the BHCA. Control generally is defined
to mean the ownership or power to vote 25 percent or more of any class of voting
securities of the Registrant or the ability to control in any manner the
election of a majority of the Registrant's directors. See "--Holding Company
Regulation."
New York Change in Control Restrictions. In addition to the CBCA, the Banking
Law generally requires prior approval of the New York Banking Board before any
action is taken that causes any company to acquire direct or indirect control of
a banking institution that is organized in the State of New York.
EXECUTIVE OFFICERS OF THE REGISTRANT AND THE BANK
The name, age, position, term of office as officer and period during which he
has served as an officer is provided below for each executive officer of the
Registrant and the Bank. All executive officers of the Registrant are also
executive officers of the Bank.
John M. Tsimbinos, Chairman of the Board and Chief Executive Officer and a
Director, joined the Bank in February 1982, became President and Chief Executive
Officer of the Bank in April 1983, and became Chairman and Chief Executive
Officer of the Bank in December 1992. Mr. Tsimbinos has been a Director since
July 1982 and he is 59 years of age.
A. Gordon Nutt, President and Chief Administrative Officer and a Director,
joined the Bank in 1983 as a Senior Vice President and Chief Administrative
Officer, became a Director in May 1991 and was elected President and Chief
Administrative Officer in December 1992. Mr. Nutt is 62 years of age.
-42-
<PAGE> 44
Dennis E. Henchy, Executive Vice President, joined the Bank in 1975 and serves
as Executive Vice President and Chief Financial Officer.
Mr. Henchy is 43 years of age.
William R. Kuhn, Executive Vice President, joined the Bank in 1974 and serves as
Executive Vice President and Chief Real Estate Lending Officer. Mr. Kuhn is 50
years of age.
John J. DeRusso, Senior Vice President, joined the Bank in 1994 and serves as
Senior Vice President and Strategic Planning/Special Projects Officer/Training &
Development. Mr. DeRusso is 55 years of age.
Ira H. Kramer, Senior Vice President, joined the Bank in 1983 and serves as
Senior Vice President and Corporate Secretary. Mr. Kramer is 46 years of age.
ITEM 2. PROPERTIES
The Registrant's principal corporate offices are in a 52,800 square foot
facility located at 1122 Franklin Avenue, Garden City, New York. This facility
is owned and principally utilized for the operations of the Bank. The Bank
conducts its business through 15 full service banking offices as follows:
-43-
<PAGE> 45
<TABLE>
<CAPTION>
Date Lease
Leased/ Leased/ Expiration
Location Owned Acquired Date
- -------- ------- -------- ----------
Principal Banking Office/
Administrative Headquarters
1122 Franklin Avenue
<S> <C> <C> <C>
Garden City, NY 11530........................... Owned 1/1/76 N/A
1024 Gates Avenue
Brooklyn, NY 11221.............................. Owned 8/1/20 N/A
2925 Avenue U
Brooklyn, NY 11229.............................. Owned 1/1/55 N/A
4848 Merrick Road
Massapequa Park, NY 11762....................... Owned 1/1/61 N/A
156-02 Cross Bay Blvd.(1)
Howard Beach, NY 11414.......................... Owned 1/1/65 N/A
224-04 Union Turnpike
Bayside, NY 11364............................... Owned 1/1/69 N/A
254-09 Horace Harding Expwy.
Little Neck, NY 11362............................ Leased 9/1/71 5/31/17
1114 Jericho Turnpike
New Hyde Park, NY 11040......................... Owned 1/1/75 N/A
247-53 Jamaica Avenue
Bellerose, NY 11426............................. Owned 1/1/75 N/A
1280 Broadway
Hewlett, NY 11557............................... Owned 9/25/96 N/A
2790 Sunrise Highway
Bellmore, NY 11710............................... Leased 7/1/80 6/30/10
1501 Deer Park Avenue
North Babylon, NY 11703......................... Owned 5/9/91 N/A
1520 Deer Park Avenue
North Babylon, NY 11703......................... Owned 5/1/94 N/A
108 Seventh Street
Garden City, NY 11530........................... Leased 2/1/95 01/31/25
699 Old Country Road
Dix Hills, NY 11746............................. Leased 9/7/95 9/06/02
</TABLE>
(1) Includes a leased accommodation facility adjacent to this branch office.
The lease on such facility expires December 2011.
The premises occupied by the Registrant and the Bank are considered to be well
located and suitably equipped to serve as banking facilities.
-44-
<PAGE> 46
ITEM 3. LEGAL PROCEEDINGS
On February 6, 1995, the Superintendent of Banks of the State of New York (the
"Superintendent") took possession of Nationar, a check-clearing and trust
company freezing all of its assets. The Bank used Nationar for certain
depository and collection services and maintained deposit balances with Nationar
in connection therewith. As a result, the Company maintained deposit balances
with Nationar and had certain stock investments and subordinated capital
debentures in Nationar.
For the year ending December 31, 1995, the consolidated statements of income
included in net gain on securities activities, a loss of $599,000 relating to
possible losses on the Company's Nationar investments and included in other
operating expense $660,000 in possible losses relating to the ultimate recovery
of frozen balances in Nationar.
In June 1996, the Company received the first distribution of approximately 40%
of its deposit claims with respect to Nationar. This was followed by two
additional distributions in November and December of 1996. These liquidating
distributions in 1996, which totalled $3,572,000, covered 100% of the Company's
deposit claim balances and 100% of the collateral portion of the Company's
subordinated capital debenture claims. In December 1996, as a result of these
distributions, the Company reversed $1,100,000 of its reserves and recognized
this amount in other income in the consolidated statement of income.
On March 4, 1997, the Superintendent's application for judicial approval of a
25% dividend to the holders of Nationar's subordinated capital debentures was
granted. Such dividend is expected to be paid during the second quarter of 1997.
The Company, however, has either fully collected or charged-off its remaining
Nationar claims and, accordingly, any such future distribution, which are not
expected to be material, will increase recorded income.
The Company is not involved in any other pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business, which in
the aggregate involve amounts which management believes to be immaterial to the
financial condition and results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-45-
<PAGE> 47
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
See "Market for Common Stock" appearing on page 24 of the Registrant's Annual
Report to Stockholders for the year ended December 31, 1996 incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA
See pages 6 through 7, inclusive, of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1996 incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 10 through 24, inclusive, of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1996 incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 25 through 52, inclusive, of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1996 incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The information required by this item appears under the caption "Executive
Officers of the Registrant and the Bank" in Part I of this Form 10-K and under
the caption "Election of Directors" on pages 7 through 10, inclusive, of the
Registrant's Proxy Statement for its 1997 Annual Meeting of Stockholders to be
held on April 21, 1997, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Executive
Compensation" on pages 15 through 22, inclusive, of the Registrant's Proxy
Statement for its 1997 Annual Meeting of Stockholders to be held on April 21,
1997, and is incorporated
herein by reference.
-46-
<PAGE> 48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the captions "Security
Ownership of Certain Beneficial Owners" on page 3, "Stock Ownership of
Management" on pages 5 and 6, inclusive, of the Registrant's Proxy Statement for
its 1997 Annual Meeting of Stockholders to be held on April 21, 1997, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the caption "Certain
Relationships and Related Transactions" on page 22 of the Registrant's Proxy
Statement for its 1997 Annual Meeting of Stockholders to be held on April 21,
1997, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. The following consolidated financial statements of the Registrant
and its subsidiaries, and the independent auditors' report
thereon, included on pages 25 through 52, inclusive, of the
Registrant's Annual Report to Stockholders for the year ended
December 31, 1996, are incorporated herein by reference:
Consolidated Financial Statements of Financial Condition
- December 31, 1996 and 1995;
Consolidated Statements of Income - For the years ended December
31, 1996, 1995 and 1994;
Consolidated Statements of Changes in Stockholders' Equity - For
the years ended December 31, 1996, 1995 and 1994;
Consolidated Statements of Cash Flows - For the years ended
December 31, 1996, 1995 and 1994;
Notes to Consolidated Financial Statements
The remaining information appearing in the Annual Report to
Stockholders is not deemed to be filed as part of this report,
except as expressly provided herein.
2. All schedules are omitted because they are not required
or applicable, or the required information is shown in
the consolidated financial statements or the notes
thereto.
-47-
<PAGE> 49
3. Exhibits
(a) The following exhibits are filed as part of this report,
except as otherwise indicated.
3.1 Certificate of Incorporation of T R Financial
Corp. (1)
3.2 Bylaws of T R Financial Corp., as amended(6)
4.1 Certificate of Incorporation of T R Financial
Corp. (See Exhibit 3.1 hereto)
4.2 Bylaws of T R Financial Corp. (See Exhibit 3.2
hereto)
4.3 Restated Organization Certificate of Roosevelt
Savings Bank (1)
4.4 Bylaws of Roosevelt Savings Bank, as amended
(6)
4.5 Amendments to Bylaws of Roosevelt Savings Bank
(7)
4.6 Stock Certificate of T R Financial Corp. (1)
4.7 Rights Agreement between T R Financial Corp.
and Chemical Bank, dated as of July 19, 1994
(2)
4.8 Certificate of Designations, Preferences and
Rights of Series A Junior Participating
Preferred Stock of T R Financial Corp.
(included as Exhibit A to the Rights Agreement
set forth at Exhibit 4.7)
10.1 Employment Agreement by and between Roosevelt
Savings Bank and John M. Tsimbinos, amended
and restated as of January 23, 1997
10.2 Employment Agreement by and between Roosevelt
Savings Bank and A. Gordon Nutt, amended and
restated as of January 23, 1997
10.3 Employment Agreement by and between Roosevelt
Savings Bank and William R. Kuhn, amended and
restated as of January 23, 1997
10.4 Employment Agreement by and between Roosevelt
Savings Bank and Dennis E. Henchy, amended and
restated as of January 23, 1997
-48-
<PAGE> 50
10.5 Employment Agreement by and between Roosevelt
Savings Bank and John J. DeRusso, amended and
restated as of January 23, 1997
10.6 Employment Agreement by and between Roosevelt
Savings Bank and Ira H. Kramer, amended and
restated as of January 23, 1997
10.7 Employment Agreement by and between T R
Financial Corp. and John M. Tsimbinos, amended
and restated as of January 23, 1997
10.8 Employment Agreement by and between T R
Financial Corp. and A. Gordon Nutt, amended
and restated as of January 23, 1997
10.9 Employment Agreement by and between T R
Financial Corp. and William R. Kuhn, amended
and restated as of January 23, 1997
10.10 Employment Agreement by and between T R
Financial Corp. and Dennis E. Henchy, amended
and restated as of January 23, 1997
10.11 Employment Agreement by and between T R
Financial Corp. and John J. DeRusso, amended
and restated as of January 23, 1997
10.12 Employment Agreement by and between T R
Financial Corp. and Ira H. Kramer, amended and
restated as of January 23, 1997
10.13 Roosevelt Savings Bank Severance Plan (7)
10.14 Indemnification Agreements (between Roosevelt
Savings Bank and Maureen E. Clancy, John M.
Tsimbinos, A. Gordon Nutt, Peter A. Baum,
Robert J. Berkin, Kenneth P. Billhardt, Robert
F. Eisen, Michael P. Galgano, Edward J.
Kowatch, James E. Orr, Jr., William R. Punt,
William Singer, Ernest L. Loser, Spiros J.
Voutsinas, John C. Mesloh, Leonard Genovese,
William R. Kuhn, Dennis E. Henchy, Ira H.
Kramer and William F. Shea, effective as of
May 18, 1993) (4)
10.15 Roosevelt Savings Bank Recognition and
Retention Plan for Outside Directors
(terminated effective as of January 23, 1997)
(3)
10.16 Roosevelt Savings Bank Recognition and
Retention Plan for Officers (3)
-49-
<PAGE> 51
10.17 Roosevelt Savings Bank Performance
Compensation Plan (8)
10.18 T R Financial Corp. 1993 Incentive Stock
Option Plan, amended and restated as of
January 23, 1997 (8)
10.19 T R Financial Corp. 1993 Stock Option Plan for
Outside Directors, amended and restated
effective as of January 23, 1997
10.20 T R Financial Corp. Employee Stock Ownership
Plan, as amended and restated (7)
10.21 First and Second Amendments to the T R
Financial Corp. Employee Stock Ownership Plan
(7)
10.22 T R Financial Corp. Employee Stock Ownership
Trust Loan and Security Agreement, Promissory
Note and Security Agreement Re Instruments of
Negotiable Documents to be Deposited (3)
10.23 Trust Agreement for the T R Financial Corp.
Employee Stock Ownership Plan (3)
10.24 Successor Trustee Agreement between State
Street Bank & Trust Company and T R Financial
Corp. for the T R Financial Corp. Employee
Stock Ownership Plan (6)
10.25 Supplemental Executive Retirement Plan of
Roosevelt Savings Bank, as amended and
restated as of March 16, 1993 (3)
10.26 First Amendment to the Supplemental Executive
Retirement Plan of Roosevelt Savings Bank, as
amended and restated (7)
10.27 Roosevelt Savings Bank Salary Reduction Plan
in RSI Retirement Trust, as amended and
restated effective January 1, 1987, including
Amendments Number One, Two, Three and Four (5)
10.28 Trust Agreement between Roosevelt Savings Bank
and Marine Midland Bank, N.A. (for the
Roosevelt Savings Bank Salary Reduction Plan
in RSI Retirement Trust) (3)
10.29 Purchase and Sale Agreement, by and between
Republic National Bank of New York and
Roosevelt Savings Bank, covering sale of
premises at 1280 Broadway, Hewlett, New York
-50-
<PAGE> 52
11.1 Statement re: Computation of per share
earnings
13.1 1996 Annual Report to Stockholders
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule (EDGAR filing only)
99.1 Proxy Statement for the 1997 Annual Meeting of
Stockholders
- ----------------
(1) Incorporated herein by reference to the Exhibits to the Registration
Statement on Form S-1, filed on March 5, 1993, Registration No.
33-59174.
(2) Incorporated herein by reference to Exhibit 2 to the Registration
Statement on Form 8-A, filed on July 19, 1994, Registration No.
0-21386.
(3) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1993.
(4) Incorporated herein by reference to the Exhibits to the Registration
Statement on Form S-1, filed on March 5, 1993, Registration No.
33-59174, except for Maureen E. Clancy, which is incorporated herein by
reference to the Exhibits to the Annual Report on Form 10-K filed by T
R Financial Corp. for fiscal year 1993.
(5) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1993, except
for Amendment Number Four, which is incorporated herein by reference to
the Exhibits to the Annual Report on Form 10-K filed by T R Financial
Corp. for fiscal year 1994
(6) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1994.
(7) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1995.
(8) Incorporated herein by reference to the Registrant's definitive Proxy
Statement for its 1997 Annual Meeting of Stockholders.
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
-51-
<PAGE> 53
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
T R FINANCIAL CORP.
Dated: March 25, 1997 BY:/s/ John M. Tsimbinos
---------------------
John M. Tsimbinos,
Chairman of the Board,
Chief Executive Officer
and Director
BY:/s/ Dennis E. Henchy
---------------------
Dennis E. Henchy,
Executive Vice President
and Chief Financial Officer
-52-
<PAGE> 54
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John M. Tsimbinos Chairman of the March 25, 1997
- ------------------------------ --------------
John M. Tsimbinos Board, Chief
Executive Officer
and Director
/s/ A. Gordon Nutt President, Chief March 25, 1997
- ------------------------------ --------------
A. Gordon Nutt Administrative
Officer and Director
/s/ Maureen E. Clancy Director March 25, 1997
- ------------------------------ --------------
Maureen E. Clancy
/s/ Robert F. Eisen, Sr. Director March 25, 1997
- ------------------------------ --------------
Robert F. Eisen, Sr.
/s/ Michael P. Galgano Director March 25, 1997
- ------------------------------ --------------
Michael P. Galgano
/s/ Leonard Genovese Director March 25, 1997
- ------------------------------ --------------
Leonard Genovese
/s/ Edward J. Kowatch Director March 25, 1997
- ------------------------------ --------------
Edward J. Kowatch
/s/ Ernest L. Loser Director March 25, 1997
- ------------------------------ --------------
Ernest L. Loser
/s/ John C. Mesloh Director March 25, 1997
- ------------------------------ --------------
John C. Mesloh
/s/ James E. Orr, Jr. Director March 25, 1997
- ------------------------------ --------------
James E. Orr, Jr.
/s/ Spiros J. Voutsinas Director March 25, 1997
- ------------------------------ --------------
Spiros J. Voutsinas
</TABLE>
-53-
<PAGE> 55
T R FINANCIAL CORP. FORM 10-K EXHIBIT LIST
DESIGNATION DESCRIPTION PAGE
- ----------- ----------- ----
3.1 Certificate of Incorporation of T R Financial Corp. (1)
3.2 Bylaws of T R Financial Corp., as amended (6)
4.1 Certificate of Incorporation of T R Financial Corp. (See
Exhibit 3.1 hereto)
4.2 Bylaws of T R Financial Corp. (See Exhibit 3.2 hereto)
4.3 Restated Organization Certificate of Roosevelt Savings
Bank (1)
4.4 Bylaws of Roosevelt Savings Bank, as amended (6)
4.5 Amendments to Bylaws of Roosevelt Savings Bank (7)
4.6 Stock Certificate of T R Financial Corp. (1)
4.7 Rights Agreement between T R Financial Corp. and Chemical
Bank, dated as of July 19, 1994 (2)
4.8 Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of T R
Financial Corp. (included as Exhibit A to the Rights
Agreement set forth at Exhibit 4.7)
10.1 Employment Agreement by and between Roosevelt Savings Bank
and John M. Tsimbinos, amended and restated as of January
23, 1997
10.2 Employment Agreement by and between Roosevelt Savings Bank
and A. Gordon Nutt, amended and restated as of January 23,
1997
10.3 Employment Agreement by and between Roosevelt Savings Bank
and William R. Kuhn, amended and restated as of January
23, 1997
10.4 Employment Agreement by and between Roosevelt Savings Bank
and Dennis E. Henchy, amended and restated as of January
23, 1997
10.5 Employment Agreement by and between Roosevelt Savings Bank
and John J. DeRusso, amended and restated as of January
23, 1997
10.6 Employment Agreement by and between Roosevelt Savings Bank
and Ira H. Kramer, amended and restated as of January 23,
1997
10.7 Employment Agreement by and between T R Financial Corp.
and John M. Tsimbinos, amended and restated as of January
23, 1997
10.8 Employment Agreement by and between T R Financial Corp.
and A. Gordon Nutt, amended and restated as of January 23,
1997
10.9 Employment Agreement by and between T R Financial Corp.
and William R. Kuhn, amended and restated as of January
23, 1997
<PAGE> 56
DESIGNATION DESCRIPTION PAGE
- ----------- ----------- ----
10.10 Employment Agreement by and between T R Financial Corp.
and Dennis E. Henchy, amended and restated as of January
23, 1997
10.11 Employment Agreement by and between T R Financial Corp.
and John J. DeRusso, amended and restated as of January
23, 1997
10.12 Employment Agreement by and between T R Financial Corp.
and Ira H. Kramer, amended and restated as of January 23,
1997
10.13 Roosevelt Savings Bank Severance Plan (7)
10.14 Indemnification Agreements (between Roosevelt Savings Bank
and Maureen E. Clancy, John M. Tsimbinos, A. Gordon Nutt,
Peter A. Baum, Robert J. Berkin, Kenneth P. Billhardt,
Robert F. Eisen, Michael P. Galgano, Edward J. Kowatch,
James E. Orr, Jr., William R. Punt, William Singer, Ernest
L. Loser, Spiros J. Voutsinas, John C. Mesloh, Leonard
Genovese, William R. Kuhn, Dennis E. Henchy, Ira H. Kramer
and William F. Shea, effective as of May 18, 1993) (4)
10.15 Roosevelt Savings Bank Recognition and Retention Plan for
Outside Directors (terminated effective as of January 23,
1997) (3)
10.16 Roosevelt Savings Bank Recognition and Retention Plan for
Officers (3)
10.17 Roosevelt Savings Bank Performance Compensation Plan (8)
10.18 T R Financial Corp. 1993 Incentive Stock Option Plan,
amended and restated as of January 23, 1997 (8)
10.19 T R Financial Corp. 1993 Stock Option Plan for Outside
Directors, amended and restated effective as of January
23, 1997
10.20 T R Financial Corp. Employee Stock Ownership Plan, as
amended and restated (7)
10.21 First and Second Amendments to the T R Financial Corp.
Employee Stock Ownership Plan (7)
10.22 T R Financial Corp. Employee Stock Ownership Trust Loan
and Security Agreement, Promissory Note and Security
Agreement Re Instruments of Negotiable Documents to be
Deposited (3)
10.23 Trust Agreement for the T R Financial Corp. Employee Stock
Ownership Plan (3)
10.24 Successor Trustee Agreement between State Street Bank &
Trust Company and T R Financial Corp. for the T R
Financial Corp. Employee Stock Ownership Plan (6)
10.25 Supplemental Executive Retirement Plan of Roosevelt
Savings Bank, as amended and restated as of March 16, 1993
(3)
-2-
<PAGE> 57
DESIGNATION DESCRIPTION PAGE
- ----------- ----------- ----
10.26 First Amendment to the Supplemental Executive Retirement
Plan of Roosevelt Savings Bank, as amended and restated
(7)
10.27 Roosevelt Savings Bank Salary Reduction Plan in RSI
Retirement Trust, as amended and restated effective
January 1, 1987, including Amendments Number One, Two,
Three and Four (5)
10.28 Trust Agreement between Roosevelt Savings Bank and Marine
Midland Bank, N.A. (for the Roosevelt Savings Bank Salary
Reduction Plan in RSI Retirement Trust) (3)
10.29 Purchase and Sale Agreement, by and between Republic
National Bank of New York and Roosevelt Savings Bank,
covering sale of premises at 1280 Broadway, Hewlett, New
York
11.1 Statement re: Computation of per share earnings
13.1 1996 Annual Report to Stockholders
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule (EDGAR filing only)
99.1 Proxy Statement for the 1997 Annual Meeting of
Stockholders
- ----------------
(1) Incorporated herein by reference to the Exhibits to the Registration
Statement on Form S-1, filed on March 5, 1993, Registration No.
33-59174.
(2) Incorporated herein by reference to Exhibit 2 to the Registration
Statement on Form 8-A, filed on July 19, 1994, Registration No.
0-21386.
(3) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1993.
(4) Incorporated herein by reference to the Exhibits to the Registration
Statement on Form S-1, filed on March 5, 1993, Registration No.
33-59174, except for Maureen E. Clancy, which is incorporated herein by
reference to the Exhibits to the Annual Report on Form 10-K filed by
T R Financial Corp. for fiscal year 1993.
(5) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1993, except
for Amendment Number Four, which is incorporated herein by reference to
the Exhibits to the Annual Report on Form 10-K filed by T R Financial
Corp. for fiscal year 1994
(6) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1994.
(7) Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by T R Financial Corp. for fiscal year 1995.
(8) Incorporated herein by reference to the Registrant's definitive Proxy
Statement for its 1997 Annual Meeting of Stockholders.
-3-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
JOHN M. TSIMBINOS
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and John M.
Tsimbinos (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Chairman of the Board and Chief Executive Officer of the Bank. The
Executive shall render administrative and management services to the Bank such
as are customarily performed by persons situated in a similar executive capacity
and shall perform such other duties not inconsistent with his title and office
as may be assigned to him by or under the authority of the Board of Directors of
the Bank (the "Board"). The Executive shall have such authority as is necessary
or appropriate to carry out his assigned duties. Failure to reelect Executive as
Chairman of the Board and Chief Executive Officer or renominate Executive as
Director of the Bank, without the consent of the Executive shall constitute a
breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the third anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
68. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as Chairman
of the Board and Chief Executive Officer of the Bank, (ii) performance of such
duties not inconsistent with his title and office as may be assigned to him by
or under the authority of the Board, and (iii) such other activities and
services related
<PAGE> 3
to the organization, operation and management of the Bank. During the Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic, industry or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Bank in accordance with this Agreement.
It is expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date shall not thereafter
be deemed to interfere with the performance of the executive's responsibilities
to the Bank. It is also expressly agreed that the Executive may conduct
activities subsequent to the Effective Date that are generally accepted for an
executive in his position, regardless of whether conducted by the Executive
prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Company ("Company
Agreement") and the course of conduct upon which such termination is based would
not constitute grounds for Termination for Cause under Section 8, then Executive
shall, to the extent practicable, assume such duties and responsibilities
formerly performed at the Company as part of his duties and responsibilities as
Chairman of the Board and Chief Executive Officer of the Bank. Nothing in this
provision shall be interpreted as restricting the Bank's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$600,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
2
<PAGE> 4
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall provide Executive with an
automobile suitable to the position of Chairman of the Board and Chief Executive
Officer of the Bank, in accordance with its prior practices, and such automobile
may be used by Executive in carrying out his duties under the Agreement,
including commuting between his residence and his principal place of employment,
and other personal use. The Bank shall reimburse Executive for his ordinary and
necessary business expenses, including, without limitation, fees for memberships
in such clubs and organizations as Executive and the Board shall mutually agree
are necessary and appropriate for business purposes, and travel and
entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the
3
<PAGE> 5
following: (i) the termination by the Bank or the Company of Executive's
full-time employment hereunder for any reason other than: following a
Change-in-Control, as defined in Section 5; for Disability, as defined in
Section 6; for Retirement, as defined in Section 7; for Cause, as defined in
Section 8; or upon Executive's death; or (ii) unless consented to by the
Executive, Executive's voluntary resignation from the Bank's employ, upon any:
(A) failure to elect or reelect or to appoint or reappoint Executive as Chairman
of the Board and Chief Executive Officer or to nominate or re-nominate Executive
as Director of the Bank or the Company, (B) a material adverse change in
Executive's function, duties, or responsibilities, which change would cause
Executive's position to become one of lesser responsibility importance, or scope
from the position and attributes thereof described in Section l, above (and any
such material change shall be deemed a continuing breach of this Agreement), (C)
a relocation of Executive's principal place of employment by more than 30 miles
from its location at the Effective Date of this Agreement, or a material
reduction in the benefits and perquisites to the Executive from those being
provided as of the Effective Date of this Agreement, (D) liquidation or
dissolution of the Bank or Company, or (E) material breach of this Agreement by
the Bank. Upon the occurrence of any event described in clauses (A), (B), (C),
(D) or (E), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon written notice pursuant to
Section 9 given within a reasonable period of time not to exceed, except in case
of a continuing breach, four calendar months after the event giving rise to said
right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) if and to the extent not already provided under Sections
4(b)(ii) and 4(b)(iii), health (including hospitalization,
medical and major medical), insurance benefits and life
insurance coverage, during his lifetime and his spouse's
lifetime, equivalent to the greater of (A) the coverage
provided on the date of this Agreement to retirees of the Bank
or the Company who had retired on normal retirement or (B) the
coverage provided at the date of Executive's termination of
employment with the Bank or the Company to retirees of the
Bank or the Company who retire on normal retirement;
4
<PAGE> 6
(v) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(vi) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Bank during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present values are to be
determined using a discount rate of 6% and the mortality
tables prescribed under section 72 of the Internal Revenue
Code of 1986, as amended ("Code");
(vii) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(viii)a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period plus two additional
years of service and earning the Base Salary at the date of
termination during the remaining unexpired Employment Period
over (B) the present value of the benefits to which he is
actually entitled under any such plans, as of the Date of
Termination of his employment with the Bank, where such
present values are to be determined using a discount rate of
6% and the mortality tables prescribed under section 72 of the
Code; and
(ix) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
5
<PAGE> 7
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(ix) shall not be made to Executive for any year in which
no incentive compensation payments are made to any of the
Bank's officers as a result of the performance of the Bank;
provided further, that, if a Change in Control of the Bank or
the Company as defined in Section 5 has occurred, payments
shall be made to Executive under this Section 4(b)(ix) during
each calendar year without regard to whether such payments are
made to any of the Bank's or the Company's officers and
without regard to whether such incentive compensation plans
and programs have been amended or terminated, in an amount
that is not less that the product of (A) the maximum
percentage rate at which an award was ever available to
Executive under such incentive compensation plans or programs,
multiplied by (B) the salary that would have been paid to
Executive during each such calendar year, which shall not be
less than Executive's Base Salary at the date of Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts;
6
<PAGE> 8
or (iv) without limitation such a Change in Control shall be deemed to have
occurred at such time as (A) any "person" (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Bank or the Company representing 20% or more of the Bank's or the Company's
outstanding securities except for any securities of the Bank purchased by the
Company in connection with the initial conversion of the Bank from mutual to
stock form (the "Conversion") and any securities purchased by the Company's or
the Bank's tax-qualified employee benefit plans and trusts; or (B) individuals
who constitute the Board on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided, however,
that any person becoming a director subsequent to the date hereof whose election
or nomination for election by the Bank's stockholders, was approved by a vote of
at least three-quarters of the directors then comprising the Incumbent Board
shall be considered as though he were a member of the Incumbent Board, but
excluding, for this purpose, any such person whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board; or (C)
a plan of reorganization, merger, consolidation, sale of all or substantially
all the assets of the Bank or the Company or similar transaction occurs in which
the Bank or Company is not the resulting entity; or (D) a proxy statement shall
be distributed soliciting proxies from stockholders of the Bank, by someone
other than the current management of the Bank, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or Bank or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Company; or (E) a tender offer is made for 20% or
more of the voting securities of the Bank or Company then outstanding. The
"Change in Control Date" shall mean the date during the Employment Period on
which a Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Bank is terminated and
if it is reasonably demonstrated by the Executive that such termination of
employment (1) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control or (2) otherwise arose in
connection with or anticipation of a Change in Control, then for all purposes of
this Agreement the "Change in Control Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean five years from
the Change in Control Date (even if such five-year period extends beyond the
Executive's 68th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be
7
<PAGE> 9
deemed to be in lieu of the benefits he is otherwise entitled as a former
employee under the Bank's or Company's employee plans and programs. For purposes
of this Agreement, Executive may be terminated for disability only if (i)
Executive shall have been absent from his duties with the Bank on a full time
basis for six (6) consecutive months, or (ii) a majority of the members of the
Board acting in good faith determine that, based upon competent and independent
medical evidence presented by a physician or physicians agreed upon by the
parties, Executive's physical or mental condition is such that he is totally and
permanently incapable of engaging in any substantial gainful employment based
upon his education, training and experience; provided, however, that on and
after the earliest date on which a Change in Control of the Bank or Company as
defined in Section 5 occurs, such a determination shall require the affirmative
vote of at least three-fourths of the members of the Board acting in good faith
and such vote shall not be made prior to the expiration of a sixty-day period
following the date on which the Board shall, by written notice to the Executive,
furnish him a statement of its grounds for proposing to make such determination,
during which period Executive shall be afforded a reasonable opportunity to make
oral and written presentations to the members of the Board, and to be
represented by his legal counsel at such presentations, to refute the grounds
for the proposed determination;
(b) The Bank will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Bank, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated
8
<PAGE> 10
companies (all such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliates companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120- day period immediately preceding the Change in Control
Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
9
<PAGE> 11
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
John M. Tsimbinos
238 Clent Road
Great Neck, New York 11021
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10
<PAGE> 12
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, including the Employment Agreement dated
June 29, 1993 and the amended and restated Employment Agreement dated October
24, 1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, amended and restated effective January
23, 1997, as it may be amended from time to time, between Executive and the
Company, such compensation payments and benefits paid by the Company will be
deemed to satisfy the corresponding obligations of the Bank under this
Agreement.
11
<PAGE> 13
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location
12
<PAGE> 14
selected by the Executive within fifty (50) miles from the location of the Bank,
in accordance with the commercial arbitration rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award in
any court having jurisdiction; provided, however, that Executive shall be
entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
13
<PAGE> 15
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
14
<PAGE> 16
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Bank, the Executive shall
not, without the prior written consent of the Bank or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Bank and those designated by it. For
purposes of this Agreement, secret and confidential information, knowledge or
data relating to the Bank or any of its affiliates, and their respective
business, shall not include any information that is public, publicly available
or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- ------------------------------ -------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- ------------------------------ -------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- ------------------------------ -------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- ------------------------------ -------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ John M. Tsimbinos
- ------------------------------ -------------------------------
JOHN M. TSIMBINOS
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came James
E. Orr, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
------------------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ernest
L. Loser, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
------------------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
------------------------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
A. GORDON NUTT
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and A. Gordon
Nutt (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as President and Chief Administrative Officer of the Bank. The Executive
shall render administrative and management services to the Bank such as are
customarily performed by persons situated in a similar executive capacity and
shall perform such other duties not inconsistent with his title and office as
may be assigned to him by or under the authority of the Board of Directors of
the Bank (the "Board"). The Executive shall have such authority as is necessary
or appropriate to carry out his assigned duties. Failure to reelect Executive as
President and Chief Administrative Officer or renominate Executive as Director
of the Bank, without the consent of the Executive shall constitute a breach of
this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the third anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
68. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as President
and Chief Administrative Officer of the Bank, (ii) performance of such duties
not inconsistent with his title and office as may be assigned to him by the
Chairman of the Board or by or under the authority of the Board, and (iii) such
other activities and services related to the organization, operation and
management of the Bank. During the
<PAGE> 3
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Bank in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Bank. It is also expressly agreed that the Executive may
conduct activities subsequent to the Effective Date that are generally accepted
for an executive in his position, regardless of whether conducted by the
Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Company ("Company
Agreement") and the course of conduct upon which such termination is based would
not constitute grounds for Termination for Cause under Section 8, then Executive
shall, to the extent practicable, assume such duties and responsibilities
formerly performed at the Company as part of his duties and responsibilities as
President and Chief Administrative Officer of the Bank. Nothing in this
provision shall be interpreted as restricting the Bank's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$260,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and
2
<PAGE> 4
perquisites substantially equivalent to those in which Executive was
participating or otherwise deriving benefit from immediately prior to the
beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall provide Executive with an
automobile suitable to the position of President and Chief Administrative
Officer of the Bank, in accordance with its prior practices, and such automobile
may be used by Executive in carrying out his duties under the Agreement,
including commuting between his residence and his principal place of employment,
and other personal use. The Bank shall reimburse Executive for his ordinary and
necessary business expenses, including, without limitation, fees for memberships
in such clubs and organizations as Executive and the Board shall mutually agree
are necessary and appropriate for business purposes, and travel and
entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder
3
<PAGE> 5
for any reason other than: following a Change-in-Control, as defined in Section
5; for Disability, as defined in Section 6; for Retirement, as defined in
Section 7; for Cause, as defined in Section 8; or upon Executive's death; or
(ii) unless consented to by the Executive, Executive's voluntary resignation
from the Bank's employ, upon any: (A) failure to elect or reelect or to appoint
or reappoint Executive as President and Chief Administrative Officer or to
nominate or re-nominate Executive as Director of the Bank or the Company, (B) a
material adverse change in Executive's function, duties, or responsibilities,
which change would cause Executive's position to become one of lesser
responsibility importance, or scope from the position and attributes thereof
described in Section l, above (and any such material change shall be deemed a
continuing breach of this Agreement), (C) a relocation of Executive's principal
place of employment by more than 30 miles from its location at the Effective
Date of this Agreement, or a material reduction in the benefits and perquisites
to the Executive from those being provided as of the Effective Date of this
Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Bank. Upon the occurrence of any event
described in clauses (A), (B), (C), (D) or (E), above, Executive shall have the
right to elect to terminate his employment under this Agreement by resignation
upon written notice pursuant to Section 9 given within a reasonable period of
time not to exceed, except in case of a continuing breach, four calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) if and to the extent not already provided under Sections
4(b)(ii) and 4(b)(iii), health (including hospitalization,
medical and major medical), insurance benefits and life
insurance coverage, during his lifetime and his spouse's
lifetime, equivalent to the greater of (A) the coverage
provided on the date of this Agreement to retirees of the Bank
or the Company who had retired on normal retirement or (B) the
coverage provided at the date of Executive's termination of
employment with the Bank or the Company to retirees of the
Bank or the Company who retire on normal retirement;
(v) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working
4
<PAGE> 6
for the Bank and the Company during the remaining unexpired
Employment Period at Executive's Base Salary at the Date of
Termination where such present value is to be determined
using a discount rate of 6%;
(vi) a lump sum payment in an amount equal to the excess,
if any, of: (A) the present value of the benefits to which
he would be entitled under the Bank's or the Company's
retirement plan (and any other defined benefit plan
maintained by the Bank or the Company) if he had continued
working for the Bank during the remaining unexpired
Employment Period earning the Base Salary at the Date of
Termination during the remaining unexpired Employment Period
over (B) the present value of the benefits to which he is
actually entitled under the Bank's or the Company's
retirement plan (and any other defined benefit plan
maintained by the Bank or the Company) as of the date of his
termination, where such present values are to be determined
using a discount rate of 6% and the mortality tables
prescribed under section 72 of the Internal Revenue Code of
1986, as amended ("Code");
(vii) a lump sum payment in an amount equal to the present
value of the Bank's or the Company's contributions that
would have been made on his behalf under the Bank's or the
Company's 401(k) savings plan (and any other defined
contribution plan maintained by the Bank or the Company) if
he had continued working for the Bank and the Company during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period and making the maximum amount of
employee contributions required, if any, under such plan or
plans, where such present values are to be determined using
a discount rate of 6%;
(viii) a lump sum payment in an amount equal to the excess,
if any, of (A) the present value of benefits to which he
would be entitled under any supplemental executive
retirement plan or any other excess benefit plan, within the
meaning of section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any plan to
provide deferred income for a select group of management or
highly compensated employees adopted by the Bank or the
Company, if he had continued working for the Bank or the
Company during the remaining unexpired Employment Period
plus two additional years of service and earning the Base
Salary at the date of termination during the remaining
unexpired Employment Period over (B) the present value of
the benefits to which he is actually entitled under any such
plans, as of the Date of Termination of his employment with
the Bank, where such present values are to be determined
using a discount rate of 6% and the mortality tables
prescribed under section 72 of the Code; and
(ix) the payments that would have been made to Executive
under all incentive compensation plans and programs adopted
by the Bank or the Company if he had continued working for
the Bank and the Company during the remaining unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the remaining unexpired
Employment Period in an amount equal to the product of (A)
the average percentage rate of incentive compensation award
(as a percentage of base salary) for each such calendar year
for the four highest compensated officers of the Bank or the
Company under such incentive compensation plans and
programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which
shall
5
<PAGE> 7
not be less than the Executive's Base Salary at the date of
termination, such payments to be made at the same time and in
the same manner as payments are made to other officers of the
Bank or the Company pursuant to the terms of such incentive
compensation plans and programs; provided, however, that
payments under this Section 4(b)(ix) shall not be made to
Executive for any year in which no incentive compensation
payments are made to any of the Bank's officers as a result of
the performance of the Bank; provided further, that, if a
Change in Control of the Bank or the Company as defined in
Section 5 has occurred, payments shall be made to Executive
under this Section 4(b)(ix) during each calendar year without
regard to whether such payments are made to any of the Bank's
or the Company's officers and without regard to whether such
incentive compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the
6
<PAGE> 8
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Bank or the Company representing 20% or more
of the Bank's or the Company's outstanding securities except for any securities
of the Bank purchased by the Company in connection with the initial conversion
of the Bank from mutual to stock form (the "Conversion") and any securities
purchased by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; or (B) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the Bank's
stockholders, was approved by a vote of at least three-quarters of the directors
then comprising the Incumbent Board shall be considered as though he were a
member of the Incumbent Board, but excluding, for this purpose, any such person
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company or similar transaction occurs in which the Bank or Company is not the
resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Bank is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean five years from
the Change in Control Date (even if such five-year period extends beyond the
Executive's 68th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank's or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated
7
<PAGE> 9
for disability only if (i) Executive shall have been absent from his duties with
the Bank on a full time basis for six (6) consecutive months, or (ii) a majority
of the members of the Board acting in good faith determine that, based upon
competent and independent medical evidence presented by a physician or
physicians agreed upon by the parties, Executive's physical or mental condition
is such that he is totally and permanently incapable of engaging in any
substantial gainful employment based upon his education, training and
experience; provided, however, that on and after the earliest date on which a
Change in Control of the Bank or Company as defined in Section 5 occurs, such a
determination shall require the affirmative vote of at least three-fourths of
the members of the Board acting in good faith and such vote shall not be made
prior to the expiration of a sixty-day period following the date on which the
Board shall, by written notice to the Executive, furnish him a statement of its
grounds for proposing to make such determination, during which period Executive
shall be afforded a reasonable opportunity to make oral and written
presentations to the members of the Board, and to be represented by his legal
counsel at such presentations, to refute the grounds for the proposed
determination;
(b) The Bank will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Bank, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated companies (all such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits");
8
<PAGE> 10
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliated companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120-day period immediately preceding the Change in Control
Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided
9
<PAGE> 11
that he shall not have returned to the performance of his duties on a full-time
basis during such thirty (30) day period), and (B) if his employment is
terminated for any other reason, the date specified in the Notice of Termination
(which, in the case of a Termination for Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
A. Gordon Nutt
634 Wyndemere Avenue
Ridgewood, New Jersey 07450
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10
<PAGE> 12
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, including the Employment Agreement dated
June 29, 1993 and the amended and restated Employment Agreement dated October
24, 1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, amended and restated effective January
23, 1997, as it may be amended from time to time, between Executive and the
Company, such compensation payments and benefits paid by the Company will be
deemed to satisfy the corresponding obligations of the Bank under this
Agreement.
11
<PAGE> 13
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location
12
<PAGE> 14
selected by the Executive within fifty (50) miles from the location of the Bank,
in accordance with the commercial arbitration rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award in
any court having jurisdiction; provided, however, that Executive shall be
entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
13
<PAGE> 15
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
14
<PAGE> 16
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Bank, the Executive shall
not, without the prior written consent of the Bank or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Bank and those designated by it. For
purposes of this Agreement, secret and confidential information, knowledge or
data relating to the Bank or any of its affiliates, and their respective
business, shall not include any information that is public, publicly available
or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- --------------------------- -------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- --------------------------- -------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- --------------------------- -------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- --------------------------- -------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ A. Gordon Nutt
- --------------------------- -------------------------------
A. GORDON NUTT
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came James
E. Orr, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ernest
L. Loser, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
WILLIAM R. KUHN
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and William
R. Kuhn (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Executive Vice President and Chief Real Estate Lending Officer of the
Bank. The Executive shall render administrative and management services to the
Bank such as are customarily performed by persons situated in a similar
executive capacity and shall perform such other duties not inconsistent with his
title and office as may be assigned to him by or under the authority of the
Board of Directors of the Bank (the "Board"). The Executive shall have such
authority as is necessary or appropriate to carry out his assigned duties.
Failure to reelect Executive as Executive Vice President and Chief Real Estate
Lending Officer, without the consent of the Executive shall constitute a breach
of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as Executive
Vice President and Chief Real Estate Lending Officer of the Bank, (ii)
performance of such duties not inconsistent with his title and office as may be
assigned to him by the Chairman of the Board or by or under the authority of the
Board, and (iii) such other activities and services related to the organization,
operation and management of the
<PAGE> 3
Bank. During the Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic, industry or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Bank in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Bank. It is also expressly agreed that the Executive may
conduct activities subsequent to the Effective Date that are generally accepted
for an executive in his position, regardless of whether conducted by the
Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Company ("Company
Agreement") and the course of conduct upon which such termination is based would
not constitute grounds for Termination for Cause under Section 8, then Executive
shall, to the extent practicable, assume such duties and responsibilities
formerly performed at the Company as part of his duties and responsibilities as
Executive Vice President and Chief Real Estate Lending Officer of the Bank.
Nothing in this provision shall be interpreted as restricting the Bank's right
to remove Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$205,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
2
<PAGE> 4
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse Executive for his
ordinary and necessary business expenses, including, without limitation, fees
for memberships in such clubs and organizations as Executive and the Board shall
mutually agree are necessary and appropriate for business purposes, and travel
and entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change-in-Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from
3
<PAGE> 5
the Bank's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Executive Vice President and Chief Real Estate Lending
Officer, (B) a material adverse change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility importance, or scope from the position and attributes
thereof described in Section l, above (and any such material change shall be
deemed a continuing breach of this Agreement), (C) a relocation of Executive's
principal place of employment by more than 30 miles from its location at the
Effective Date of this Agreement, or a material reduction in the benefits and
perquisites to the Executive from those being provided as of the Effective Date
of this Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Bank. Upon the occurrence of any event
described in clauses (A), (B), (C), (D) or (E), above, Executive shall have the
right to elect to terminate his employment under this Agreement by resignation
upon written notice pursuant to Section 9 given within a reasonable period of
time not to exceed, except in case of a continuing breach, four calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Bank during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present
4
<PAGE> 6
values are to be determined using a discount rate of 6% and
the mortality tables prescribed under section 72 of the
Internal Revenue Code of 1986, as amended ("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Bank, where
such present values are to be determined using a discount rate
of 6% and the mortality tables prescribed under section 72 of
the Code; and
(viii)the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Bank's officers as a result of the performance of the
Bank; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii) during each calendar year without regard to whether
such payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive
5
<PAGE> 7
compensation plans or programs, multiplied by (B) the salary
that would have been paid to Executive during each such
calendar year, which shall not be less than Executive's Base
Salary at the date of Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Bank's stockholders, was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent Board shall
be considered as though he were a member of the Incumbent Board, but excluding,
for this purpose, any such person whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction occurs in which the
6
<PAGE> 8
Bank or Company is not the resulting entity; or (D) a proxy statement shall be
distributed soliciting proxies from stockholders of the Bank, by someone other
than the current management of the Bank, seeking stockholder approval of a plan
of reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Bank is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank's or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Bank on a full time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
7
<PAGE> 9
(b) The Bank will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Bank, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated companies (all such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliated companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120-day period immediately preceding the Change in Control
Date.
8
<PAGE> 10
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only
9
<PAGE> 11
if such notice is given in good faith and the party giving such notice pursues
the resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Bank will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as a participant
in all compensation, benefit and insurance plans in which he was participating
when the notice of dispute was given, until the dispute is finally resolved in
accordance with this Agreement. Amounts paid under this Section are in addition
to all other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
William R. Kuhn
3 Midwood Road
Stony Brook, New York 11790
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not,
10
<PAGE> 12
without the written consent of the Board, become an officer, employee,
consultant, director or trustee of any savings bank, savings and loan
association, savings and loan holding company, bank or bank holding company if
such position (a) entails working in (or providing services in) New York City,
Nassau, Suffolk or Westchester counties or (b) entails working in (or providing
services in) any county in northern New Jersey or southern Connecticut that is
both (i) within the Bank's primary trade (or operating) area at the time in
question, which shall be determined by reference to the Bank's business plan as
in effect from time to time, and (ii) in material or substantial deposit-taking
functions or lending activities at such time; provided, however, that this
Section 11 shall not apply if Executive's employment is terminated for the
reasons set forth in Section 4, 5, 6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, including the Employment Agreement dated
June 29, 1993 or the amended and restated Employment Agreement dated October 24,
1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, amended and restated effective January
23, 1997, as it may be amended from time to time, between Executive and the
Company, such compensation payments and benefits paid by the Company will be
deemed to satisfy the corresponding obligations of the Bank under this
Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only
11
<PAGE> 13
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
12
<PAGE> 14
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
13
<PAGE> 15
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
14
<PAGE> 16
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Bank, the Executive shall
not, without the prior written consent of the Bank or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Bank and those designated by it. For
purposes of this Agreement, secret and confidential information, knowledge or
data relating to the Bank or any of its affiliates, and their respective
business, shall not include any information that is public, publicly available
or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- ---------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- ---------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- ---------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- ---------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ William R. Kuhn
- ---------------------------- ---------------------------------
WILLIAM R. KUHN
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came William
R. Kuhn, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
DENNIS E. HENCHY
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and Dennis E.
Henchy (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Chief Financial Officer and Executive Vice President of the Bank. The
Executive shall render administrative and management services to the Bank such
as are customarily performed by persons situated in a similar executive capacity
and shall perform such other duties not inconsistent with his title and office
as may be assigned to him by or under the authority of the Board of Directors of
the Bank (the "Board"). The Executive shall have such authority as is necessary
or appropriate to carry out his assigned duties. Failure to reelect Executive as
Chief Financial Officer and Executive Vice President, without the consent of the
Executive shall constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as Chief
Financial Officer and Executive Vice President of the Bank, (ii) performance of
such duties not inconsistent with his title and office as may be assigned to him
by the Chairman of the Board or by or under the authority of the Board, and
(iii) such other activities and services related to the organization, operation
and management of the Bank. During
<PAGE> 3
the Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Bank in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Bank. It is also expressly agreed that the Executive may
conduct activities subsequent to the Effective Date that are generally accepted
for an executive in his position, regardless of whether conducted by the
Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Company ("Company
Agreement") and the course of conduct upon which such termination is based would
not constitute grounds for Termination for Cause under Section 8, then Executive
shall, to the extent practicable, assume such duties and responsibilities
formerly performed at the Company as part of his duties and responsibilities as
Chief Financial Officer and Executive Vice President of the Bank. Nothing in
this provision shall be interpreted as restricting the Bank's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$200,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and
2
<PAGE> 4
perquisites substantially equivalent to those in which Executive was
participating or otherwise deriving benefit from immediately prior to the
beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse Executive for his
ordinary and necessary business expenses, including, without limitation, fees
for memberships in such clubs and organizations as Executive and the Board shall
mutually agree are necessary and appropriate for business purposes, and travel
and entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change-in-Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from the Bank's employ, upon any: (A) failure to elect or reelect or
to appoint or reappoint Executive as Chief
3
<PAGE> 5
Financial Officer and Executive Vice President, (B) a material adverse change in
Executive's function, duties, or responsibilities, which change would cause
Executive's position to become one of lesser responsibility importance, or scope
from the position and attributes thereof described in Section l, above (and any
such material change shall be deemed a continuing breach of this Agreement), (C)
a relocation of Executive's principal place of employment by more than 30 miles
from its location at the Effective Date of this Agreement, or a material
reduction in the benefits and perquisites to the Executive from those being
provided as of the Effective Date of this Agreement, (D) liquidation or
dissolution of the Bank or Company, or (E) material breach of this Agreement by
the Bank. Upon the occurrence of any event described in clauses (A), (B), (C),
(D) or (E), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon written notice pursuant to
Section 9 given within a reasonable period of time not to exceed, except in case
of a continuing breach, four calendar months after the event giving rise to said
right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Bank during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present values are to be
determined using a discount rate of 6% and the mortality
tables
4
<PAGE> 6
prescribed under section 72 of the Internal Revenue Code of
1986, as amended ("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Bank, where
such present values are to be determined using a discount rate
of 6% and the mortality tables prescribed under section 72 of
the Code; and
(viii)the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Bank's officers as a result of the performance of the
Bank; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii) during each calendar year without regard to whether
such payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have
5
<PAGE> 7
been paid to Executive during each such calendar year, which
shall not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Bank's stockholders, was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent Board shall
be considered as though he were a member of the Incumbent Board, but excluding,
for this purpose, any such person whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction occurs in which the
Bank or Company is not the resulting entity; or (D) a proxy statement shall be
distributed soliciting
6
<PAGE> 8
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Bank is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank's or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Bank on a full time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
(b) The Bank will cause to be continued insurance coverage,
including life, health,
7
<PAGE> 9
dental, prescription drug and disability coverage substantially identical to the
coverage maintained by the Bank or the Company for Executive prior to his
Termination for Disability. This coverage shall cease upon the earlier of (i)
the date Executive returns to the full-time employment of the Bank, in the same
capacity as he was employed prior to his Termination for Disability and pursuant
to an employment agreement between Executive and the Bank; (ii) Executive's
full-time employment by another employer; (iii) Executive's attaining the normal
age of retirement or receiving benefits under the Bank's or the Company's
defined benefit plan; (iv) the Executive's death; (v) the Executive's
eligibility to collect payments under the disability provision of the defined
benefit plan; or (vi) the expiration of the term of this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated companies (all such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliates companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120-day period immediately preceding the Change in Control
Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination
8
<PAGE> 10
in accordance with the Bank's retirement policy or in accordance with any
retirement arrangement established with Executive's consent with respect to him.
Upon termination of Executive upon Retirement, Executive shall be entitled to
all benefits under any retirement plan of the Bank or the Company and other
plans to which Executive is a party, and shall be entitled to the benefit, if
any, as a former employee under the Bank's or the Company's employee benefit
plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was
9
<PAGE> 11
given (including, but not limited to, Base Salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is finally
resolved in accordance with this Agreement. Amounts paid under this Section are
in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Dennis E. Henchy
22 Pembroke Drive
No. Massapequa, New York 11758
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern
10
<PAGE> 12
New Jersey or southern Connecticut that is both (i) within the Bank's primary
trade (or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, including the Employment Agreement dated
June 29, 1993 and the amended and restated Employment Agreement dated October
24, 1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, amended and restated effective January
23, 1997, as it may be amended from time to time, between Executive and the
Company, such compensation payments and benefits paid by the Company will be
deemed to satisfy the corresponding obligations of the Bank under this
Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
11
<PAGE> 13
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any
12
<PAGE> 14
other cash compensation, fringe benefits and any compensation and benefits due
Executive under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
-------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agree-
13
<PAGE> 15
ment or otherwise and on which an excise tax under Section 4999 of the Code will
be assessed, the payment determined under this Section 23(a) shall be made to
the Executive on the earlier of (i) the date the Company, the Bank or any direct
or indirect subsidiary or affiliate of the Company is required to withhold such
tax, or (ii) the date the tax is required to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Bank, the Executive shall
not, without the prior written consent of the Bank or as may otherwise be
required by law or legal process,
14
<PAGE> 16
communicate or divulge any such information, knowledge or data to anyone other
than the Bank and those designated by it. For purposes of this Agreement, secret
and confidential information, knowledge or data relating to the Bank or any of
its affiliates, and their respective business, shall not include any information
that is public, publicly available or available through trade association
sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- --------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- --------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- --------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- --------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ William R. Kuhn /s/ Dennis E. Henchy
- ---------------------------- --------------------------------
DENNIS E. HENCHY
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
--------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
--------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Dennis
E. Henchy, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
--------------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
JOHN J. DeRUSSO
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and John J.
DeRusso (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Senior Vice President, Strategic Planning and Special Projects of the
Bank. The Executive shall render administrative and management services to the
Bank such as are customarily performed by persons situated in a similar
executive capacity and shall perform such other duties not inconsistent with his
title and office as may be assigned to him by or under the authority of the
Board of Directors of the Bank (the "Board"). The Executive shall have such
authority as is necessary or appropriate to carry out his assigned duties.
Failure to reelect Executive as Senior Vice President, Strategic Planning and
Special Projects, without the consent of the Executive shall constitute a breach
of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twelve (12) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the first anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as Senior
Vice President, Strategic Planning and Special Projects of the Bank, (ii)
performance of such duties not inconsistent with his title and office as may be
assigned to him by the Chairman of the Board or by or under the authority of the
Board, and (iii) such other activities and services related to the organization,
operation and management of the Bank.
<PAGE> 3
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Bank in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Bank. It is also expressly agreed that the Executive may
conduct activities subsequent to the Effective Date that are generally accepted
for an executive in his position, regardless of whether conducted by the
Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to the
Employment Agreement between Executive and the Company dated January 23, 1997,
as it may be amended from time to time ("Company Agreement") and the course of
conduct upon which such termination is based would not constitute grounds for
Termination for Cause under Section 8, then Executive shall, to the extent
practicable, assume such duties and responsibilities formerly performed at the
Company as part of his duties and responsibilities as Senior Vice President,
Strategic Planning and Special Projects of the Bank. Nothing in this provision
shall be interpreted as restricting the Bank's right to remove Executive for
Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$150,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
2
<PAGE> 4
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse Executive for his
ordinary and necessary business expenses, including, without limitation, fees
for memberships in such clubs and organizations as Executive and the Board shall
mutually agree are necessary and appropriate for business purposes, and travel
and entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change-in-Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from
3
<PAGE> 5
the Bank's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Senior Vice President, Strategic Planning and Special
Projects, (B) a material adverse change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility importance, or scope from the position and attributes
thereof described in Section l, above (and any such material change shall be
deemed a continuing breach of this Agreement), (C) a relocation of Executive's
principal place of employment by more than 30 miles from its location at the
Effective Date of this Agreement, or a material reduction in the benefits and
perquisites to the Executive from those being provided as of the Effective Date
of this Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Bank. Upon the occurrence of any event
described in clauses (A), (B), (C), (D) or (E), above, Executive shall have the
right to elect to terminate his employment under this Agreement by resignation
upon written notice pursuant to Section 9 given within a reasonable period of
time not to exceed, except in case of a continuing breach, four calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Bank during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present
4
<PAGE> 6
values are to be determined using a discount rate of 6% and
the mortality tables prescribed under section 72 of the
Internal Revenue Code of 1986, as amended ("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Bank, where
such present values are to be determined using a discount rate
of 6% and the mortality tables prescribed under section 72 of
the Code; and
(viii)the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Bank's officers as a result of the performance of the
Bank; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii) during each calendar year without regard to whether
such payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive
5
<PAGE> 7
compensation plans or programs, multiplied by (B) the salary
that would have been paid to Executive during each such
calendar year, which shall not be less than Executive's Base
Salary at the date of Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Bank's stockholders, was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent Board shall
be considered as though he were a member of the Incumbent Board, but excluding,
for this purpose, any such person whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction occurs in which the
6
<PAGE> 8
Bank or Company is not the resulting entity; or (D) a proxy statement shall be
distributed soliciting proxies from stockholders of the Bank, by someone other
than the current management of the Bank, seeking stockholder approval of a plan
of reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Bank is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean one year from
the Change in Control Date (even if such one-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank's or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Bank on a full time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
7
<PAGE> 9
(b) The Bank will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Bank, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated companies (all such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliated companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120-day period immediately preceding the Change in Control
Date.
8
<PAGE> 10
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only
9
<PAGE> 11
if such notice is given in good faith and the party giving such notice pursues
the resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Bank will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as a participant
in all compensation, benefit and insurance plans in which he was participating
when the notice of dispute was given, until the dispute is finally resolved in
accordance with this Agreement. Amounts paid under this Section are in addition
to all other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
John J. DeRusso
34 Andrews Drive
Massapequa Park, New York 11762
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of
10
<PAGE> 12
any savings bank, savings and loan association, savings and loan holding
company, bank or bank holding company if such position (a) entails working in
(or providing services in) New York City, Nassau, Suffolk or Westchester
counties or (b) entails working in (or providing services in) any county in
northern New Jersey or southern Connecticut that is both (i) within the Bank's
primary trade (or operating) area at the time in question, which shall be
determined by reference to the Bank's business plan as in effect from time to
time, and (ii) in material or substantial deposit-taking functions or lending
activities at such time; provided, however, that this Section 11 shall not apply
if Executive's employment is terminated for the reasons set forth in Section 4,
5, 6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes the Employment Agreement dated October 24, 1995 between
the Bank and the Executive, except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to the Executive of a kind
elsewhere provided. No provisions of this Agreement shall be interpreted to mean
that Executive is subject to receiving fewer benefits than those available to
him without reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement effective January 23, 1997, as it may
be amended from time to time, between Executive and the Company, such
compensation payments and benefits paid by the Company will be deemed to satisfy
the corresponding obligations of the Bank under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
11
<PAGE> 13
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or
12
<PAGE> 14
settlement, Executive shall be entitled to the payment of all back-pay,
including salary, bonuses and any other cash compensation, fringe benefits and
any compensation and benefits due Executive under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E= the rate at which the excise tax is assessed under Section
4999 of the Code;
P= the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI= the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI= the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M= the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
13
<PAGE> 15
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Bank, the Executive shall
not, without the prior written consent of the Bank or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Bank and
14
<PAGE> 16
those designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Bank or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- --------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- --------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- ---------------------------- --------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- ---------------------------- --------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ John J. DeRusso
- ---------------------------- --------------------------------
JOHN J. DeRUSSO
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 29th day of January, 1997, before me personally came John J.
DeRusso, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ROOSEVELT SAVINGS BANK
AND
IRA H. KRAMER
Amended and Restated as of
January 23, 1997
<PAGE> 2
ROOSEVELT SAVINGS BANK
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and among
Roosevelt Savings Bank (the "Bank"), a New York chartered savings bank, with its
principal administrative office at 1122 Franklin Avenue, Garden City, New York,
T R Financial Corp., a corporation organized under the laws of the State of
Delaware which is the holding company for the Bank (the "Company") and Ira H.
Kramer (the "Executive"). This Agreement amends and restates the Employment
Agreement dated October 24, 1995 by and among the Bank, the Company and the
Executive.
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Senior Vice President and Corporate Secretary of the Bank. The
Executive shall render administrative and management services to the Bank such
as are customarily performed by persons situated in a similar executive capacity
and shall perform such other duties not inconsistent with his title and office
as may be assigned to him by or under the authority of the Board of Directors of
the Bank (the "Board"). The Executive shall have such authority as is necessary
or appropriate to carry out his assigned duties. Failure to reelect Executive as
Senior Vice President and Corporate Secretary, without the consent of the
Executive shall constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including (i) service as Senior
Vice President and Corporate Secretary of the Bank, (ii) performance of such
duties not inconsistent with his title and office as may be assigned to him by
the Chairman of the Board or by or under the authority of the Board, and (iii)
such other activities and services related to the organization, operation and
management of the Bank. During
<PAGE> 3
the Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Bank in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Bank. It is also expressly agreed that the Executive may
conduct activities subsequent to the Effective Date that are generally accepted
for an executive in his position, regardless of whether conducted by the
Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank,
the daily extensions provided pursuant to Section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or Section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Company are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Company ("Company
Agreement") and the course of conduct upon which such termination is based would
not constitute grounds for Termination for Cause under Section 8, then Executive
shall, to the extent practicable, assume such duties and responsibilities
formerly performed at the Company as part of his duties and responsibilities as
Senior Vice President and Corporate Secretary of the Bank. Nothing in this
provision shall be interpreted as restricting the Bank's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary at an annual rate of not less than
$155,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Bank's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
2
<PAGE> 4
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to the Roosevelt
Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R Financial
Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank Recognition and
Retention Plan for Officers, the T R Financial Corp. 1993 Incentive Stock Option
Plan, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health and accident plans, alternative recovery programs,
group life, health coverage (including hospitalization, medical and major
medical), prescription drug, dental and long-term disability insurance plans, or
any other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) Executive's principal place of employment shall be at the Bank's
executive offices at the address first above written, or at such other location
in New York City or in Nassau, Suffolk or Westchester County at which the Bank
shall maintain its principal executive offices, or at such other location as the
Board and Executive may mutually agree upon. The Bank shall provide Executive,
at his principal place of employment, with a private office, stenographic
services and other support services and facilities suitable to his position with
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse Executive for his
ordinary and necessary business expenses, including, without limitation, fees
for memberships in such clubs and organizations as Executive and the Board shall
mutually agree are necessary and appropriate for business purposes, and travel
and entertainment expenses, incurred in connection with the performance of his
duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Company Agreement, the Bank shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Company Agreement less
any compensation and benefits received from the Company, subject to the terms
and conditions of this Agreement including the Termination for Cause provisions
in Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change-in-Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from
3
<PAGE> 5
the Bank's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Senior Vice President and Corporate Secretary, (B) a
material adverse change in Executive's function, duties, or responsibilities,
which change would cause Executive's position to become one of lesser
responsibility importance, or scope from the position and attributes thereof
described in Section l, above (and any such material change shall be deemed a
continuing breach of this Agreement), (C) a relocation of Executive's principal
place of employment by more than 30 miles from its location at the Effective
Date of this Agreement, or a material reduction in the benefits and perquisites
to the Executive from those being provided as of the Effective Date of this
Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Bank. Upon the occurrence of any event
described in clauses (A), (B), (C), (D) or (E), above, Executive shall have the
right to elect to terminate his employment under this Agreement by resignation
upon written notice pursuant to Section 9 given within a reasonable period of
time not to exceed, except in case of a continuing breach, four calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Bank
shall be obligated to pay and to provide Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Bank;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's employee benefit plans and programs
and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits, as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Bank during
the remaining unexpired Employment Period at the highest
annual rate of salary achieved during the Employment Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Bank during
the remaining unexpired Employment Period earning the Base
Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present
4
<PAGE> 6
values are to be determined using a discount rate of 6% and
the mortality tables prescribed under section 72 of the
Internal Revenue Code of 1986, as amended ("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Bank, where
such present values are to be determined using a discount rate
of 6% and the mortality tables prescribed under section 72 of
the Code; and
(viii)the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Bank's officers as a result of the performance of the
Bank; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii) during each calendar year without regard to whether
such payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive
5
<PAGE> 7
compensation plans or programs, multiplied by (B) the salary
that would have been paid to Executive during each such
calendar year, which shall not be less than Executive's Base
Salary at the date of Termination.
The benefits to be provided under, and the amounts payable
pursuant to, this Section 4 shall be provided and be payable
without regard to proof of damages and without regard to the
Executive's efforts, if any, to mitigate damages. The Bank and
Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of
employment are not capable of accurate measurement as of the
date first above written and that such liquidated damages
constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
(10) days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Bank shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Bank's stockholders, was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent Board shall
be considered as though he were a member of the Incumbent Board, but excluding,
for this purpose, any such person whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction occurs in which the
6
<PAGE> 8
Bank or Company is not the resulting entity; or (D) a proxy statement shall be
distributed soliciting proxies from stockholders of the Bank, by someone other
than the current management of the Bank, seeking stockholder approval of a plan
of reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Bank is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Bank and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank's or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Bank on a full time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
7
<PAGE> 9
(b) The Bank will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Bank, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the Bank
or the Company and its affiliated companies (all such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Bank, the amount of life insurance provided to the Executive by the Bank shall
not be less than the lesser of $400,000 or three times the Executive's then
annual Base Salary. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within ten days of the Date
of Termination. With respect to the provision of Other Benefits after the Change
of Control Date, the term Other Benefits as utilized in this Section 6A shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Bank and affiliated companies to the estates and
beneficiaries of peer executives of the Bank and such affiliates companies under
such plans, programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their beneficiaries at
any time during the 120-day period immediately preceding the Change in Control
Date.
8
<PAGE> 10
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Bank or its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Bank shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Bank. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only
9
<PAGE> 11
if such notice is given in good faith and the party giving such notice pursues
the resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Bank will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as a participant
in all compensation, benefit and insurance plans in which he was participating
when the notice of dispute was given, until the dispute is finally resolved in
accordance with this Agreement. Amounts paid under this Section are in addition
to all other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement.
(d) The Bank may terminate the Executive's employment at any time,
but any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Ira H. Kramer
12 Hollywood Drive
Plainview, New York 11803
If to the Board:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (l) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Bank as may reasonably be required by the Bank
in connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not,
10
<PAGE> 12
without the written consent of the Board, become an officer, employee,
consultant, director or trustee of any savings bank, savings and loan
association, savings and loan holding company, bank or bank holding company if
such position (a) entails working in (or providing services in) New York City,
Nassau, Suffolk or Westchester counties or (b) entails working in (or providing
services in) any county in northern New Jersey or southern Connecticut that is
both (i) within the Bank's primary trade (or operating) area at the time in
question, which shall be determined by reference to the Bank's business plan as
in effect from time to time, and (ii) in material or substantial deposit-taking
functions or lending activities at such time; provided, however, that this
Section 11 shall not apply if Executive's employment is terminated for the
reasons set forth in Section 4, 5, 6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Bank. The Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, including the Employment Agreement dated
June 29, 1993 and the amended and restated Employment Agreement dated October
24, 1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER COMPANY AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, amended and restated effective January
23, 1997, as it may be amended from time to time, between Executive and the
Company, such compensation payments and benefits paid by the Company will be
deemed to satisfy the corresponding obligations of the Bank under this
Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only
11
<PAGE> 13
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Bank, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Any such successor of
the Bank shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Bank, and Executive's obligations
hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Bank agrees to pay
all such costs as they are incurred by Executive, to the full extent permitted
by law, and without regard to whether the Bank believes that it has a defense to
any action, suit or proceeding by the Executive or that it is not obligated for
any payments under this Agreement.
12
<PAGE> 14
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
any act taken or not taken, or any omission or failure to act, by him in good
faith while performing services for the Company or the Bank to the same extent
and upon the same terms and conditions as other similarly situated officers and
directors of the Company or the Bank. If and to the extent that the Company or
the Bank, maintains, at any time during the Employment Period, an insurance
policy covering the other officers and directors of the Company or the Bank
against laws suits, the Company or the Bank shall use its best efforts to cause
Executive to be covered under such policy upon the same terms and conditions as
other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Bank or "in the ownership of a substantial portion of the
assets" of the Bank occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Bank, the
Company or any direct or indirect subsidiary or affiliate of the Company to (or
for the benefit of) the Executive, the Bank shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been
13
<PAGE> 15
if no excise tax under Section 4999 of the Code had been imposed. With respect
to any payment in the nature of compensation that is made to (or for the benefit
of) the Executive under the terms of this Agreement or otherwise and on which an
excise tax under Section 4999 of the Code will be assessed, the payment
determined under this Section 23(a) shall be made to the Executive on the
earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company is required to withhold such tax, or (ii)
the date the tax is required to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Bank, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Bank, or when reduced by
the amount of the payment made to the Bank under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the Bank
a copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least twenty days before the date on which such return is
required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Bank or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Bank or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Bank or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. Notwithstanding the foregoing, in the event of a termination of
employment, the amounts provided in Section 4 shall be the Executive's sole
remedy for any purported breach of this Agreement by the Bank.
25. MITIGATION; OTHER CLAIMS.
The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Bank all secret or confidential information, knowledge or data relating to
the Bank or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Bank or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this
14
<PAGE> 16
Agreement). After termination of the Executive's employment with the Bank, the
Executive shall not, without the prior written consent of the Bank or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Bank and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Bank or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
15
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: ROOSEVELT SAVINGS BANK
/s/ Dennis E. Henchy By: /s/ John M. Tsimbinos
- ------------------------------ ------------------------------
Dennis E. Henchy John M. Tsimbinos
Executive Vice President, Duly Authorized Director
Chief Financial Officer
/s/ Dennis E. Henchy By: /s/ A. Gordon Nutt
- ------------------------------ ------------------------------
Dennis E. Henchy A. Gordon Nutt
Executive Vice President, Duly Authorized Director
Chief Financial Officer
[SEAL]
ATTEST: T R FINANCIAL CORP.
(Guarantor)
/s/ Dennis E. Henchy By: /s/ John M. Tsimbinos
- ------------------------------ ------------------------------
Dennis E. Henchy John M. Tsimbinos
Executive Vice President, Duly Authorized Director
Chief Financial Officer
/s/ Dennis E. Henchy By: /s/ A. Gordon Nutt
- ------------------------------ ------------------------------
Dennis E. Henchy A. Gordon Nutt
Executive Vice President, Duly Authorized Director
Chief Financial Officer
[SEAL]
WITNESS:
/s/ A. Gordon Nutt /s/ Ira H. Kramer
- ------------------------------ ------------------------------
IRA H. KRAMER
16
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ira H.
Kramer, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
17
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
JOHN M. TSIMBINOS
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and John M. Tsimbinos (the "Executive").
This Agreement amends and restates the Employment Agreement dated October 13,
1995 by and between the Company and the Executive. Any reference to "Bank" shall
mean Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Chairman of the Board and Chief Executive Officer of the Company. The
Executive shall render administrative and management services to the Company
such as are customarily performed by persons situated in a similar executive
capacity and shall perform such other duties not inconsistent with his title and
office as may be assigned to him by or under the authority of the Board of
Directors of the Company (the "Board"). The Executive shall have such authority
as is necessary or appropriate to carry out his assigned duties. Failure to
reelect Executive as Chairman of the Board and Chief Executive Officer or
renominate Executive as Director of the Company, without the consent of the
Executive shall constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the third anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
68. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as Chairman
of the Board and Chief Executive Officer of the Company, (ii) performance of
such duties not inconsistent with his title and office as may be assigned to him
by or under the authority of the Board, and (iii) such other activities and
services
<PAGE> 3
related to the organization, operation and management of the Company. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Company. It is also expressly agreed that the Executive
may conduct activities subsequent to the Effective Date that are generally
accepted for an executive in his position, regardless of whether conducted by
the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as Chairman of the Board
and Chief Executive Officer of the Company. Nothing in this provision shall be
interpreted as restricting the Company's right to remove Executive for Cause in
accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$600,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Company shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
-2-
<PAGE> 4
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
provide Executive with an automobile suitable to the position of Chairman of the
Board and Chief Executive Officer of the Company, in accordance with its prior
practices, and such automobile may be used by Executive in carrying out his
duties under the Agreement, including commuting between his residence and his
principal place of employment, and other personal use. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
-3-
<PAGE> 5
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from the Company's employ, upon any: (A) failure to elect or reelect
or to appoint or reappoint Executive as Chairman of the Board and Chief
Executive Officer of the Company or to nominate or re-nominate Executive as
Director of the Bank or the Company, (B) material adverse change in Executive's
function, duties, or responsibilities, which change would cause Executive's
position to become one of lesser responsibility, importance, or scope from the
position and attributes thereof described in Section 1, above (and any such
material change shall be deemed a continuing breach of this Agreement), (C)
relocation of Executive's principal place of employment by more than 30 miles
from its location at the Effective Date of this Agreement, or a material
reduction in the benefits and perquisites to the Executive from those being
provided as of the Effective Date of this Agreement, (D) liquidation or
dissolution of the Bank or Company, or (E) material breach of this Agreement by
the Company. Upon the occurrence of any event described in clauses (A), (B),
(C), (D) or (E), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon written notice pursuant to
Section 9 given within a reasonable period of time not to exceed, except in case
of a continuing breach, four calendar months after the event giving rise to said
right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
(iv) if and to the extent not already provided under Sections
4(b)(ii) and 4(b)(iii), health (including hospitalization,
medical and major medical), insurance benefits and life
insurance coverage, during his lifetime and his spouse's
lifetime, equivalent to the greater of (A) the coverage
provided on the date of this Agreement to retirees of the Bank
or the Company who had retired on normal retirement or (B) the
coverage provided at the date of Executive's termination of
-4-
<PAGE> 6
employment with the Bank or the Company to retirees of the
Bank or the Company who retire on normal retirement;
(v) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(vi) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present values are to be
determined using a discount rate of 6% and the mortality
tables prescribed under section 72 of the Internal Revenue
Code of 1986, as amended ("Code");
(vii) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(viii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period plus two additional
years of service and earning the Base Salary at the date of
termination during the remaining unexpired Employment Period
over (B) the present value of the benefits to which he is
actually entitled under any such plans, as of the Date of
Termination of his employment with the Company, where such
present values are to be determined using a discount rate of
6% and the mortality tables prescribed under section 72 of the
Code; and
(ix) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each
-5-
<PAGE> 7
calendar year that ends during the remaining unexpired
Employment Period in an amount equal to the product of (A) the
average percentage rate of incentive compensation award (as a
percentage of base salary) for each such calendar year for the
four highest compensated officers of the Bank or the Company
under such incentive compensation plans and programs,
multiplied by (B) the salary that would have been paid to
Executive during each such calendar year, which shall not be
less than the Executive's Base Salary at the date of
termination, such payments to be made at the same time and in
the same manner as payments are made to other officers of the
Bank or the Company pursuant to the terms of such incentive
compensation plans and programs; provided, however, that
payments under this Section 4(b)(ix) shall not be made to
Executive for any year in which no incentive compensation
payments are made to any of the Company's officers as a result
of the performance of the Company; provided further, that, if
a Change in Control of the Bank or the Company as defined in
Section 5 has occurred, payments shall be made to Executive
under this Section 4(b)(ix) during each calendar year without
regard to whether such payments are made to any of the Bank's
or the Company's officers and without regard to whether such
incentive compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results
-6-
<PAGE> 8
in a transaction requiring prior FRB approval under the Bank Holding Company Act
of 1956, as amended, and the regulations promulgated thereunder by the FRB at 12
C.F.R. Section 225.11, as in effect on the date hereof, except for the Company's
acquisition of the Bank and any transaction resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; or (iv) without limitation such a Change in Control shall be deemed
to have occurred at such time as (A) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or the Company representing 20% or more of
the Bank's or the Company's outstanding securities except for any securities of
the Bank purchased by the Company in connection with the initial conversion of
the Bank from mutual to stock form (the "Conversion") and any securities
purchased by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; or (B) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the directors
then comprising the Incumbent Board shall be considered as though he were a
member of the Incumbent Board, but excluding, for this purpose, any such person
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company or similar transaction occurs in which the Bank or Company is not the
resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean five years from
the Change in Control Date (even if such five-year period extends beyond the
Executive's 68th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Company and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
-7-
<PAGE> 9
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
-8-
<PAGE> 10
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliates
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section , no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.
-9-
<PAGE> 11
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
John M. Tsimbinos
238 Clent Road
Great Neck, New York 11021
-10-
<PAGE> 12
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement
dated June 29, 1993 and the amended and restated Employment Agreement dated
October 13, 1995, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of a kind elsewhere
provided. No provisions of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such
-11-
<PAGE> 13
compensation payments and benefits paid by the Bank will be deemed to satisfy
the corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
-12-
<PAGE> 14
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to whether the Company believes that it has
a defense to any action, suit or proceeding by the Executive or that it is not
obligated for any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company to (or for
the benefit of) the Executive, the Company shall pay to the Executive an amount
equal to X determined under the following formula:
-13-
<PAGE> 15
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax applicable
to the Executive under the Code for the taxable year in
question (taking into account any phase-out or loss of
deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state and
local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything
-14-
<PAGE> 16
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment..
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
-15-
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, Roosevelt Bank and TR Financial Corp. have
caused this Agreement to be executed and their seals to be affixed hereunto by
their duly authorized directors, and Executive has signed this Agreement, on the
23rd day of January, 1997.
ATTEST: T R FINANCIAL CORP.
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- --------------------------- ------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- --------------------------- ------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ John M. Tsimbinos
- --------------------------- ------------------------------
JOHN M. TSIMBINOS
-16-
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came James
E. Orr, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ernest
L. Loser, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-------------------------------------
Eleanor I. Feuring
Notary Public
-17-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
A. GORDON NUTT
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and A. Gordon Nutt (the "Executive"). This
Agreement amends and restates the Employment Agreement dated October 13, 1995 by
and between the Company and the Executive. Any reference to "Bank" shall mean
Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as President and Chief Administrative Officer of the Company. The
Executive shall render administrative and management services to the Company
such as are customarily performed by persons situated in a similar executive
capacity and shall perform such other duties not inconsistent with his title and
office as may be assigned to him by or under the authority of the Board of
Directors of the Company (the "Board"). The Executive shall have such authority
as is necessary or appropriate to carry out his assigned duties. Failure to
reelect Executive as President and Chief Administrative Officer or renominate
Executive as Director of the Company, without the consent of the Executive shall
constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the third anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
68. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as President
and Chief Administrative Officer of the Company, and if duly elected, Director
of the Company, (ii) performance of such duties not inconsistent with his title
and office as may be assigned to him by the Chairman of the Board or by or
<PAGE> 3
under the authority of the Board, and (iii) such other activities and services
related to the organization, operation and management of the Company. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Company. It is also expressly agreed that the Executive
may conduct activities subsequent to the Effective Date that are generally
accepted for an executive in his position, regardless of whether conducted by
the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as President and Chief
Administrative Officer of the Company. Nothing in this provision shall be
interpreted as restricting the Company's right to remove Executive for Cause in
accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$260,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary
-2-
<PAGE> 4
provided in this Section 3(a), the Company shall provide Executive at no cost to
Executive with all such other benefits as are provided uniformly to permanent
full-time employees of the Bank.
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
provide Executive with an automobile suitable to the position of President and
Chief Administrative Officer of the Company, in accordance with its prior
practices, and such automobile may be used by Executive in carrying out his
duties under the Agreement, including commuting between his residence and his
principal place of employment, and other personal use. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
-3-
<PAGE> 5
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for Disability, as defined in Section 6; for Retirement, as
defined in Section 7; for Cause, as defined in Section 8; or upon Executive's
death; or (ii) unless consented to by the Executive, Executive's voluntary
resignation from the Company's employ, upon any: (A) failure to elect or reelect
or to appoint or reappoint Executive as President and Chief Administrative
Officer of the Company or to nominate or renominate Executive as Director of the
Bank or the Company, (B) material adverse change in Executive's function,
duties, or responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Section 1, above (and any such material change
shall be deemed a continuing breach of this Agreement), (C) relocation of
Executive's principal place of employment by more than 30 miles from its
location at the Effective Date of this Agreement, or a material reduction in the
benefits and perquisites to the Executive from those being provided as of the
Effective Date of this Agreement, (D) liquidation or dissolution of the Bank or
Company, or (E) material breach of this Agreement by the Company. Upon the
occurrence of any event described in clauses (A), (B), (C), (D) or (E), above,
Executive shall have the right to elect to terminate his employment under this
Agreement by resignation upon written notice pursuant to Section 9 given within
a reasonable period of time not to exceed, except in case of a continuing
breach, four calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
-4-
<PAGE> 6
(iv) if and to the extent not already provided under Sections
4(b)(ii) and 4(b)(iii), health (including hospitalization,
medical and major medical), insurance benefits and life
insurance coverage, during his lifetime and his spouse's
lifetime, equivalent to the greater of (A) the coverage
provided on the date of this Agreement to retirees of the Bank
or the Company who had retired on normal retirement or (B) the
coverage provided at the date of Executive's termination of
employment with the Bank or the Company to retirees of the
Bank or the Company who retire on normal retirement;
(v) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(vi) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the present value of the
benefits to which he is actually entitled under the Bank's or
the Company's retirement plan (and any other defined benefit
plan maintained by the Bank or the Company) as of the date of
his termination, where such present values are to be
determined using a discount rate of 6% and the mortality
tables prescribed under section 72 of the Internal Revenue
Code of 1986, as amended ("Code");
(vii) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(viii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period plus two additional
years of service and earning the Base Salary at the date of
termination during the remaining unexpired Employment Period
over (B) the present value of the benefits to which he is
actually entitled under any such plans, as of the Date of
Termination of his employment with the Company, where such
present values are to be determined
-5-
<PAGE> 7
using a discount rate of 6% and the mortality tables
prescribed under section 72 of the Code; and
(ix) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(ix) shall not be made to Executive for any year in which
no incentive compensation payments are made to any of the
Company's officers as a result of the performance of the
Company; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(ix) during each calendar year without regard to whether
such payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof,
-6-
<PAGE> 8
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (ii) results in a Change in Control of the Bank or
the Company within the meaning of the Change in Bank Control Act and the Rules
and Regulations promulgated by the Federal Deposit Insurance Corporation (the
"FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank and the Board of
Governors of the Federal Reserve System ("FRB") at 12 C.F.R. Section 225.41(b)
with respect to the Company, as in effect on the date hereof, but excluding any
such Change in Control resulting from the purchase of securities by the
Company's or the Bank's tax-qualified employee benefit plans and trusts; (iii)
results in a transaction requiring prior FRB approval under the Bank Holding
Company Act of 1956, as amended, and the regulations promulgated thereunder by
the FRB at 12 C.F.R. Section 225.11, as in effect on the date hereof, except for
the Company's acquisition of the Bank and any transaction resulting from the
purchase of securities by the Company's or the Bank's tax-qualified employee
benefit plans and trusts; or (iv) without limitation such a Change in Control
shall be deemed to have occurred at such time as (A) any "person" (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Bank or the Company representing 20% or more
of the Bank's or the Company's outstanding securities except for any securities
of the Bank purchased by the Company in connection with the initial conversion
of the Bank from mutual to stock form (the "Conversion") and any securities
purchased by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; or (B) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the directors
then comprising the Incumbent Board shall be considered as though he were a
member of the Incumbent Board, but excluding, for this purpose, any such person
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company or similar transaction occurs in which the Bank or Company is not the
resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean five years from
the Change in Control Date (even if such five-year period extends beyond the
Executive's 68th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be
-7-
<PAGE> 9
payable without regard to proof of damages and without regard to the Executive's
efforts, if any, to mitigate damages. The Company and Executive hereby stipulate
that the damages which may be incurred by Executive following any Change in
Control are not capable of accurate measurement as of the date first above
written and that such liquidated damages constitute reasonable damages under the
circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
-8-
<PAGE> 10
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliates
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section, no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of
-9-
<PAGE> 11
a resolution duly adopted by the affirmative vote of not less than three-fourths
of the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
-10-
<PAGE> 12
If to Executive:
A. Gordon Nutt
634 Wyndemere Avenue
Ridgewood, New Jersey 07450
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement
dated June 29, 1993 and the amended and restated Employment Agreement dated
October 13, 1995, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of a kind elsewhere
provided. No provisions of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.
-11-
<PAGE> 13
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such compensation
payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
-12-
<PAGE> 14
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to whether the Company believes that it has
a defense to any action, suit or proceeding by the Executive or that it is not
obligated for any payments under this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the
-13-
<PAGE> 15
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company to (or for the benefit of) the Executive, the Company shall pay to the
Executive an amount equal to X determined under the following formula:
X = E x P
---------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax
applicable to the Executive under the Code for the taxable
year in question (taking into account any phase-out or loss
of deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
-14-
<PAGE> 16
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
-15-
<PAGE> 17
SIGNATURES
IN WITNESS WHEREOF, T R Financial Corp. has caused this Agreement to
be executed and its seal to be affixed hereunto by its duly authorized
directors, and Executive has signed this Agreement, on the 23rd day of January,
1997.
ATTEST: T R FINANCIAL CORP.
/s/ Ira H. Kramer By: /s/ James E. Orr, Jr.
- ----------------------------- ---------------------------------------
Ira H. Kramer James E. Orr, Jr.
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ Ernest L. Loser
- ----------------------------- ---------------------------------------
Ira H. Kramer Ernest L. Loser
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ A. Gordon Nutt
- ----------------------------- ---------------------------------------
A. GORDON NUTT
-16-
<PAGE> 18
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came James
E. Orr, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ernest
L. Loser, to me known, who, being by me duly sworn, did depose and say that he
is a member of the Board of Directors of T R Financial Corp., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
----------------------------------
Eleanor I. Feuring
Notary Public
-17-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
WILLIAM R. KUHN
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and William R. Kuhn (the "Executive"). This
Agreement amends and restates the Employment Agreement dated October 13, 1995 by
and between the Company and the Executive. Any reference to "Bank" shall mean
Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Executive Vice President and Chief Real Estate Lending Officer of the
Company. The Executive shall render administrative and management services to
the Company such as are customarily performed by persons situated in a similar
executive capacity and shall perform such other duties not inconsistent with his
title and office as may be assigned to him by or under the authority of the
Board of Directors of the Company (the "Board"). The Executive shall have such
authority as is necessary or appropriate to carry out his assigned duties.
Failure to reelect Executive as Executive Vice President and Chief Real Estate
Lending Officer of the Company, without the consent of the Executive shall
constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as Executive
Vice President and Chief Real Estate Lending Officer of the Company, (ii)
performance of such duties not inconsistent with his title and office as may be
assigned to him by the Chairman of the Board or by or under the authority of the
Board, and (iii) such other activities and services related to the organization,
operation and management of the
<PAGE> 3
Company. During the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic, industry or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
executive's responsibilities to the Company. It is also expressly agreed that
the Executive may conduct activities subsequent to the Effective Date that are
generally accepted for an executive in his position, regardless of whether
conducted by the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as Executive Vice
President and Chief Real Estate Lending Officer of the Company. Nothing in this
provision shall be interpreted as restricting the Company's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$205,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Company shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
-2-
<PAGE> 4
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for
-3-
<PAGE> 5
Disability, as defined in Section 6; for Retirement, as defined in Section 7;
for Cause, as defined in Section 8; or upon Executive's death; or (ii) unless
consented to by the Executive, Executive's voluntary resignation from the
Company's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Executive Vice President and Chief Real Estate Lending
Officer of the Company, (B) material adverse change in Executive's function,
duties, or responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Section 1, above (and any such material change
shall be deemed a continuing breach of this Agreement), (C) relocation of
Executive's principal place of employment by more than 30 miles from its
location at the Effective Date of this Agreement, or a material reduction in the
benefits and perquisites to the Executive from those being provided as of the
Effective Date of this Agreement, (D) liquidation or dissolution of the Bank or
Company, or (E) material breach of this Agreement by the Company. Upon the
occurrence of any event described in clauses (A), (B), (C), (D) or (E), above,
Executive shall have the right to elect to terminate his employment under this
Agreement by resignation upon written notice pursuant to Section 9 given within
a reasonable period of time not to exceed, except in case of a continuing
breach, four calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date
-4-
<PAGE> 6
of Termination during the remaining unexpired Employment
Period over (B) the present value of the benefits to which he
is actually entitled under the Bank's or the Company's
retirement plan (and any other defined benefit plan maintained
by the Bank or the Company) as of the date of his termination,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Internal Revenue Code of 1986, as amended
("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Company,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Code; and
(viii) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Company's officers as a result of the performance of the
Company; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii)
-5-
<PAGE> 7
during each calendar year without regard to whether such
payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, AS IN EFFECT ON
THE DATE hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Company's stockholders, was approved by a vote of
at least three-quarters of the directors then comprising the Incumbent Board
shall be considered as
-6-
<PAGE> 8
though he were a member of the Incumbent Board, but excluding, for this purpose,
any such person whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction occurs in which the Bank or Company is not
the resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Company and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the
-7-
<PAGE> 9
affirmative vote of at least three-fourths of the members of the Board acting in
good faith and such vote shall not be made prior to the expiration of a
sixty-day period following the date on which the Board shall, by written notice
to the Executive, furnish him a statement of its grounds for proposing to make
such determination, during which period Executive shall be afforded a reasonable
opportunity to make oral and written presentations to the members of the Board,
and to be represented by his legal counsel at such presentations, to refute the
grounds for the proposed determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided
-8-
<PAGE> 10
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliates companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section, no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except
-9-
<PAGE> 11
upon the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal there from having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
William R. Kuhn
3 Midwood Road
Stony Brook, New York 11790
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
-10-
<PAGE> 12
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement
dated June 29, 1993 and the amended and restated Employment Agreement dated
October 13, 1995, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of a kind elsewhere
provided. No provisions of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such compensation
payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by
-11-
<PAGE> 13
written instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or condition for
the future as to any act other than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to
-12-
<PAGE> 14
whether the Company believes that it has a defense to any action, suit or
proceeding by the Executive or that it is not obligated for any payments under
this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company to (or for
the benefit of) the Executive, the Company shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
---------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax
applicable to the Executive under the Code for the taxable
year in question (taking into account any phase-out or loss
of deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
-13-
<PAGE> 15
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
-14-
<PAGE> 16
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
SIGNATURES
IN WITNESS WHEREOF, T R Financial Corp. has caused this Agreement to
be executed and its seal to be affixed hereunto by its duly authorized
directors, and Executive has signed this Agreement, on the 23rd day of January,
1997.
ATTEST: T R FINANCIAL CORP.
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- -------------------------- --------------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- -------------------------- --------------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ William R. Kuhn
- -------------------------- --------------------------------------------
WILLIAM R. KUHN
-15-
<PAGE> 17
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
resides at 238 Clent Road, Great Neck, New York, that he is a member of the
Board of Directors of T R Financial Corp., the Delaware corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he resides at 634 Wyndemere Avenue, Ridgewood, New Jersey, that he is a member
of the Board of Directors of T R Financial Corp., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came William
R. Kuhn, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
-16-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
DENNIS E. HENCHY
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and Dennis E. Henchy (the "Executive").
This Agreement amends and restates the Employment Agreement dated October 13,
1995 by and between the Company and the Executive. Any reference to "Bank" shall
mean Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Chief Financial Officer and Executive Vice President of the Company.
The Executive shall render administrative and management services to the Company
such as are customarily performed by persons situated in a similar executive
capacity and shall perform such other duties not inconsistent with his title and
office as may be assigned to him by or under the authority of the Board of
Directors of the Company (the "Board"). The Executive shall have such authority
as is necessary or appropriate to carry out his assigned duties. Failure to
reelect Executive as Chief Financial Officer and Executive Vice President of the
Company, without the consent of the Executive shall constitute a breach of this
Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as Chief
Financial Officer and Executive Vice President of the Company, (ii) performance
of such duties not inconsistent with his title and office as may be assigned to
him by the Chairman of the Board or by or under the authority of the Board, and
(iii) such other activities and services related to the organization, operation
and management of the Company.
<PAGE> 3
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Company. It is also expressly agreed that the Executive
may conduct activities subsequent to the Effective Date that are generally
accepted for an executive in his position, regardless of whether conducted by
the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as Chief Financial
Officer and Executive Vice President of the Company. Nothing in this provision
shall be interpreted as restricting the Company's right to remove Executive for
Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$200,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Company shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
-2-
<PAGE> 4
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for
-3-
<PAGE> 5
Disability, as defined in Section 6; for Retirement, as defined in Section 7;
for Cause, as defined in Section 8; or upon Executive's death; or (ii) unless
consented to by the Executive, Executive's voluntary resignation from the
Company's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Chief Financial Officer and Executive Vice President of
the Company, (B) material adverse change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above (and any such material change shall be
deemed a continuing breach of this Agreement), (C) relocation of Executive's
principal place of employment by more than 30 miles from its location at the
Effective Date of this Agreement, or a material reduction in the benefits and
perquisites to the Executive from those being provided as of the Effective Date
of this Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Company. Upon the occurrence of any
event described in clauses (A), (B), (C), (D) or (E), above, Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation upon written notice pursuant to Section 9 given within a reasonable
period of time not to exceed, except in case of a continuing breach, four
calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date
-4-
<PAGE> 6
of Termination during the remaining unexpired Employment
Period over (B) the present value of the benefits to which he
is actually entitled under the Bank's or the Company's
retirement plan (and any other defined benefit plan maintained
by the Bank or the Company) as of the date of his termination,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Internal Revenue Code of 1986, as amended
("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Company,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Code; and
(viii) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Company's officers as a result of the performance of the
Company; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii)
-5-
<PAGE> 7
during each calendar year without regard to whether such
payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Company's stockholders, was approved by a vote of
at least three-quarters of the directors then comprising the Incumbent Board
shall be considered as
-6-
<PAGE> 8
though he were a member of the Incumbent Board, but excluding, for this purpose,
any such person whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction occurs in which the Bank or Company is not
the resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Company and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the
-7-
<PAGE> 9
affirmative vote of at least three-fourths of the members of the Board acting in
good faith and such vote shall not be made prior to the expiration of a
sixty-day period following the date on which the Board shall, by written notice
to the Executive, furnish him a statement of its grounds for proposing to make
such determination, during which period Executive shall be afforded a reasonable
opportunity to make oral and written presentations to the members of the Board,
and to be represented by his legal counsel at such presentations, to refute the
grounds for the proposed determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided
-8-
<PAGE> 10
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliates companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section, no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except
-9-
<PAGE> 11
upon the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal there from having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Dennis E. Henchy
22 Pembroke Drive
No. Massapequa, New York 11758
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
-10-
<PAGE> 12
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement date
June 29, 1993 and the amended and restated Employment Agreement dated October
13, 1995, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provisions of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such compensation
payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by
-11-
<PAGE> 13
written instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or condition for
the future as to any act other than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to
-12-
<PAGE> 14
whether the Company believes that it has a defense to any action, suit or
proceeding by the Executive or that it is not obligated for any payments under
this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company to (or for
the benefit of) the Executive, the Company shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
---------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax
applicable to the Executive under the Code for the taxable
year in question (taking into account any phase-out or loss
of deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
-13-
<PAGE> 15
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
-14-
<PAGE> 16
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
SIGNATURES
IN WITNESS WHEREOF, T R Financial Corp. has caused this Agreement to
be executed and its seal to be affixed hereunto by its duly authorized
directors, and Executive has signed this Agreement, on the 23rd day of January,
1997.
ATTEST: T R FINANCIAL CORP.
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- --------------------------- --------------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- --------------------------- --------------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ William R. Kuhn /s/ Dennis E. Henchy
- --------------------------- -------------------------------------------
DENNIS E. HENCHY
-15-
<PAGE> 17
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
resides at 238 Clent Road, Great Neck, New York, that he is a member of the
Board of Directors of T R Financial Corp., the Delaware corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he resides at 634 Wyndemere Avenue, Ridgewood, New Jersey, that he is a member
of the Board of Directors of T R Financial Corp., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Dennis
E. Henchy, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
-16-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
JOHN J. DeRUSSO
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and John J. DeRusso (the "Executive"). This
Agreement amends and restates the Employment Agreement dated October 13, 1995 by
and between the Bank and the Executive. Any reference to "Bank" shall mean
Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Senior Vice President, Strategic Planning and Special Projects, of the
Company. The Executive shall render administrative and management services to
the Company such as are customarily performed by persons situated in a similar
executive capacity and shall perform such other duties not inconsistent with his
title and office as may be assigned to him by or under the authority of the
Board of Directors of the Company (the "Board"). The Executive shall have such
authority as is necessary or appropriate to carry out his assigned duties.
Failure to reelect Executive as Senior Vice President, Strategic Planning and
Special Projects, of the Company, without the consent of the Executive shall
constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twelve (12) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the first anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as Senior
Vice President, Strategic Planning and Special Projects, of the Company, (ii)
performance of such duties not inconsistent with his title and office as may be
assigned to him by the Chairman of the Board or by or under the authority of the
Board, and
<PAGE> 3
(iii) such other activities and services related to the organization, operation
and management of the Company. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate, civic,
industry or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the executive's responsibilities to the Company. It is also expressly agreed
that the Executive may conduct activities subsequent to the Effective Date that
are generally accepted for an executive in his position, regardless of whether
conducted by the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as Senior Vice President,
Strategic Planning and Special Projects, of the Company. Nothing in this
provision shall be interpreted as restricting the Company's right to remove
Executive for Cause in accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$150,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Company shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
-2-
<PAGE> 4
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for
-3-
<PAGE> 5
Disability, as defined in Section 6; for Retirement, as defined in Section 7;
for Cause, as defined in Section 8; or upon Executive's death; or (ii) unless
consented to by the Executive, Executive's voluntary resignation from the
Company's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Senior Vice President, Strategic Planning and Special
Projects, of the Company, (B) material adverse change in Executive's function,
duties, or responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Section 1, above (and any such material change
shall be deemed a continuing breach of this Agreement), (C) relocation of
Executive's principal place of employment by more than 30 miles from its
location at the Effective Date of this Agreement, or a material reduction in the
benefits and perquisites to the Executive from those being provided as of the
Effective Date of this Agreement, (D) liquidation or dissolution of the Bank or
Company, or (E) material breach of this Agreement by the Company. Upon the
occurrence of any event described in clauses (A), (B), (C), (D) or (E), above,
Executive shall have the right to elect to terminate his employment under this
Agreement by resignation upon written notice pursuant to Section 9 given within
a reasonable period of time not to exceed, except in case of a continuing
breach, four calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date
-4-
<PAGE> 6
of Termination during the remaining unexpired Employment
Period over (B) the present value of the benefits to which he
is actually entitled under the Bank's or the Company's
retirement plan (and any other defined benefit plan maintained
by the Bank or the Company) as of the date of his termination,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Internal Revenue Code of 1986, as amended
("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Company,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Code; and
(viii) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Company's officers as a result of the performance of the
Company; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii)
-5-
<PAGE> 7
during each calendar year without regard to whether such
payments are made to any of the Bank's or the Company's
officers and without regard to whether such incentive
compensation plans and programs have been amended or
terminated, in an amount that is not less that the product of
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plans
or programs, multiplied by (B) the salary that would have been
paid to Executive during each such calendar year, which shall
not be less than Executive's Base Salary at the date of
Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Company's stockholders, was approved by a vote of
at least three-quarters of the directors then comprising the Incumbent Board
shall be considered as
-6-
<PAGE> 8
though he were a member of the Incumbent Board, but excluding, for this purpose,
any such person whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction occurs in which the Bank or Company is not
the resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean one year from
the Change in Control Date (even if such one-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Company and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the
-7-
<PAGE> 9
affirmative vote of at least three-fourths of the members of the Board acting in
good faith and such vote shall not be made prior to the expiration of a
sixty-day period following the date on which the Board shall, by written notice
to the Executive, furnish him a statement of its grounds for proposing to make
such determination, during which period Executive shall be afforded a reasonable
opportunity to make oral and written presentations to the members of the Board,
and to be represented by his legal counsel at such presentations, to refute the
grounds for the proposed determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided
-8-
<PAGE> 10
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliates companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section, no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except
-9-
<PAGE> 11
upon the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal there from having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
John J. DeRusso
34 Andrews Drive
Massapequa Park, New York 11762
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
-10-
<PAGE> 12
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement
dated October 13, 1995, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to the Executive of a kind
elsewhere provided. No provisions of this Agreement shall be interpreted to mean
that Executive is subject to receiving fewer benefits than those available to
him without reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such compensation
payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be
-11-
<PAGE> 13
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to
-12-
<PAGE> 14
whether the Company believes that it has a defense to any action, suit or
proceeding by the Executive or that it is not obligated for any payments under
this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company to (or for
the benefit of) the Executive, the Company shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
---------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax
applicable to the Executive under the Code for the taxable
year in question (taking into account any phase-out or loss
of deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
-13-
<PAGE> 15
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment..
-14-
<PAGE> 16
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
SIGNATURES
IN WITNESS WHEREOF, T R Financial Corp. has caused this Agreement to
be executed and its seal to be affixed hereunto by its duly authorized
directors, and Executive has signed this Agreement, on the 23rd day of January,
1997.
ATTEST: T R FINANCIAL CORP.
/s/ Ira H. Kramer By: /s/ John M. Tsimbinos
- -------------------------- ---------------------------------------
Ira H. Kramer John M. Tsimbinos
Corporate Secretary Duly Authorized Director
/s/ Ira H. Kramer By: /s/ A. Gordon Nutt
- -------------------------- ---------------------------------------
Ira H. Kramer A. Gordon Nutt
Corporate Secretary Duly Authorized Director
[SEAL]
WITNESS:
/s/ Dennis E. Henchy /s/ John J. DeRusso
- -------------------------- -------------------------------------------
JOHN J. DeRUSSO
-15-
<PAGE> 17
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
resides at 238 Clent Road, Great Neck, New York, that he is a member of the
Board of Directors of T R Financial Corp., the Delaware corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he resides at 634 Wyndemere Avenue, Ridgewood, New Jersey, that he is a member
of the Board of Directors of T R Financial Corp., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 29th day of January, 1997, before me personally came John J.
DeRusso, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
-16-
<PAGE> 1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
T R FINANCIAL CORP.
AND
IRA H. KRAMER
Amended and Restated as of
January 23, 1997
<PAGE> 2
T R FINANCIAL CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 23, 1997 by and
between T R Financial Corp., a corporation organized under the laws of the State
of Delaware (the "Company") with its principal administrative office at 1122
Franklin Avenue, Garden City, New York, which is the holding company for the
Roosevelt Savings Bank (the "Bank"), and Ira H. Kramer (the "Executive"). This
Agreement amends and restates the Employment Agreement dated October 13, 1995 by
and between the Company and the Executive. Any reference to "Bank" shall mean
Roosevelt Savings Bank or any successor thereto.
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company
on a full-time basis for said period;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve as Senior Vice President and Corporate Secretary of the Company. The
Executive shall render administrative and management services to the Company
such as are customarily performed by persons situated in a similar executive
capacity and shall perform such other duties not inconsistent with his title and
office as may be assigned to him by or under the authority of the Board of
Directors of the Company (the "Board"). The Executive shall have such authority
as is necessary or appropriate to carry out his assigned duties. Failure to
reelect Executive as Senior Vice President and Corporate Secretary of the
Company, without the consent of the Executive shall constitute a breach of this
Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall
be deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of twenty-four (24) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 9, in which case the term of this
Agreement shall become fixed and shall end on the second anniversary of the date
of such written notice; provided, that in any event, the term of this Agreement
shall end on the last day of the month in which the Executive attains the age of
65. For purposes of this Agreement, the term "Employment Period" shall mean the
term of this Agreement plus such extensions as are provided herein.
(b) During the period of his employment hereunder, except for
periods of absence occasioned by illness, disability, holidays, reasonable
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder including (i) service as Senior
Vice President and Corporate Secretary of the Company, (ii) performance of such
duties not inconsistent with his title and office as may be assigned to him by
the Chairman of the Board or by or under the authority of the Board, and (iii)
such other activities and services related to the organization, operation and
management of the Company.
<PAGE> 3
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic, industry or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the executive's
responsibilities to the Company. It is also expressly agreed that the Executive
may conduct activities subsequent to the Effective Date that are generally
accepted for an executive in his position, regardless of whether conducted by
the Executive prior to the Effective Date.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by the Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit
a continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and Executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Company,
the daily extensions provided pursuant to Section 2(a) shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in Section 4(a) or section 5(b), the term "unexpired
Employment Period" shall mean the period of time commencing from the date of
such termination and ending on the last day of the Employment Period computed
with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank ("Bank Agreement") and
the course of conduct upon which such termination is based would not constitute
grounds for Termination for Cause under Section 8, then Executive shall, to the
extent practicable, assume such duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as Senior Vice President
and Corporate Secretary of the Company. Nothing in this provision shall be
interpreted as restricting the Company's right to remove Executive for Cause in
accordance with Section 8.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation a salary at an annual rate of not less than
$155,000 per year or such higher rate as may be prescribed by or under the
authority of the Board ("Base Salary"). The annual salary payable under this
Section 3 shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary, which increased amount shall be considered
the Executive's Base Salary for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a particular
time be reduced without his prior written consent. In addition to the Base
Salary provided in this Section 3(a), the Company shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
-2-
<PAGE> 4
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including, but not limited to, the
Roosevelt Savings Bank Salary Reduction Plan in RSI Retirement Trust, the T R
Financial Corp. Employee Stock Ownership Plan, the Roosevelt Savings Bank
Recognition and Retention Plan for Officers, the T R Financial Corp. 1993
Incentive Stock Option Plan, retirement plans, supplemental retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, alternative
recovery programs, group life, health coverage (including hospitalization,
medical and major medical), prescription drug, dental and long-term disability
insurance plans, or any other employee benefit plan or arrangement made
available by the Company in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
will be entitled to incentive compensation and bonuses as provided in any plan
of the Company in which Executive is eligible to participate. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location in New York City or in Nassau, Suffolk or Westchester County at which
the Company shall maintain its principal executive offices, or at such other
location as the Board and Executive may mutually agree upon. The Company shall
provide Executive, at his principal place of employment, with a private office,
stenographic services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Board shall mutually agree are necessary and appropriate for
business purposes, and travel and entertainment expenses, incurred in connection
with the performance of his duties under this Agreement, upon presentation to
the Company of an itemized account of such expenses in such form as the Company
may reasonably require.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(e) by reason of one of the circumstances
contained in Section 2(e), and the Executive receives or will receive less than
the full amount of compensation and benefits formerly entitled to him under the
Bank Agreement, the Company shall assume the obligation to provide Executive
with his compensation and benefits in accordance with the Bank Agreement less
any compensation and benefits received from the Bank, subject to the terms and
conditions of this Agreement including the Termination for Cause provisions in
Section 8.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to
the terms and conditions stated in Sections 8 and 15.
(a) Upon the occurrence of an Event of Termination (as herein
defined) during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than: following a Change in Control, as defined
in Section 5; for
-3-
<PAGE> 5
Disability, as defined in Section 6; for Retirement, as defined in Section 7;
for Cause, as defined in Section 8; or upon Executive's death; or (ii) unless
consented to by the Executive, Executive's voluntary resignation from the
Company's employ, upon any: (A) failure to elect or reelect or to appoint or
reappoint Executive as Senior Vice President and Corporate Secretary of the
Company, (B) material adverse change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above (and any such material change shall be
deemed a continuing breach of this Agreement), (C) relocation of Executive's
principal place of employment by more than 30 miles from its location at the
Effective Date of this Agreement, or a material reduction in the benefits and
perquisites to the Executive from those being provided as of the Effective Date
of this Agreement, (D) liquidation or dissolution of the Bank or Company, or (E)
material breach of this Agreement by the Company. Upon the occurrence of any
event described in clauses (A), (B), (C), (D) or (E), above, Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation upon written notice pursuant to Section 9 given within a reasonable
period of time not to exceed, except in case of a continuing breach, four
calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination as set forth in
Section 4(a), on the Date of Termination, as defined in Section 9, the Company
shall be obligated to pay, or to provide, Executive, or, in the event of his
subsequent death, to his surviving spouse or such other beneficiary or
beneficiaries as Executive may designate in writing, or if neither his estate,
as severance pay or liquidated damages, or both, the benefits provided below and
a payment equal to the sum of the payments set forth below:
(i) his earned but unpaid salary as of the date of the termination
of his employment with the Company;
(ii) the benefits, if any, to which he is entitled as a former
employee under the Bank's or Company's employee benefit plans
and programs and compensation plans and programs;
(iii) continued group life, health (including hospitalization,
medical and major medical), prescription drug, dental and
long-term disability insurance benefits as provided by the
Bank or the Company, in addition to that provided pursuant to
Section 4(b)(ii), if and to the extent necessary to provide
for Executive, for the remaining unexpired Employment Period,
coverage equivalent to the coverage to which he would have
been entitled if he had continued working for the Company
during the remaining unexpired Employment Period at the
highest annual rate of salary achieved during the Employment
Period;
(iv) a lump sum payment, as liquidated damages in an amount equal
to the present value of the salary that Executive would have
earned if he had continued working for the Bank and the
Company during the remaining unexpired Employment Period at
Executive's Base Salary at the Date of Termination where such
present value is to be determined using a discount rate of 6%;
(v) a lump sum payment in an amount equal to the excess, if any,
of: (A) the present value of the benefits to which he would be
entitled under the Bank's or the Company's retirement plan
(and any other defined benefit plan maintained by the Bank or
the Company) if he had continued working for the Company
during the remaining unexpired Employment Period earning the
Base Salary at the Date of Termination during the remaining
unexpired Employment Period over (B) the
-4-
<PAGE> 6
present value of the benefits to which he is actually entitled
under the Bank's or the Company's retirement plan (and any
other defined benefit plan maintained by the Bank or the
Company) as of the date of his termination, where such present
values are to be determined using a discount rate of 6% and
the mortality tables prescribed under section 72 of the
Internal Revenue Code of 1986, as amended ("Code");
(vi) a lump sum payment in an amount equal to the present value of
the Bank's or the Company's contributions that would have been
made on his behalf under the Bank's or the Company's 401(k)
savings plan (and any other defined contribution plan
maintained by the Bank or the Company) if he had continued
working for the Bank and the Company during the remaining
unexpired Employment Period earning the Base Salary at the
Date of Termination during the remaining unexpired Employment
Period and making the maximum amount of employee contributions
required, if any, under such plan or plans, where such present
values are to be determined using a discount rate of 6%;
(vii) a lump sum payment in an amount equal to the excess, if any,
of (A) the present value of benefits to which he would be
entitled under any supplemental executive retirement plan or
any other excess benefit plan, within the meaning of section
3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any plan to provide deferred income
for a select group of management or highly compensated
employees adopted by the Bank or the Company, if he had
continued working for the Bank or the Company during the
remaining unexpired Employment Period earning the Base Salary
at the date of termination during the remaining unexpired
Employment Period over (B) the present value of the benefits
to which he is actually entitled under any such plans, as of
the Date of Termination of his employment with the Company,
where such present values are to be determined using a
discount rate of 6% and the mortality tables prescribed under
section 72 of the Code; and
(viii) the payments that would have been made to Executive under all
incentive compensation plans and programs adopted by the Bank
or the Company if he had continued working for the Bank and
the Company during the remaining unexpired Employment Period
and had earned an incentive award in each calendar year that
ends during the remaining unexpired Employment Period in an
amount equal to the product of (A) the average percentage rate
of incentive compensation award (as a percentage of base
salary) for each such calendar year for the four highest
compensated officers of the Bank or the Company under such
incentive compensation plans and programs, multiplied by (B)
the salary that would have been paid to Executive during each
such calendar year, which shall not be less than the
Executive's Base Salary at the date of termination, such
payments to be made at the same time and in the same manner as
payments are made to other officers of the Bank or the Company
pursuant to the terms of such incentive compensation plans and
programs; provided, however, that payments under this Section
4(b)(viii) shall not be made to Executive for any year in
which no incentive compensation payments are made to any of
the Company's officers as a result of the performance of the
Company; provided further, that, if a Change in Control of the
Bank or the Company as defined in Section 5 has occurred,
payments shall be made to Executive under this Section
4(b)(viii) during each calendar year without regard to whether
such payments are made to
-5-
<PAGE> 7
any of the Bank's or the Company's officers and without regard
to whether such incentive compensation plans and programs have
been amended or terminated, in an amount that is not less that
the product of (A) the maximum percentage rate at which an
award was ever available to Executive under such incentive
compensation plans or programs, multiplied by (B) the salary
that would have been paid to Executive during each such
calendar year, which shall not be less than Executive's Base
Salary at the date of Termination.
The benefits to be provided under, and the amounts payable pursuant to, this
Section 4 shall be provided and be payable without regard to proof of damages
and without regard to the Executive's efforts, if any, to mitigate damages. The
Company and Executive hereby stipulate that the damages which may be incurred by
Executive following any such termination of employment are not capable of
accurate measurement as of the date first above written and that such liquidated
damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 4 shall be made within ten
days of the Executive's Date of Termination.
(d) In the event payments are made under Section 4 or Section 5, the
Executive may select an individual or firm to provide him with financial and tax
planning services with respect to such payments, and the Company shall reimburse
the Executive for the reasonable costs of such services.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there
shall have been a Change in Control of the Bank or Company, as set forth below.
For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean an event of a nature that: (i) would be required to be reported in
response to Item l(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank Control Act and
the Rules and Regulations promulgated by the Federal Deposit Insurance
Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank
and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R.
Section 225.41(b) with respect to the Company, as in effect on the date hereof,
but excluding any such Change in Control resulting from the purchase of
securities by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; (iii) results in a transaction requiring prior FRB approval under
the Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof, except for the Company's acquisition of the Bank and any
transaction resulting from the purchase of securities by the Company's or the
Bank's tax-qualified employee benefit plans and trusts; or (iv) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the initial conversion of the Bank from mutual to stock form
(the "Conversion") and any securities purchased by the Company's or the Bank's
tax-qualified employee benefit plans and trusts; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Company's stockholders, was approved by a vote of
at least three-quarters of the directors then comprising the Incumbent Board
shall be considered as though he were a member of the Incumbent Board, but
excluding, for this purpose, any such person
-6-
<PAGE> 8
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company or similar transaction occurs in which the Bank or Company is not the
resulting entity; or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or Bank or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Bank or the Company; or (E) a tender offer is made for 20% or more of the voting
securities of the Bank or Company then outstanding. The "Change in Control Date"
shall mean the date during the Employment Period on which a Change in Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated and if it is reasonably
demonstrated by the Executive that such termination of employment (1) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) If any of the events described in Section 5(a) constituting a
Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the payments and the
benefits provided below on the Change in Control Date. The amounts payable and
the benefits to be provided under this Section 5(b) to Executive shall consist
of the payments and benefits that would be due to the Executive and the
Executive's family under Section 4 as if an Event of Termination under Section
4(a) had occurred on the Change in Control Date and that for purposes of this
Section 5(b), the term "unexpired Employment Period" shall mean three years from
the Change in Control Date (even if such three-year period extends beyond the
Executive's 65th birthday). The benefits to be provided under, and the amounts
payable pursuant to, this Section 5 shall be provided and be payable without
regard to proof of damages and without regard to the Executive's efforts, if
any, to mitigate damages. The Company and Executive hereby stipulate that the
damages which may be incurred by Executive following any Change in Control are
not capable of accurate measurement as of the date first above written and that
such liquidated damages constitute reasonable damages under the circumstances.
(c) Payments to Executive under Section 5(b) shall be made on the
Change in Control Date.
6. TERMINATION FOR DISABILITY.
(a) In the event of Termination for Disability, Executive shall
receive the benefits provided in Section 6(b); provided, however, that the
benefits provided under Section 6(b) shall not be deemed to be in lieu of the
benefits he is otherwise entitled as a former employee under the Bank or
Company's employee plans and programs. For purposes of this Agreement, Executive
may be terminated for disability only if (i) Executive shall have been absent
from his duties with the Company on a full-time basis for six (6) consecutive
months, or (ii) a majority of the members of the Board acting in good faith
determine that, based upon competent and independent medical evidence presented
by a physician or physicians agreed upon by the parties, Executive's physical or
mental condition is such that he is totally and permanently incapable of
engaging in any substantial gainful employment based upon his education,
training and experience; provided, however, that on and after the earliest date
on which a Change in Control of the Bank or Company as defined in Section 5
occurs, such a determination shall require the affirmative vote of at least
three-fourths of the members of the Board acting in good faith and such vote
-7-
<PAGE> 9
shall not be made prior to the expiration of a sixty-day period following the
date on which the Board shall, by written notice to the Executive, furnish him a
statement of its grounds for proposing to make such determination, during which
period Executive shall be afforded a reasonable opportunity to make oral and
written presentations to the members of the Board, and to be represented by his
legal counsel at such presentations, to refute the grounds for the proposed
determination;
(b) The Company will cause to be continued insurance coverage,
including life, health, dental, prescription drug and disability coverage
substantially identical to the coverage maintained by the Bank or the Company
for Executive prior to his Termination for Disability. This coverage shall cease
upon the earlier of (i) the date Executive returns to the full-time employment
of the Company, in the same capacity as he was employed prior to his Termination
for Disability and pursuant to an employment agreement between Executive and the
Company; (ii) Executive's full-time employment by another employer; (iii)
Executive's attaining the normal age of retirement or receiving benefits under
the Bank's or the Company's defined benefit plan; (iv) the Executive's death;
(v) the Executive's eligibility to collect payments under the disability
provision of the defined benefit plan; or (vi) the expiration of the term of
this Agreement.
(c) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
6A. TERMINATION UPON DEATH.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. In such event, the Executive and
the Executive's legal representatives shall be entitled to the following:
(i) payment of the sum of (1) the Executive's annual Base Salary
through the Date of Termination to the extent not theretofore paid and (2)
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"),
(ii) the continuation of all benefits to the Executive's family and
dependent that would have been provided if the Executive had been entitled
to the benefits under Section 4(b)(ii), (iii) and (iv), and
(iii) the timely payment of any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (all such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
provided, however, that if the Executive dies while in the employment of the
Company, the amount of life insurance provided to the Executive by the Company
shall not be less than the lesser of $400,000 or three times the Executive's
then annual Base Salary. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ten days of
the Date of Termination. With respect to the provision of Other Benefits after
the Change of Control Date, the term Other Benefits as utilized in this Section
6A shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the
-8-
<PAGE> 10
Company and such affiliates companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Change in Control Date.
7. TERMINATION UPON RETIREMENT.
Termination by the Company of the Executive based on "Retirement"
shall mean termination in accordance with the Company's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank or the
Company and other plans to which Executive is a party, and shall be entitled to
the benefit, if any, as a former employee under the Bank's or the Company's
employee benefit plans and programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The terms "Termination for Cause" or "Cause" shall mean termination
because of the Executive's personal dishonesty, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, conviction of a felony with respect to the Bank or the Company or
any material breach of this Agreement. For purposes of this Section, no act, or
the failure to act, on Executive's part shall be "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company or its affiliates. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.
9. NOTICE.
(a) Any purported termination by the Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to Section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty days after a Notice
of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case
-9-
<PAGE> 11
the Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
(d) The Company may terminate the Executive's employment at any
time, but any termination by the Company, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement or under any other benefit or compensation plans or programs
maintained by the Bank or the Company from time to time. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 8 hereinabove.
(e) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Ira H. Kramer
12 Hollywood Drive
Plainview, New York 11803
If to the Board:
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Attention: Corporate Secretary
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement
shall be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such
information and assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party.
-10-
<PAGE> 12
11. COVENANT NOT TO COMPETE.
Executive hereby covenants and agrees that for a period of one year
following his Date of Termination, if such termination occurs prior to the end
of the term of the Agreement, he shall not, without the written consent of the
Board, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company if such position (a) entails working in (or
providing services in) New York City, Nassau, Suffolk or Westchester counties or
(b) entails working in (or providing services in) any county in northern New
Jersey or southern Connecticut that is both (i) within the Bank's primary trade
(or operating) area at the time in question, which shall be determined by
reference to the Bank's business plan as in effect from time to time, and (ii)
in material or substantial deposit-taking functions or lending activities at
such time; provided, however, that this Section 11 shall not apply if
Executive's employment is terminated for the reasons set forth in Section 4, 5,
6, or 7.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Company.
13. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive including the Employment Agreement
dated June 29, 1993 and the amended and restated Employment Agreement dated
October 13, 1995, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of a kind elsewhere
provided. No provisions of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that full compensation payments and benefits are paid to or received by
Executive under the Employment Agreement, dated January 23, 1997, as it may be
amended from time to time, between Executive and the Bank, such compensation
payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Company under this Agreement.
15. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by
-11-
<PAGE> 13
written instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or condition for
the future as to any act other than that specifically waived.
17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company, and Executive's
obligations hereunder shall continue in favor of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York, without reference to conflicts of law principles.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty miles from the location of the Company, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect.
Judgment may be-entered on the arbitrators' award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement. The Company agrees to
pay all such costs as they are incurred by Executive, to the full extent
permitted by law, and without regard to
-12-
<PAGE> 14
whether the Company believes that it has a defense to any action, suit or
proceeding by the Executive or that it is not obligated for any payments under
this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Company shall indemnify, hold harmless and defend Executive
for any act taken or not taken, or any omission or failure to act, by him in
good faith while performing services for the Company or the Bank to the same
extent and upon the same terms and conditions as other similarly situated
officers and directors of the Company or the Bank. If and to the extent that the
Company or the Bank, maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Company or the
Bank against laws suits, the Company or the Bank shall use its best efforts to
cause Executive to be covered under such policy upon the same terms and
conditions as other similarly situated officers and directors.
23. TAX INDEMNIFICATION.
(a) This Section 23 shall apply if at the relevant date and during
the six-month period ending on the relevant date, the Bank was in compliance
with all applicable minimum capital requirements imposed upon the Bank by
federal or state regulatory authorities, taking into account any phase-in
period, grandfather rights or similar provisions that are applicable to the
Bank. For purposes of the preceding sentence, the term "relevant date" shall
mean the day before the date on which the change "in the ownership or effective
control" of the Company or "in the ownership of a substantial portion of the
assets" of the Company occurs within the meaning of Section 280G of the Code. If
this Section 23 applies, then if, for any taxable year, the Executive shall be
liable for the payment of an excise tax under Section 4999 of the Code, with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company to (or for
the benefit of) the Executive, the Company shall pay to the Executive an amount
equal to X determined under the following formula:
X = E x P
---------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section 23;
FI = the highest effective marginal rate of income tax
applicable to the Executive under the Code for the taxable
year in question (taking into account any phase-out or loss
of deductions, personal exemptions and other similar
adjustments);
SLI = the sum of the highest effective marginal rates of income
tax applicable to the Executive under all applicable state
and local laws for the taxable year in question (taking into
account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
-13-
<PAGE> 15
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
Any payment under this Section 23 shall be adjusted so as to fully indemnify the
Executive on an after-tax basis so that the Executive would be in the same
after-tax financial position in which he would have been if no excise tax under
Section 4999 of the Code had been imposed. With respect to any payment in the
nature of compensation that is made to (or for the benefit of) the Executive
under the terms of this Agreement or otherwise and on which an excise tax under
Section 4999 of the Code will be assessed, the payment determined under this
Section 23(a) shall be made to the Executive on the earlier of (i) the date the
Company, the Bank or any direct or indirect subsidiary or affiliate of the
Company is required to withhold such tax, or (ii) the date the tax is required
to be paid by the Executive.
(b) Notwithstanding anything in this Section 23 to the contrary, in
the event that the Executive's liability for the excise tax under Section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in Section 23(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under Section 23(a), when increased by the amount of the payment
made to the Executive under this Section 23(b) by the Company, or when reduced
by the amount of the payment made to the Company under this Section 23(b) by the
Executive, equals the amount that, it is finally determined, should have
properly been paid to the Executive under Section 23(a). The interest paid under
this Section 23(b) shall be determined at the rate provided under Section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was paid
to the Executive under this Section 23, the Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an excise tax
payment made by the Company, at least twenty days before the date on which such
return is required to be filed with the Internal Revenue Service.
24. NON-EXCLUSIVITY OF RIGHTS.
Except as otherwise provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, in the event of a
termination of employment, the amounts provided in Section 4 shall be the
Executive's sole remedy for any purported breach of this Agreement by the
Company.
25. MITIGATION; OTHER CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
-14-
<PAGE> 16
26. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. For purposes of this Agreement, secret and confidential
information, knowledge or data relating to the Company or any of its affiliates,
and their respective business, shall not include any information that is public,
publicly available or available through trade association sources.
27. ACCESS TO DOCUMENTS.
The Executive shall have the right to obtain copies of any Company
or Bank documents that Executive reasonably believes, in good faith, are
necessary or appropriate in determining his entitlement to, and the amount of,
payments and benefits under this Agreement.
SIGNATURES
IN WITNESS WHEREOF, T R Financial Corp. has caused this Agreement to
be executed and its seal to be affixed hereunto by its duly authorized
directors, and Executive has signed this Agreement, on the 23rd day of January,
1997.
ATTEST: T R FINANCIAL CORP.
/s/ Dennis E. Henchy By: /s/ John M. Tsimbinos
- ------------------------------- ---------------------------------------
Dennis E. Henchy John M. Tsimbinos
Executive Vice President, Duly Authorized Director
Chief Financial Officer
/s/ Dennis E. Henchy By: /s/ A. Gordon Nutt
- ------------------------------- ---------------------------------------
Dennis E. Henchy A. Gordon Nutt
Executive Vice President, Duly Authorized Director
Chief Financial Officer
[SEAL]
WITNESS:
/s/ A. Gordon Nutt /s/ Ira H. Kramer
- ------------------------------- -------------------------------------------
IRA H. KRAMER
-15-
<PAGE> 17
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came John M.
Tsimbinos, to me known, who, being by me duly sworn, did depose and say that he
resides at 238 Clent Road, Great Neck, New York, that he is a member of the
Board of Directors of T R Financial Corp., the Delaware corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came A.
Gordon Nutt, to me known, who, being by me duly sworn, did depose and say that
he resides at 634 Wyndemere Avenue, Ridgewood, New Jersey, that he is a member
of the Board of Directors of T R Financial Corp., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NASSAU )
On this 23rd day of January, 1997, before me personally came Ira H.
Kramer, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
/s/ Eleanor I. Feuring
-----------------------------------
Eleanor I. Feuring
Notary Public
-16-
<PAGE> 1
EXHIBIT 10.19
T R FINANCIAL CORP.
1993 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 23, 1997
I. PURPOSE
The purpose of the T R Financial Corp. 1993 Stock Option Plan for
Outside Directors, as amended and restated as of January 23, 1997 (the
"Directors' Option Plan"), is to promote the growth and profitability of T R
Financial Corp. (the "Company") and Roosevelt Savings Bank (the "Bank") by
providing the outside directors of the Company and its Affiliates, including the
outside directors of the Bank (for purposes of this Directors' Option Plan, the
term "Outside Director" shall mean a member of the Board of Directors of the
Company or any of its Affiliates (the "Board") not also serving as an employee
of the Company or any of its Affiliates; provided, however, that such term shall
include any members of the Board who have previously served as an employee of
the Company or any of its Affiliates and who cease to be so employed but
continue on the Board) with an incentive to achieve long-term objectives of the
Company and to attract and retain Outside Directors of outstanding competence by
providing such Outside Directors with an opportunity to acquire an equity
interest in the Company. For purposes of this Section I, the term "Affiliate"
shall mean (i) a member of a controlled group of corporations, as defined in
Section 1563(a) of the Internal Revenue Code of 1986, as amended, determined
without regard to Sections 1563(a)(4) and (e)(3)(C), of which the Company is a
member or (ii) an unincorporated trade or business which is under common control
with the Company as determined in accordance with Section 414(c) of the Code and
the regulations issued thereunder.
II. GRANT OF OPTIONS
(a) Initial Grant. Each Outside Director who is serving in such
capacity on the date of the conversion of the Bank from mutual to stock form and
the acquisition of the Bank by the Company (the "Conversion") and the Company's
initial public offering, and who was not a consulting trustee or a consultant of
the Bank immediately prior to the consummation of the Conversion, shall be
granted non-statutory stock options (the "Non-statutory Stock Options" or the
"Options") to purchase shares of the common stock of the Company (the "Common
Stock") as follows:
<TABLE>
<CAPTION>
YEARS OF SERVICE NUMBER OF OPTIONS
- ---------------- -----------------
<S> <C>
Less than 5....................................................... 20,485
5 to 10........................................................... 25,947
More than 10...................................................... 34,140
</TABLE>
In addition, each Outside Director of the Company who is serving in
such capacity on the date of the Company's initial public offering and at the
Effective Date and who was a consulting trustee or consultant of the Bank
immediately prior to the consummation of the Conversion of the Bank shall be
granted Non-statutory Stock Options to purchase 28,677 shares of Common Stock.
The Options granted herein are subject to adjustment as provided in Section IV
hereof. The purchase price per share of the Common Stock deliverable upon the
exercise of each Non-statutory Stock Option shall be the initial public offering
price of the Common Stock sold in connection with the Conversion of the Bank.
The effective date of these initial grants shall be the Effective Date of the
Directors' Option Plan.
(b) Grants to Subsequent Outside Directors. To the extent Options are
available for grant under the Directors' Option Plan, each Outside Director
("Subsequent Outside Director") who is first
<PAGE> 2
elected as a director subsequent to June 29, 1993, the effective date of the
Directors' Option Plan ("Effective Date"), but prior to January 1, 1997, is
hereby granted, as of the date on which such Subsequent Outside Director is
qualified and first begins to serve as an Outside Director, Non-statutory Stock
Options to purchase 20,485 shares of Common Stock, subject to adjustment
pursuant to Section IV, or to purchase such lesser number of shares of Common
Stock as remain in this Directors' Option Plan. The purchase price per share of
the Common Stock deliverable upon exercise of such Options shall equal the Fair
Market Value of the Common Stock on the date the grant of such Options is
effective, as determined under paragraph (d) of this Section II.
If Options for sufficient shares are not available under the Directors'
Option Plan to fulfill the grant of Options under Section II(b) hereof to any
Subsequent Outside Director first elected subsequent to the Effective Date and
prior to January 1, 1997, and thereafter Options become available, such
Subsequent Outside Director shall then receive Options to purchase an amount of
shares of Common Stock, determined by dividing pro rata among each Subsequent
Outside Director, Options for the number of shares then available under the
Outside Directors' Plan, not to exceed 20,485 shares of Common Stock, subject to
adjustment as to any one Subsequent Outside Director. The date of grant shall be
the date Options for such shares become available. The purchase price per share
of the Common Stock deliverable upon exercise of such Options shall equal the
Fair Market Value of the Common Stock on the date such Options are granted, as
determined under paragraph (d) of this Section II.
If, pursuant to this paragraph (b), a Subsequent Outside Director
receives Options to purchase fewer than 20,485 shares of Common Stock, subject
to adjustment pursuant to Section IV hereof, and Options for additional shares
subsequently become available under the Directors' Option Plan, Options to
purchase such shares of Common Stock shall first be allocated as of the date of
availability, to any Subsequent Outside Director who has not previously been
granted an Option. Such Options shall be granted to purchase a number of shares
of Common Stock no greater than the number of shares covered by Options granted
to other Subsequent Outside Directors first elected subsequent to the Effective
Date, but who have received Options to purchase fewer than 20,485 shares of
Common Stock (subject to adjustment pursuant to Section IV). Thereafter, Options
for any remaining shares shall then be granted pro rata among all Subsequent
Outside Directors granted Options to purchase fewer than 20,485 shares of Common
Stock. No Outside Director first elected subsequent to the Effective Date shall
receive an Option to purchase more than 20,485 shares (subject to adjustment) of
Common Stock.
Notwithstanding the foregoing, effective as of January 1, 1997, no
Options shall be granted to Subsequent Outside Directors pursuant to this
Section II(b).
(c) Annual Grants to Outside Directors. Effective as of April 22, 1997
for 1997, and as of the day following each annual meeting of stockholders of the
Company after 1997 ("Annual Grant Date"), to the extent that Options are
available for grant under the Directors' Option Plan, each Outside Director on
such Annual Grant Date shall be granted Non-statutory Stock Options to purchase
1,200 shares of Common Stock, subject to adjustment pursuant to Section IV, or
to purchase such lesser number of shares of Common Stock as remain in this
Directors' Option Plan. If Options for sufficient shares are not available under
the Directors' Option Plan to grant each Outside Director an Option to purchase
1,200 shares of Common Stock, then the shares available shall be divided pro
rata among each Outside Director. The purchase price per share of the Common
Stock deliverable upon exercise of such Options shall equal the Fair Market
Value of the Common Stock on the date the Options are granted, as determined in
paragraph (d) of this Section II.
Notwithstanding the foregoing, any former Outside Director who retires
from the Board prior to the Annual Grant Date in a particular year shall, if
such retiring Outside Director has five or more full
-2-
<PAGE> 3
years of service on the Board, receive Non-statutory Stock Options to purchase
1,200 shares of Common Stock, subject to any adjustments pursuant to Section IV,
in the year in which such Outside Director retires; provided, however, that such
Outside Director was an Outside Director on December 31st of the year prior to
the Annual Grant Date. For purposes of this Section II(c), "service on the
Board" shall include service on the Board while an employee of the Company or
any of its Affiliates and service as a trustee of the Bank prior to the
conversion of the Bank to stock form on June 29, 1993.
If Options for sufficient shares are not available under the Directors'
Option Plan to fulfill the grant under this Section II(c) to any Outside
Director, and thereafter Options become available, such Outside Director shall
then receive Options to purchase an amount of shares of Common Stock, which
amount shall be determined by dividing pro rata among each Outside Director
Options for the number of shares then available under the Outside Directors'
Plan; provided, however, that no Outside Director shall receive Options to
purchase more than 1,200 shares of Common Stock in any calendar year after 1996.
The date of grant shall be the date the Options for such shares become
available. The purchase price per share of the Common Stock deliverable upon
exercise of such Options shall equal the Fair Market Value of the Common Stock
on the date the Options are granted, as determined under paragraph (d) of this
Section II.
(d) Fair Market Value. For purposes of the Directors' Option Plan, when
used in connection with Common Stock on a specified date, Fair Market Value
means:
(i) the final reported sales price on the date in question (or
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange
on which the shares of Common Stock are listed or admitted to trading;
or
(ii) if the shares of Common Stock are not listed or admitted
to trading on any such exchange, the closing bid quotation with respect
to a share of Common Stock on such date on the Nasdaq Stock Market, or,
if no such quotation is provided, on another similar system, selected
by the committee established to administer the Directors' Option Plan
("Committee"), then in use; or
(iii) if sections II(d)(i) and (ii) are not applicable, the
fair market value of a share of Common Stock as the Committee may
determine. For purposes of the grant of Options in the Conversion, Fair
Market Value shall mean the initial public offering price of the Common
Stock.
III. TERMS AND CONDITIONS
(a) Vesting of Options.
(i) All Options granted pursuant to Sections II(a) and (b)
shall vest and become exercisable one year after the date of grant,
which in the case of Outside Directors serving on the Board at the time
of the Conversion of the Bank shall be the Effective Date; provided,
however, that in the event of death, Disability, Retirement, or a
Change in Control of the Company or Bank (all as defined in Section
III(f) below), all Options shall vest immediately, subject to Section
III(f) below.
(ii) All Options granted pursuant to Section II(c) shall vest
and become exercisable at a rate of one-third of the aggregate number
of Options granted at the end of each consecutive
-3-
<PAGE> 4
twelve-month period after the date of grant of such Options; provided,
however, that in the event of death, Disability, Retirement or a Change
in Control of the Company or Bank (all as defined in Section III(f)
below), all Options shall vest immediately, subject to Section III(f)
below.
(iii) Notwithstanding any other provision in this Plan, with
respect to Options granted pursuant to Sections II(a) and (b), if the
Outside Director's service on the Board is terminated prior to the date
the Plan is presented to the stockholders of the Company for
ratification, such Options may not be exercised prior to the date of
the stockholders' meeting regarding such ratification, but shall remain
exercisable for a period of one year from the date of such meeting.
(iv) If the Outside Director dies before fully exercising any
portion of an Option then exercisable, such Option may be exercised by
such Outside Director's designated beneficiary, or in the event that
such Outside Director has not designated a beneficiary, such Outside
Director's personal representative(s), heir(s) or devisee(s) at any
time within the one year period following his or her death; provided,
however, that in no event shall the Option be exercisable more than 120
months after the date of its grant.
(v) If the Outside Director is removed upon an intentional
failure to perform stated duties, a breach of a fiduciary duty
involving personal dishonesty which results in material loss to the
Company or one of its Affiliates, a willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or a
final cease-and-desist order which results in material loss to the
Company or one of its Affiliates ("Removal for Cause"), all Options
awarded to such Outside Director shall expire upon such Removal for
Cause.
(b) Option Agreement. Each Option shall be evidenced by a written
Option agreement between the Company and the Outside Director specifying the
number of shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions which are not inconsistent with the
terms of this grant.
(c) Termination of Option. Subject to the provisions of Section III(f),
each Option shall expire upon the earlier of (i) 120 months following the date
of grant, or (ii) one year following the date on which the Outside Director
ceases to serve in such capacity for any reason other than Removal for Cause.
(d) Manner of Exercise. The Option may be exercised from time to time,
in whole or in part, by delivering a written notice of exercise to one of the
Human Resources officers of the Bank. Such notice is irrevocable and must be
accompanied by full payment of the exercise price (as determined in Section
II(d) hereof) in cash or shares of previously acquired Common Stock of the
Company at the Fair Market Value of such shares determined on the exercise date
by the manner described in Section II(d) above or by such other means as
determined by the Board. Options granted under this Plan may be exercised
pursuant to a "cashless exercise" of an Option in accordance with applicable
securities laws. If previously acquired shares of Common Stock are tendered in
payment of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) Transferability. Each Option granted hereby may be exercised only
by the Outside Director to whom it is issued or, in the event of the Outside
Director's death, his or her designated beneficiary(ies), personal
representative(s), designee(s), heir(s) or devisee(s) pursuant to the terms of
Section III(d) hereof.
-4-
<PAGE> 5
(f) Termination of Service. Upon the termination of a recipient's
service on the Board for any reason other than death, Disability, Retirement,
Change in Control or Removal for Cause, the participant's Options shall be
exercisable only as to those shares which were immediately purchasable by the
recipient at the date of termination.
(g) Designation of Beneficiary. An Outside Director may designate a
person or persons to receive, in the event of death, any Option to which the
Outside Director would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Company and may be revoked in writing. If
an Outside Director fails effectively to designate a beneficiary, then such
Outside Director's estate will be deemed to be the beneficiary.
In the event of death or Disability of any recipient, all Options held
by such recipient, whether or not exercisable at such time, shall become
immediately exercisable by the recipient or the recipient's beneficiary(ies) or
legal representatives. Upon termination of the recipient's service due to
Retirement or a Change in Control, all Options held by such recipient, whether
or not exercisable at such time, shall also become immediately exercisable. For
purposes of this Directors' Option Plan, the following terms are defined:
(i) "Change in Control" means an event of a nature that: (i)
would be required to be reported in response to Item 1(a) of the
current report on Form 8-K, as in effect on the date hereof, pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (ii) results in a Change in Control of
the Bank or the Company within the meaning of the Change in Bank
Control Act and the Rules and Regulations promulgated by the Federal
Deposit Insurance Corporation (the "FDIC") at 12 C.F.R. Section
303.4(a) with respect to the Bank and the Board of Governors of the
Federal Reserve System ("FRB") at 12 C.F.R. Section 225.41(b) with
respect to the Company, as in effect on the date hereof, but excluding
any such Change in Control resulting from the purchase of securities by
the Company's or the Bank's tax-qualified employee benefit plans and
trusts; (iii) results in a transaction requiring prior FRB approval
under the Bank Holding Company Act of 1956, as amended, and the
regulations promulgated thereunder by the FRB at 12 C.F.R. Section
225.11, as in effect on the date hereof, except for the Company's
acquisition of the Bank and any transaction resulting from the purchase
of securities by the Company's or the Bank's tax-qualified employee
benefit plans and trusts; or (iv) without limitation, such a Change in
Control shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Bank or the Company representing 20% or more of the Bank's or the
Company's outstanding securities except for any securities of the Bank
purchased by the Company in connection with the initial conversion of
the Bank from mutual to stock form (the "Conversion") and any
securities purchased by the Company's or the Bank's tax-qualified
employee benefit plans and trusts; or (b) individuals who constitute
the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause
(b), considered as though he were a member of the Incumbent Board, but
excluding, for this purpose, any such person whose initial assumption
of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all
the assets of the Bank or
-5-
<PAGE> 6
the Company or similar transaction occurs in which the Bank or Company
is not the resulting entity; or (d) a proxy statement shall be
distributed soliciting proxies from stockholders of the Company, by
someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or
consolidation of the Company or Bank or similar transaction with one or
more corporations as a result of which the outstanding shares of the
class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not
issued by the Bank or the Company; or (e) a tender offer is made for
20% or more of the voting securities of the Bank or Company then
outstanding.
(ii) "Disability" means a condition of total incapacity,
mental or physical, preventing further performance of service as an
Outside Director, which the Board shall have determined, on the basis
of competent medical evidence, is likely to be permanent.
(iii) "Retirement" means the termination of service on the
Board after attainment of age 75 or following at least five full years
of service as a director, in either case following written notice to
the Board or the Secretary of the Company of such Outside Director's
intention to retire. For purposes of this Section III(f)(iii), "service
as a director" shall include service on the Board while an employee of
the Company or any of its Affiliates and service as a trustee of the
Bank prior to the conversion of the Bank to stock form on June 29,
1993.
IV. COMMON STOCK SUBJECT TO THE DIRECTORS' OPTION PLAN
The shares which shall be issued and delivered upon exercise of Options
granted under the Directors' Option Plan may be either authorized and unissued
shares of Common Stock or authorized and issued shares of Common Stock held by
the Company as treasury stock. The number of shares of Common Stock reserved for
issuance under the Directors' Option Plan shall not exceed 404,224 shares of
Common Stock of the Company, par value $.01 per share, subject to adjustments
pursuant to this Section IV. Any shares of Common Stock subject to an Option
which for any reason either terminates unexercised or expires, shall again be
available for issuance under the Directors' Option Plan.
In the event of any change or changes in the outstanding Common Stock
of the Company by reason of any stock dividend or split, recapitalization,
reorganization, merger, consolidation, spin-off, combination or any similar
corporate change, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Company, the number of shares of
Common Stock which may be issued under this Directors' Option Plan, the number
of shares of Common Stock subject to Options granted under this Directors'
Option Plan and the Option price of such Options, shall be automatically
adjusted to prevent dilution or enlargement of the rights granted to an Outside
Director under the Directors' Option Plan.
V. EFFECTIVE DATE OF THE PLAN; STOCKHOLDER RATIFICATION
The Directors' Option Plan became effective upon the Conversion of the
Bank on June 29, 1993 and was approved by the stockholders of the Company on
December 13, 1993. The Plan was amended and restated as of January 23, 1997 as
provided herein, and as so amended and restated, is effective as of January 23,
1997.
-6-
<PAGE> 7
VI. TERMINATION OF THE PLAN
The right to grant Options under the Directors' Option Plan will
terminate upon the earlier of ten years after the Effective Date of the Plan or
the issuance of an amount of stock equal to 404,224 shares of Common Stock (the
maximum number of shares of Common Stock reserved under this Plan). A majority
of the outstanding shares of the Common Stock entitled to vote is required to
terminate the Directors' Option Plan; provided, however, no such termination
shall, without the consent of the affected individual, affect such individual's
rights under a previously granted Option.
VII. AMENDMENT OF THE PLAN
The Board may amend, revise or terminate the Plan in whole or in part
at any time. No such modification, amendment or termination may affect the
rights of an Outside Director under an outstanding Option without the written
consent of such Outside Director.
VIII. HEADINGS.
The headings of sections are included solely for convenience of
reference. If there is any conflict between such headings and the text of the
Directors' Option Plan, the text shall control.
IX. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State
of Delaware.
-7-
<PAGE> 1
EXHIBIT 10.29
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
REPUBLIC NATIONAL BANK OF NEW YORK,
Seller
and
ROOSEVELT SAVINGS BANK,
Purchaser
Premises: 1280 Broadway
Hewlett, New York
Section 39, Block 207, Lots 42-46, 71 and 73
Date: June 21, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
CONTENTS
ARTICLE PAGE
Recitals.................................................................... 1
1. Definitions............................................................. 1
2. Agreement of Purchase and Sale; Deed.................................... 3
3. Purchase Price.......................................................... 4
4. Escrow.................................................................. 5
5. Closing................................................................. 6
6. Representations of the Purchaser........................................ 7
7. Representations of the Seller........................................... 7
8. Purchase and Assumption Agreement....................................... 8
9. Conditions Precedent.................................................... 8
10. Documentation........................................................... 9
11. Closing Adjustments; Transfer Taxes..................................... 9
12. Risk of Loss............................................................ 10
13. No Assignment........................................................... 11
14. The Seller's Possession Following the Closing........................... 11
15. Brokers................................................................. 11
16. Notices................................................................. 12
17. Miscellaneous........................................................... 12
17.1 Captions..................................................... 12
17.2 Parties Bound................................................ 12
17.3 No Recording................................................. 13
17.4 Entire Agreement............................................. 13
17.5 No Oral Modifications........................................ 13
17.6 Partial Invalidity........................................... 13
17.7 Counterparts................................................. 13
Signatures.................................................................. 13
Acknowledgments
SCHEDULE
Schedule A - Metes and Bounds Description of the Premises
Schedule B - Federal Tax Identification Numbers of the Seller and the Purchaser
-i-
<PAGE> 3
PURCHASE AND SALE AGREEMENT made this twenty-first day of June, 1996
between REPUBLIC NATIONAL BANK OF NEW YORK, a national banking association
organized and existing under the laws of the United States of America having its
principal office at 452 Fifth Avenue, New York, New York 10018; and ROOSEVELT
SAVINGS BANK, a stock savings bank organized and existing under the laws of the
State of New York having its principal office at 1122 Franklin Avenue, Garden
City, New York 11530.
W I T N E S S E T H:
Republic National Bank of New York has entered into that certain
Purchase and Assumption Agreement, dated January 10, 1996, with Bank Leumi Trust
Company of New York pursuant to which, inter alia, Republic National Bank of New
York has agreed to acquire and Bank Leumi Trust Company of New York has agreed
to sell the premises known as 1280 Broadway, Hewlett, New York. The consummation
of such transaction is currently scheduled for June 21, 1996.
Roosevelt Savings Bank desires to purchase and Republic National Bank
of New York desires to sell the aforesaid premises after it acquires the same.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 The following terms used herein shall have the meanings
hereinafter ascribed to them:
(a) "Bank Leumi" means Bank Leumi Trust Company of
New York.
(b) "Building and other improvements" means the
one-story masonry building situated upon the Premises and all other physical
improvements constructed thereon or otherwise within the Premises, including all
driveways, canopies, electrical and other lines and paved areas.
(c) "Business Days" means all days, except Saturdays,
Sundays and legal holidays on which the Seller and Purchaser close their retail
branches for the regular conduct of business with the public.
(d) "Closing" means the settlement conference at
which the fee simple title to the Premises shall be conveyed to the Purchaser
pursuant to the terms and provisions of this Agreement.
(e) "Closing Date" means the date on which the
Closing shall occur as determined pursuant to Section 5.01 of this Agreement.
(f) "Contract Deposit" means the sum deposited with
the Escrow Agent pursuant to paragraph (a) of Section 3.02 hereof.
(g) "Escrow Agent" means Kronish, Lieb, Weiner &
Hellman LLP, or any successor thereto or substitute escrow agent appointed in
accordance with the terms and provisions of Section 4.03 hereof.
(h) "Escrow Fund" means the Contract Deposit and any
and all interest earned thereon.
<PAGE> 4
-2-
(i) "Marketable title" to the Real Property means
title to the fee simple of the Real Property as any title insurance company
licensed to conduct business in the State of New York would be willing to insure
without exception other than the Permitted Exceptions.
(j) "Permitted Exceptions" means the following:
(i) Real estate taxes, unpaid installments
of assessments, water and sewer charges, if any, which are or may become liens
upon the Real Property which need not be paid as of the Closing Date;
(ii) Any state of facts shown on that
certain survey entitled "Map of Property Situated at Hewlett," dated January 25,
1996, prepared by Krause Land Surveyors and any subsequent state of facts an
accurate survey and inspection of the Real Property would disclose, provided
such subsequent state of facts does not render title unmarketable;
(iii) Telephone Easement in Liber 1225 page
1, as amended by Liber 3883 page 295;
(iv) Zoning ordinances and regulations and
other statutes, codes and regulations regulating the use and occupancy of real
estate, including environmental protection laws;
(v) Rights of utility companies of record to
lay, maintain, install and repair pipes, lines, poles, conduits, cable boxes and
related equipment on, over, under and adjoining the Premises; and
(vi) Judgments against the Seller, provided
that a title insurance company licensed to do business in the State of New York
is willing to insure against collection out of the Real Property.
(vii) Unpaid corporate franchise taxes or
other unincorporated business taxes of any prior owner of the Real Property (or
any portion thereof), provided that a title insurance company licensed to do
business in the State of New York is willing to insure against collection out of
the Real Property;
(viii) Easements, restrictions, agreements
and covenants of record, provided the same do not prevent the use or continued
use of the Building and improvements for the purposes permitted by the
certificate of occupancy therefor; and
(ix) Except as hereinafter provided,
violations, whether or not noted or issued, of any or all building, fire, safety
and other laws , codes, ordinances and regulations affecting the Real Property
as at the Closing Date.
(k) "Personal Property" means the fixtures,
equipment, vaults, safe deposit boxes, teller counters, automatic teller
machines, drive-up teller station, night depository box, lunchroom equipment,
built-in cabinets and all other tangible personal property which are (i) located
on the date hereof within the Building and other improvements and (ii) used in
connection with the maintenance or operation of the Building and other
improvements.
(l) "Premises" means the premises described by metes
and bounds on Schedule A annexed hereto and made part hereof and shown on the
Land and Tax Map of the County of Nassau, New York
<PAGE> 5
-3-
as Section 39, Block 207, Lots 42-46, 71 and 73.
(m) "Purchase and Assumption Agreement" means that
certain Purchase and Assumption Agreement, dated January 10, 1996, between Bank
Leumi and the Seller.
(n) "Purchase Price" means the sum payable by the
Purchaser to the Seller in consideration of the conveyance of the Real Property
as specified in Section 3.01 of this Agreement.
(o) "Purchaser" means Roosevelt Savings Bank.
(p) "Real Property" means the Premises and the
Building and other improvements situated thereon.
(q) "Seller" means Republic National Bank of New
York.
1.2 The words "herein," "hereof," "hereto," "hereunder" and
similar words shall be interpreted as being references to this Agreement as a
whole and not merely the clause, paragraph, Section or Article in which such
word appears. Lists following words such as "include" and "including" shall be
deemed to be examples only and not exhaustive of any possible list of items of
similar nature which could otherwise have been set forth and the words "include"
and "including" shall be read to mean "include, without limiting the generality
of the foregoing."
1.3 Wherever appropriate in this Agreement, personal pronouns
shall be deemed to include the other genders and the singular or plural of any
defined term or other word shall, as the context may require, be deemed to
include, as the case may be, either the singular or the plural. All Article and
Section references set forth herein shall, unless the context otherwise
specifically requires, be deemed references to the Articles and Sections of this
Agreement.
2. AGREEMENT OF PURCHASE AND SALE; DEED.
2.1 The Seller shall sell and the Purchaser shall purchase,
upon the terms and provisions and subject to the conditions hereinafter set
forth, the Real Property, together with (i) all right, title and interest of the
Seller, if any, in and to land lying in the bed of any street or highway in
front of or adjoining the Premises to the center line of such street or highway,
(ii) any unpaid award for any taking by eminent domain or any damage to the
Premises by the change of grade of any street or highway, (iii) all
appurtenances and hereditaments and all of the estate and rights of the Seller
in and to the Real Property, and (iv) the Personal Property.
2.2 The Seller shall convey and the Purchaser shall accept
marketable title to the Real Property by a statutory short form bargain and sale
deed without covenants against grantor's acts containing a covenant against
liens as prescribed by Section 13 of the Lien Law and a statement pursuant to
Section 909 of the Business Corporation Law to the effect that the Real Property
does not constitute all or substantially all of the assets of the Seller or if
it does, that such conveyance has been duly authorized by the shareholders and
directors of the Seller.
2.3 The Purchaser shall promptly order an examination of the
title to the Real Property and cause the title report to be delivered to the
Seller's counsel. The Seller shall not be under any obligation to cure
<PAGE> 6
-4-
any title defect or to remove any exception to title not among the Permitted
Exceptions if the aggregate cost of curing all such title defects and removing
such exceptions not among the Permitted Exceptions exceeds fifty thousand and
no/100 ($50,000.00) dollars. If the Seller elects to cure any title defect or to
remove any exception to title not among the Permitted Exceptions, it shall be
entitled to adjourn the Closing Date for up to sixty (60) days to attempt to
cure such defect or remove such exception.
2.4 Subject to the terms and provisions of Section 5.03, if
the Seller is unable to convey marketable title to the Real Property to the
Purchaser by December 31, 1996 or is unwilling to cure title defects or remove
exceptions to title not among the Permitted Exceptions the aggregate cost of
which exceeds fifty thousand and no/100 ($50,000.00) dollars as provided in
Section 2.03, then either party may, upon ten (10) days' notice to the other,
terminate this Agreement whereupon the Seller shall return the portion of the
Purchase Price paid pursuant to paragraph (a) of Section 3.02 hereof to the
Purchaser and neither party shall have any further obligations hereunder. Such
right of termination shall be the Purchaser's sole remedy. Notwithstanding the
foregoing, the Purchaser may elect to consummate this transaction subject to
such title defects and exceptions to title as may exist, without any diminution
of the Purchase Price or further claim against the Seller.
2.5 Notwithstanding anything hereinabove set forth to the
contrary, the Purchaser agrees that at the option of the Seller, the Purchaser
shall accept marketable title to the Real Property directly from Bank Leumi;
provided that such conveyance is otherwise in accordance with the terms and
provisions of this Agreement. The Purchaser shall cooperate with the Seller to
cause Bank Leumi to convey fee simple title to the Purchaser. In connection
therewith, the Purchaser shall execute and deliver such documents and
instruments as the Seller or Bank Leumi may reasonably require to effect such
direct conveyance. The Seller shall hold the Purchaser harmless for any transfer
tax, interest thereon or penalties arising by reason thereof due to
consideration paid to Bank Leumi in excess of the consideration paid hereunder
or that is paid to the Seller in excess of the amount reported on form TP-584 to
be filed with the New York State Department of Taxation and Finance in
connection herewith. The terms and provisions of the immediately preceding
sentence shall survive the delivery of the deed on the Closing Date.
2.6 If the Purchaser shall fail to consummate this transaction
as contemplated herein, the Seller's sole remedy shall be to keep the payment
made pursuant to paragraph (a) of Section 3.02 as liquidated damages. The
parties hereto agree that calculating the loss to the Seller by reason of such a
failure to consummate this transaction would be difficult if not impossible to
calculate and that the amount of such payment represents a fair and reasonable
estimate of any such loss under the circumstances.
3. PURCHASE PRICE.
3.1 The purchase price to be paid by the Purchaser to the
Seller for the Real Property is one million one hundred thousand and no/100
($1,100,000.00) dollars.
3.2 The Purchase Price shall be paid by the Purchaser to the
Seller in the lawful currency of the United States of America, as follows:
(a) One hundred ten thousand and no/100 ($110,000.00)
dollars upon the execution of this Agreement, which amount is payable by check
subject to collection, payable to the order of the Escrow Agent, as escrow
agent, and the proceeds of which shall be held by the Escrow Agent in accordance
with the terms and provisions of this Agreement; and
<PAGE> 7
-5-
(b) Nine hundred ninety thousand and no/100
($990,000.00) dollars upon the conveyance of title to the Real Property at the
Closing.
3.3 The balance of the Purchase Price payable upon the Closing
shall be paid by an unendorsed official bank check drawn on a member bank of the
New York Clearinghouse Association to the order of the Seller or its designee
or, at the option of the Seller, by immediately available federal funds wired to
an account designated by the Seller at least two (2) Business Days prior to the
Closing Date.
3.4 If the bank upon which the check referred to in paragraph
(a) of section 3.02 shall fail, for any reason, to pay the same, the Seller may
terminate this Agreement.
3.5 If the fee title to the Premises is conveyed directly to
the Purchaser by Bank Leumi, the Purchaser agrees to pay out and to the extent
of the balance of the Purchase Price due at the Closing under paragraph (b) of
Section 3.02 (i) all sums due to Bank Leumi pursuant to the Purchase and
Assumption Agreement and (ii) the remainder of the Purchase Price to the Seller.
If the balance of the Purchase Price due at the Closing is insufficient to pay
all sums due to Bank Leumi, the Seller shall pay the additional amount due to
Bank Leumi. Closing adjustments shall be made as of such date subject to the
Seller reimbursing the Purchaser for the net amount thereof paid by the
Purchaser, if the Seller remains in possession of the Real Property pursuant to
Article 13 hereof.
3.6 No portion of the Purchase Price has been allocated to any
personal property which may be conveyed incidental to the sale of the Real
Property. If any governmental authority shall assess any sales tax to the
conveyance of such personal property, the Purchaser shall pay such tax and any
interest or penalties or both which may be payable with respect to the same. The
obligations of the Purchaser pursuant to this Section 3.06 shall survive the
delivery of the deed on the Closing Date.
4. ESCROW.
4.1 (a) The Escrow Agent shall deposit the Contract
Deposit in an interest-bearing money market account that it maintains at
Republic National Bank of New York, 452 Fifth Avenue, New York, New York 10018.
(b) If the deed is delivered and accepted, the Escrow
Agent shall deliver the Escrow Fund to the Seller. If the Closing does not occur
for any reason other than the default of the Seller or the failure of any
condition precedent to either party's obligation to consummate this transaction
to be satisfied, the Escrow Agent shall deliver the Escrow Fund to the Seller.
If the Closing shall not occur by reason of the Seller's default or the failure
of any condition precedent to either party's obligation to consummate this
transaction to be satisfied, the Escrow Agent shall deliver the Escrow Fund to
the Purchaser.
(c) Prior to delivering the Escrow Fund to the Seller
or the Purchaser pursuant to the second and third sentences of paragraph (b) of
this Section 4.01, the Escrow Agent shall deliver to the Seller and the
Purchaser notice of the Escrow Agent's intention to deliver the Escrow Fund.
If, within five (5) days after tendering such notice, the Escrow Agent shall not
have received a notice from either party instructing the Escrow Agent not to
deliver the Escrow Fund as specified in the Escrow Agent's notice, the Escrow
Agent shall deliver the Escrow Fund to the party so specified. If, however, the
Escrow Agent receives within such five-day period written instructions from
either party that the Escrow Agent should not so deliver the Escrow Fund, the
Escrow Agent shall continue to hold the Escrow Fund until (i) it receives
written instructions executed by the Seller and the Purchaser specifying how the
Escrow Fund should be disbursed or (ii) it is served with an order of a court of
<PAGE> 8
-6-
competent jurisdiction directing the disbursement of the Escrow Fund or (iii)
the Escrow Agent shall resign as hereinafter provided in Section 4.03, in which
case the Escrow Fund shall be delivered to the successor escrow agent or the
Clerk of the Supreme Court of the State of New York, New York County, as the
case may be.
4.2 (a) The Escrow Agent has agreed not to charge a fee
for performing its duties hereunder. Notwithstanding such agreement, if a
dispute should arise with respect to the disposition of the Escrow Fund, all
costs that the Escrow Agent may incur (including legal fees, filing fees and
other costs associated) in connection with commencing and maintaining an action
by way of interpleader shall be borne equally by the Seller and the Purchaser
who hereby agree to pay the same to the Escrow Agent. The Escrow Agent may
represent itself in any such action, in which case its legal fees shall be
measured by the rates it has established as the base billing rates for it
attorneys and legal assistants, together with its standard charges for
disbursements and other chargeable costs. Furthermore, the Seller and the
Purchaser shall jointly and severally indemnify and hold the Escrow Agent
harmless for all liabilities (including legal fees) incurred by the Escrow Agent
arising out of its performance of its duties hereunder, except to the extent
that such liabilities result from the wilful disregard of the Escrow Agent's
obligations or its gross negligence. The provisions of this paragraph (a) shall
survive the consummation of this transaction and the termination of this
Agreement.
(b) The Escrow Agent shall have no liability
hereunder for its failure to perform any obligation hereunder, except arising by
reason of its wilful disregard of the Escrow Agent's obligations or its gross
negligence.
(c) The Seller and the Purchaser acknowledge that the
Escrow Agent is acting solely as a stakeholder hereunder and not the agent of
either party in connection with its obligations hereunder.
4.3 The Escrow Agent may resign as escrow agent hereunder upon
ten (10) days' notice to the Seller and the Purchaser. If the Seller and the
Purchaser shall have selected a successor escrow agent within such ten (10) day
period, then the Escrow Agent shall deliver the Escrow Fund to its successor. If
no such successor has been selected by the Seller and the Purchaser, the Escrow
Agent may (i) continue as escrow agent hereunder until a successor has been
selected or (ii) deposit the Escrow Fund with the Clerk of the Supreme Court of
the State of New York, New York County. Upon delivering the Escrow Fund to such
successor escrow agent or the Clerk of the Supreme Court of the State of New
York, New York County, the Escrow Agent shall be relieved of all further
obligations hereunder.
4.4 The Purchaser acknowledges that the Escrow Agent is also
counsel to the Seller in connection with this and other transactions.
Notwithstanding that fact, the Purchaser agrees that the Escrow Agent may
continue to act as counsel to the Seller in connection herewith and in
connection with any other transaction between the Seller and the Purchaser and
in connection with any dispute, action, cause of action or claim arising out of
this transaction or any other transaction between the Seller and the Purchaser.
4.5 The Escrow Agent is executing this Agreement solely for
the purpose of agreeing to the terms and provisions of this Article 4.
5. CLOSING.
5.1 The Closing shall take place (i) (x) on or about July 21,
1996 at 10:00 a.m. (local time) at the offices of Kronish, Lieb, Weiner &
Hellman LLP, 1114 Avenue of the Americas, New York, New York
<PAGE> 9
-7-
10036-7798 or at such other location in the City of New York as the Seller may
otherwise hereafter designate or (y) at such other time and place in the City of
New York as the Seller may specify in a notice to the Purchaser given not later
than five (5) Business Days prior to the specified Closing Date but (ii) not
later than December 31, 1996.
5.2 Notwithstanding the terms and provisions of Section 4.01,
if the closing scheduled under the Purchase and Assumption Agreement shall be
postponed or adjourned beyond July 21, 1996, the Seller shall have the right to
postpone or adjourn the Closing hereunder until, at the option of the Seller,
(i) such time and date as the closing under the Purchase and Assumption
Agreement shall occur or (ii) a date which is not later than ten (10) days
following the closing under the Purchase and Assumption Agreement.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 The Purchaser represents and warrants to the Seller that:
(a) The Purchaser has inspected the Real Property and
shall accept the same in its "as is" condition on the date hereof, normal wear
and tear excepted.
(b) Except as hereinafter specifically set forth,
neither the Seller nor any broker or other person purporting to represent or
speak on behalf of the Seller has made any representation respecting the Real
Property or any portion thereof, including any representation respecting the
physical condition thereof and the existence or non-existence of any defect
thereto, the existence or non-existence of any hazardous substance or material
(including asbestos, chemical; gas; medical waste; polychlorinated biphenyls
(pcb's); methane; radon; radioactive material or volatile hydrocarbons), the
suitability of the Real Property for the Purchaser's intended use thereof or the
zoning regulations affecting the Real Property.
(c) The Purchaser has made or caused to be made such
inspections of the Real Property as the Purchaser has deemed advisable and
consulted with such legal counsel, engineers, inspectors and other experts as it
deemed prudent to determine the suitability of the Real Property for the
Purchaser's intended use thereof and in purchasing the Real Property, the
Purchaser is not relying upon any statements made by or on behalf of the Seller
not herein set forth.
(d) The person executing this Agreement on behalf of
the Purchaser has been duly authorized to do so by the board of directors of the
Purchaser and this Agreement constitutes the valid and binding obligation of the
Purchaser, enforceable in accordance with its terms.
(e) The Purchaser is aware that the Seller does not
own the Real Property and likewise is not in possession thereof.
6.2 Each of the representations and warranties made by the
Purchaser in Section 5.01 is material.
7. REPRESENTATIONS OF THE SELLER.
7.1 The Seller represents and warrants to the Purchaser that:
<PAGE> 10
-8-
(a) The Purchase and Assumption Agreement has not
been terminated and remains in full force and effect.
(b) The Purchase and Assumption Agreement grants the
Seller the right, subject to the terms and provisions of the Purchase and
Assumption Agreement, to acquire the fee simple title to the Real Property.
(c) The Seller has delivered to the Purchaser or the
Purchaser's counsel a true and complete copy of all documents respecting the fee
simple title to the Real property as may be in the possession of the Seller,
including a survey thereof, violations reports and title report.
(d) The person executing this Agreement on behalf of
the Seller has been duly authorized to do so by the board of directors of the
Purchaser and this Agreement constitutes the valid and binding obligation of the
Seller, enforceable in accordance with its terms.
(e) The Purchase and Assumption Agreement requires
Bank Leumi to convey the Personal property "free and clear of any Encumbrances"
and in "good operating condition and repair, normal wear and tear excepted...."
The Seller shall not encumber the Personal Property. Under the Purchase and
Assumption Agreement the term "Encumbrances" means "all mortgages, claims,
charges, liens, encumbrances, easements, restrictions, pledges, calls,
commitments, security interests, conditional sales agreements, title retention
agreements, leases, any state of facts an accurate survey would show provided it
does not render title unmarketable and other restrictions of any kind or nature,
except for statutory liens securing payments not yet due."
7.2 Each of the representations and warranties made by the
Purchaser in Section 6.01 is material.
8. PURCHASE AND ASSUMPTION AGREEMENT.
8.1 The obligation of the Seller hereunder to convey and the
obligation of the Purchaser to purchase the Real Property are conditioned upon
Bank Leumi conveying the Real Property to the Seller on or before August 20,
1996. If the conveyance of the Real Property to the Seller is not consummated by
such date, then either party may terminate this Agreement upon ten (10) days'
notice to the other and the Escrow Fund shall be disbursed to the Purchaser,
whereupon neither party shall have any further obligation to the other
hereunder. If the transaction under the Purchase and Assumption Agreement is
consummated within such ten (10) day period, then the non-terminating party may
void such termination upon notice to the other party and the Closing shall take
place within ten (10) Business Days after such notice on a date specified
therein.
8.2 Notwithstanding anything herein set forth to the contrary,
if the Purchase and Assumption Agreement should be terminated or if Bank Leumi
should fail to convey fee simple title to the Real Property to the Seller, for
any reason whatsoever, including the unwillingness of the Seller to accept title
thereto by reason of any default of Bank Leumi or its failure to satisfy any
condition to the Seller's obligation to close or by reason of the Seller's
default thereunder, the Seller shall have no obligation to convey the Real
Property to the Purchaser.
9. CONDITIONS PRECEDENT.
<PAGE> 11
-9-
9.1 The obligation of the Seller and the Purchaser to
consummate this transaction is further conditioned upon approval by the banking
department of the State of New York or such other governmental agency(ies) as
may have jurisdiction thereof, of the Purchaser acquiring the Real Property and
using the same as a branch. If such condition is not satisfied by December 31,
1996 or if such application for approval is denied prior to such date, either
party may, upon ten (10) days' notice to the other, terminate this Agreement
whereupon the Escrow Fund shall be returned to the Purchaser and neither party
shall have any further obligations hereunder.
9.2 The Purchaser shall make immediate and diligent
application to the banking department and such other agency(ies) as may have
jurisdiction to obtain such approval and shall use reasonable efforts thereafter
to obtain such approval(s). The Purchaser shall keep the Seller apprised of the
status of such application.
10. DOCUMENTATION.
10.1 Immediately following the execution hereof, the Purchaser
shall execute and deliver to the Seller a Transferee Questionnaire for filing
with the department of taxation and finance of the State of New York pursuant to
Article 31-B of the Tax Law.
10.2 Immediately following the execution hereof, the Seller
shall execute and file a Transferor Questionnaire and file the same with the
Transferee Questionnaire with the department of taxation and finance of the
State of New York pursuant to Article 31-B of the Tax Law.
10.3 At the Closing, the Seller shall deliver to the
Purchaser:
(a) the deed as heretofore described.
(b) a bill of sale, without recourse or warranty, for
any personal property being conveyed incidental to the Real Property.
(c) an assignment of together with any and all
service contracts assigned to the Seller by Bank Leumi.
(d) the keys to the Building (unless the Seller shall
continue in possession thereof pursuant to Article 13 hereof).
(e) such instruction manuals, warranties and
guarantees with respect to the Building's systems, equipment and apparatus as
may have been assigned by Bank Leumi to the Seller.
10.4 At the Closing, the Purchaser shall deliver to the Seller
the balance of the Purchase price and checks for any net closing adjustments due
to the Seller as hereinafter provided.
10.5 Each of the parties shall execute such tax returns and
other documents required to consummate the transaction contemplated hereby.
10.6 Each of the parties shall promptly and diligently comply
with the requirements of Article 31-B of the Tax Law and the Purchaser shall
cooperate with the Seller to obtain a tentative assessment of any tax due under
said Article 31-B or a statement of no tax due thereunder, whichever shall be
applicable.
<PAGE> 12
-10-
11. CLOSING ADJUSTMENTS; TRANSFER TAXES.
11.1 Subject to the terms and provisions of Section 14.03, the
following items shall be adjusted at the Closing as of midnight of the Closing
Date and the net amount of such closing adjustments shall, as the case may be,
paid to the Seller at the Closing by the Purchaser's unendorsed check (or wired
funds, if calculated prior to the Closing) or taken as a credit against the
Purchase Price:
(a) real estate taxes and assessments.
(b) water charges and sewer rents
(c) service contract fees. (if applicable)
(d) fuel oil (if applicable) pursuant to a reading of
a reputable fuel oil dealer not sooner than forty-eight (48) hours prior to the
Closing.
(e) electricity.
11.2 If the information necessary to compute any closing
adjustment is not available at the Closing, then such adjustment shall be made
as promptly as feasible following the Closing. If either party shall discover
any error in the computation of any closing adjustment, such error shall be
corrected promptly following notification thereof by the discovering party to
the other (provided, that such notification shall be given within thirty (30)
days following the discovery thereof but not later than one (1) year following
the Closing Date) and an appropriate payment to correct the same shall then be
made. The provisions of this Section 11.02 shall survive the delivery of the
deed at the Closing.
11.3 The Seller shall timely pay all documentary stamp taxes
and any tax payable under Article 31-B of the Tax Law in connection with this
transaction.
11.4 The Seller shall pay all costs in connection with the
recording of the deed, except as specified in Section 1103 hereof.
12. RISK OF LOSS.
12.1 If the Real Property shall be damaged or destroyed but
the Seller shall consummate the transaction under the Purchase and Assumption
Agreement, then the Purchaser shall be obligated to consummate the transaction
hereunder and the Seller shall, at Purchaser's option, (i) assign to the
Purchaser such proceeds of insurance, if any, assigned to the Seller by Bank
Leumi on account of such damage or (ii) rebuild the Building and other
improvements, to the extent of net insurance proceeds (after deducting costs of
adjusting any claim), to the extent feasible to the condition they were in
immediately prior to such event of damage or destruction. In the case of
rebuilding under clause (ii) of the preceding sentence, the Closing Date shall
be adjourned until a date within ten (10) Business Days after the substantial
completion of such work. If the Purchaser desires that new work or changes to
the Building and other improvements be made, then the Seller shall assign such
insurance proceeds and the Closing shall proceed forthwith. Prior to the
Closing, the Seller shall maintain or cause there to be maintained fire and
extended insurance for the Building and other improvements for not less than the
replacement cost thereof.
<PAGE> 13
-11-
12.2 Except as otherwise provided in Section 1201, the
provisions of Section 5-1311 of the General Obligations Law shall govern this
transaction.
13. NO ASSIGNMENT.
Neither this Agreement nor any of the rights or obligations of the
Purchaser under this Agreement may be assigned by the Purchaser without the
prior written consent of the Seller.
14. THE SELLER'S POSSESSION FOLLOWING THE CLOSING.
14.1 The Seller may occupy the Real Property exclusively for
ninety (90) days following the Closing Date (i) for it to give notice to the
owners (or lessees) of safe deposit boxes located at the Building that the
Seller is closing such branch and is intending to move the contents of such safe
deposit boxes to such other location(s) as the Seller elects plus (ii) a
reasonable period of time thereafter (not to exceed thirty (30) days) for the
Seller to wind up operations at the Real Property.
14.2 If the Seller exercises its rights under Section 14.01,
the closing adjustments shall be made as of the date that the Seller vacates the
Real Property.
14.3 The Seller shall pay all operating expenses of the Real
Property during the period of its post-Closing possession thereof (including
electricity, fuel, cleaning and rubbish removal, real estate taxes, water
charges and sewer rents). All closing adjustments shall be made as of midnight
of the date on which possession of the Real Property is tendered to the
Purchaser.
14.4 The Seller shall maintain for the benefit of the
Purchaser and the Real Property during the period of its post-Closing possession
thereof hazard insurance for the replacement cost of the Building and
improvements and liability insurance for injury and death to persons and
property damage. Such insurance shall be primary and not secondary coverage. If
there shall occur any damage to the Building and improvements, the Seller shall,
at the Purchaser's option, (i) assign the insurance proceeds with respect to
such damage to the Purchaser or (ii) rebuild the Building and other
improvements, to the extent of net insurance proceeds (after deducting costs of
adjusting any claim), to the extent feasible to the condition they were in
immediately prior to such event of damage or destruction.
15. BROKERS.
The Seller and the Tenant hereby each mutually represent and warrant to
the other that Grubb & Ellis New York, Inc. and Island Realty Group were the
sole brokers instrumental in negotiating or effecting this Agreement. The Seller
agrees to pay such brokers any commissions they may have earned pursuant to
separate agreement between the Seller and such broker. The Purchaser shall
indemnify and hold the Seller harmless from and against any claim, action, cause
of action or other liability that the Seller may incur by reason of any claim
for a commission in connection herewith by any other broker with whom the
Purchaser may have dealt. The provisions of this Article 14 shall not constitute
a third-party beneficiary contract.
<PAGE> 14
-12-
16. NOTICES.
All notices and other communications required or desired to be
given under this Agreement shall be in writing, signed by the party serving the
notice or other communication, and sent by registered or certified United States
mail, return receipt requested, personal service or reputable overnight courier
service, to the address of the party to whom given as set forth below or to such
other address as either party may designate in writing in the manner herein
prescribed. All such notices and other communication shall be deemed effective
upon receipt. Addresses to which notices shall be sent are, as follows:
To the Seller:
Republic National Bank of New York
452 Fifth Avenue
New York, New York 10018
Attention: Mr. Barry S. Seidel
with a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
Attention: Jack K. Feirman, Esq.
To the Purchaser:
Roosevelt Savings Bank
1122 Franklin Avenue
Garden City, New York 11530
Attention: Mr. Anthony Mallia
with a copy to:
Cullen & Dykman
1000 Quentin Roosevelt Boulevard
Garden City, New York 11530
Attention: Kathleen Douglas, Esq.
17. MISCELLANEOUS.
17.1 CAPTIONS. Article and Section headings are inserted only
as a matter of convenience and for reference and they shall not be construed to
define, limit or describe the scope of this Lease nor the intent of any
provision hereof.
17.2 PARTIES BOUND. The covenants, conditions and agreements
contained in this Agreement bind and inure to the benefit of the Seller and the
Purchaser and their respective legal representatives, successors, and, except as
otherwise provided in this Lease, their assigns.
<PAGE> 15
-13-
17.3 NO RECORDING. Neither this Agreement nor memorandum
hereof may be recorded.
17.4 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and all prior negotiations and agreements are
merged into this Agreement.
17.5 NO ORAL MODIFICATIONS. This Agreement may not be changed,
modified, terminated or discharged, in whole or in part, except by a writing,
executed by the party against whom enforcement of the change, modification,
termination or discharge is to be sought.
17.6 PARTIAL INVALIDITY. If any term, covenant, condition or
provision of this Agreement, or the application thereof to any person or
circumstance, shall ever be held to be invalid or unenforceable, then in each
such event the remainder of this Lease or the application of such term,
covenant, condition or provision to any other person or any other circumstance
(other than those as to which it shall be invalid or unenforceable) shall not be
thereby affected, and each term, covenant, condition and provision hereof shall
remain valid and enforceable to the fullest extent permitted by law.
17.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts each of which when executed and delivered shall
constitute an original, and all such counterparts, when taken together shall be
deemed to be but one and the same Agreement.
IN WITNESS WHEREOF, the Seller and the Purchaser have
respectively executed this Lease as of the day and year first above written.
REPUBLIC NATIONAL BANK OF NEW YORK
By:/s/Robert D. Ginsberg
---------------------------
Name: Robert D. Ginsberg
Title: Vice President
ROOSEVELT SAVINGS BANK
By:/s/Anthony Mallia
---------------------------
Name: Anthony Mallia
Title: Senior Vice President
KRONISH, LIEB, WEINER & HELLMAN LLP
By:/s/Jack K. Feirman
---------------------------
Name: Jack K. Feirman
Title: Partner
<PAGE> 16
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On July 13, 1996 before me personally came Robert D. Ginsberg to me
known, who being by me duly sworn, did depose and say that he resides at 39
Random Farms Drive, Chappaqua, New York, is a Vice President of Republic
National Bank of New York, the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/Jack K. Feirman
--------------------
Notary Public
STATE OF NEW YORK )
: ss.
COUNTY OF NASSAU )
On June 27, 1996 before me personally came Anthony Mallia to me known,
who being by me duly sworn, did depose and say that he resides at 1122 Franklin
Avenue, Garden City, New York, is a Senior Vice President of Roosevelt Savings
Bank, the corporation described in and which executed the above instrument; and
that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/Kathy L. Douglas
--------------------
Notary Public
<PAGE> 17
SCHEDULE A
to
Purchase and Sale Agreement, Dated June 21, 1996,
between
Republic National Bank of New York, Seller,
and
Roosevelt Savings Bank, Purchaser
Metes and Bounds Description of the Premises
ALL that certain plot, piece or parcel of land, situate, lying and
being at Hewlett, Town of Hempstead, County of Nassau and State of New York,
known and designated as and by the lots numbered 42 to 46 (inclusive) and part
of an Alley (now known as tax lots 71 and 73) on a certain map entitled, "Map of
property at Hewlett, N.Y. belonging to Holly Arms, Inc." and filed in the Office
of the Board of Assessors, Town of Hempstead, New York, February 3, 1927, as Map
No. C-3, and recorded in the Nassau County Clerk's Office in Liber 1619 Mp 389,
being bounded and described as follows:
BEGINNING at a point on the Northwesterly side of Broadway (old line) distant
120 feet Southwesterly from the corner formed by the Westerly side of Holly
Place and the Northwesterly side of Broadway (old line);
thence running SOUTHWESTERLY along SOUTH 40 degrees 34 minutes West along the
Northwesterly side of Broadway 100 feet to the Northeasterly side of Lot 47 on
said map;
thence partly along said line NORTH 49 degrees 26 minutes West, 102.0 feet;
thence NORTH 40 degrees 34 minutes East, 100.0 feet;
thence SOUTH 49 degrees 26 minutes East partly along the Southwesterly line of
lot 41 on said map 102.0 feet to the Northwesterly side of Broadway, to the
point or place of BEGINNING.
Schedule A - Page 1
<PAGE> 18
SCHEDULE B
to
Purchase and Sale Agreement, Dated June 21, 1996,
between
Republic National Bank of New York, Seller,
and
Roosevelt Savings Bank, Purchaser
Federal Tax Identification Numbers of the Seller and the Purchaser
Republic National Bank of New York - Tax Identification Number: 13-2774727
Roosevelt Savings Bank - Tax Identification Number: 11-1253290
Schedule B - Page 1
<PAGE> 1
T R Financial Corp.
Statement re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
1. Net income $30,515,000 $20,925,000 $12,415,000
----------- ----------- -----------
2. Weighted average common
shares outstanding 8,287,495 9,008,559 9,686,055
3. Common stock equivalents
attributable to dilutive effect
of stock options 576,509 504,294 368,571
4. Total weighted average
common shares and equivalents
outstanding for primary earnings
per share computations 8,864,004 9,512,853 10,054,626
----------- ----------- -----------
5. Primary earnings per share $ 3.44 $ 2.20 $ 1.23
----------- ----------- -----------
</TABLE>
<PAGE> 1
T R Financial Corp. & Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS
At or for the Year Ended December 31
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Total assets $3,259,627 $2,904,623 $2,563,949
Loans receivable 1,716,182 1,423,574 1,197,340
Total securities 1,450,779 1,386,619 1,250,290
Total deposits 2,343,513 2,038,341 1,696,359
Borrowed funds 637,835 594,563 625,200
Net income 30,515 20,925 12,415
Stockholders' equity
to total assets 6.26% 6.87% 6.93%
Return on average
stockholders' equity 16.03% 10.65% 6.84%
[PHOTO]
Total Deposits Total Assets Net Income
- -------------- ------------ ----------
(Billions of dollars) (Billions of dollars) (Billions of dollars)
[BAR GRAPH]
<PAGE> 2
[LOGO] T R FINANCIAL
CORP.
HOLDING COMPANY FOR
ROOSEVELT SAVINGS BANK
A Message to Our Stockholders
Our Company had the most profitable year since it opened for business in 1895.
We look forward to sharing this historic news with each of you at our Annual
Meeting on April 21, 1997, 9:30 a.m., at the Westbury Manor, Westbury, New York.
Until we meet, we are pleased to summarize the Company's 1996 results.
The Company's Value to Stockholders
Stockholders benefited from record results in 1996. Four cash dividends were
paid and earnings broke all Company records. A $1,000 investment at the
Company's initial public offering on June 29, 1993 was worth $3,944 at year end
1996.
Cash Dividends Enhance Stockholder Value
Cash dividends are one declaration of the Company's commitment to enhancing
stockholder value. Four cash dividends were paid to stockholders in 1996. Each
quarterly dividend was higher than the previous quarter and was paid on common
shares as follows: $0.14 - March 1, 1996, $0.16 - June 3, 1996, $0.18 -
September 3, 1996 and $0.20 - December 2, 1996. The Board was pleased to
announce in January 1997 that it declared a cash dividend of $0.22 per common
share payable on March 3, 1997. The Board of Directors will continue to review
the dividend regularly and intends to maintain a quarterly dividend in the
future consistent with the Company's earnings performance.
Summary of Operating Results, Capital and Asset Quality
Net income for the year ending December 31, 1996 rose 45.8% over the prior year
to $30.5 million, representing earnings of $3.44 per share. Stockholders' equity
in T R Financial Corp. was $204 million at December 31, 1996, representing 6.26%
of total assets and a book value of $25.01 per share.
At December 31, 1996, leverage and risk-based capital ratios of Roosevelt
Savings Bank were 6.07% and 16.86%, respectively. The Bank's capital ratios are
well in excess of the Federal Deposit Insurance Corporation capital requirements
of at least 4% for the leverage ratio and 8% for the risk-based measure and
qualify the Bank to be designated as a well-capitalized institution by
regulatory agencies.
Non-performing assets decreased 37.1% from December 31, 1995 to $15.9
million, or 0.49% of total assets, at December 31, 1996. Non-performing loans
decreased to $12.6 million, or 0.74% of total loans, at December 31, 1996, a
decrease of $6.1 million from December 31, 1995.
<PAGE> 3
We continue to reserve for possible loan losses because of uncertainty in
the future economic environment and a growing loan portfolio. At December 31,
1996, the allowance for possible loan losses was $14.4 million, or 113.8% of
non-performing loans.
Managing the Company
Management's approach to operating the Company will continue to be focused on
the achievement of long-term value for stockholders. We will continue to manage
the Company with a conservative investment strategy to achieve consistently
solid earnings performance and maintain financial strength. Capital will be
managed to enable the Company to enhance stockholder value.
Community Reinvestment
The Company's business plan calls for it to focus on providing financial
services to the communities it serves in the greater New York metropolitan area.
Management is continually evaluating other communities that would benefit from
our services. The deciding factor to expand into other areas is profitability
and the opportunity to enhance stockholder value.
We have been diligent in our efforts to make financial services available
to community residents in our lending areas and have been recognized for our
efforts especially in the area of providing financing for homeownership. During
1996, business and political leaders complimented our Company for its role in
making the American dream of homeownership a reality for many people.
The Company has received numerous accolades from business, political and
community leaders acknowledging the homeownership and community reinvestment and
development initiatives of the Company. These include letters of appreciation
from The White House and The State of New York.
"I am delighted to commend you for your many years of dedicated service to
your community. America's strength as a nation has always depended on
citizens who have been willing to commit themselves to working for the
well-being of others."
Bill Clinton, President, United States of America, October 1996.
<PAGE> 4
"Let me take this opportunity to congratulate you for your leadership in helping
to make homeownership a reality for an increasing number of low and moderate
income families... You have established a commendable model which other
institutions may follow."
George E. Pataki, Governor, New York State, November 1996.
Other organizations that have paid tribute to the Company for its
partnership programs include: Department of Housing and Urban Development,
Federal Deposit Insurance Corporation, East New York Urban Youth Corps.,
Public School 191, Queens, New York, Neighborhood Housing Services of New
York City, Neighborhood Housing Services of Bedford-Stuyvesant, Federal
Housing Finance Board, Federal Home Loan Bank of New York and America's
Community Bankers, Washington, D.C.
Our Personal Message to Officers and Staff
We want to thank everyone at T R Financial for their personal commitment
that has enabled the Company to achieve great success. On a professional
level all of you have contributed to the record earnings in 1996, which
enhanced stockholder value.
Your professional contribution is only one aspect of your personal
commitment that benefits our communities. There are many people throughout
the Company who volunteer their time, effort and knowledge to improving the
quality of life for other human beings in the communities we serve. The
Company's Good Neighbor Award program was developed to recognize acts of
human kindness that benefit our communities. This past year, five
individuals from the Company received awards for: saving lives when a
neighbor's home burned to the ground; teaching home construction skills to
inner city homeowners; twenty-five years of work with the United Cerebral
Palsy Association; work with hospitals and children's homes; and developing
spiritual growth of individuals in local communities.
Our Personal Message to Stockholders
Thank you for your continued confidence in our Board of Directors and
management team. Many of you have been stockholders since the initial
public offering. Your ongoing ownership encourages us to continue to manage
the Company as we have done in the past, with the primary focus on
enhancing stockholder value.
/s/ A. Gordon Nutt /s/ John M. Tsimbinos
A. Gordon Nutt John M. Tsimbinos
President & Chief Administrative Officer Chairman of the Board &
Chief Executive Officer
<PAGE> 5
[LOGO] T R FINANCIAL
CORP.
HOLDING COMPANY FOR
ROOSEVELT SAVINGS BANK
TABLE OF CONTENTS
Selected Consolidated Financial and Other Data .............................. 6
Glossary of Financial Terms ................................................. 8
Management's Discussion and Analysis ........................................ 10
Consolidated Statements of Financial Condition .............................. 25
Consolidated Statements of Income ........................................... 26
Consolidated Statements of Changes in Stockholders' Equity................... 27
Consolidated Statements of Cash Flows........................................ 28
Notes to Consolidated Financial Statements .................................. 30
Independent Auditors' Report ................................................ 52
Directors and Officers ...................................................... 53
Stockholder Information ..................................................... 54
<PAGE> 6
T R Financial Corp. & Subsidiaries
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
====================================================================================================================================
At December 31,
-----------------------------------------------------------------------
(in thousands) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA
Total assets $3,259,627 $2,904,623 $2,563,949 $2,007,234 $1,605,493
Loans receivable 1,716,182 1,423,574 1,197,340 1,072,584 948,403
Allowance for possible loan losses 14,370 13,267 12,045 13,760 11,145
Securities available for sale:
Bonds and equities 337,446 304,154 271,979 297,237 197,448
Mortgage-backed securities 104,401 226,842 150,551 137,214 --
Securities held to maturity/for investment, net:
Bonds and equities 53,632 98,792 322,800 210,233 229,650
Mortgage-backed securities 955,300 756,831 504,960 159,674 83,186
Other real estate owned, net 3,264 6,547 6,535 7,077 14,777
Due to depositors 2,343,513 2,038,341 1,696,359 1,217,745 1,277,092
Borrowed funds 637,835 594,563 625,200 545,200 194,250
Stockholders' equity 204,038 199,684 177,767 184,738 94,324
====================================================================================================================================
For the Year Ended December 31,
-----------------------------------------------------------------------
(in thousands, except per share data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA
Interest income $218,404 $194,690 $148,073 $119,404 $117,953
Interest expense 137,170 124,305 88,321 68,148 70,613
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 81,234 70,385 59,752 51,256 47,340
Provision for possible loan losses 1,400 3,050 2,250 6,100 8,050
Non-interest income:
Loan fees and other charges, net
and other income 8,406 7,621 6,596 8,514 7,595
Net gain on securities activities and sales of
whole loans 7,513 5,464 592 4,589 2,386
Non-interest expense 43,063 42,685 42,019 38,155 31,242
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes,
extraordinary charges and net cumulative
effect of changes in accounting principles 52,690 37,735 22,671 20,104 18,029
Provision for income tax 22,175 16,810 10,256 8,646 9,010
- ------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary charges and
net cumulative effect of changes in
accounting principles 30,515 20,925 12,415 11,458 9,019
Extraordinary charges from prepayments of
FHLB advances, net of taxes -- -- -- (2,287) --
Net cumulative effect of changes in accounting
principles -- -- -- 500 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 30,515 $ 20,925 $ 12,415 $ 9,671 $ 9,019
====================================================================================================================================
Earnings Per Share(1) $ 3.44 $ 2.20 $ 1.24 $ 0.46 N/A
====================================================================================================================================
</TABLE>
(notes on next page)
6
<PAGE> 7
T R Financial Corp. & Subsidiaries
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
====================================================================================================================================
At or For the Year Ended December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
Performance Ratios:
Return on average assets 1.00% 0.76% 0.55% 0.54% 0.59%
Return on average stockholders' equity 16.03% 10.65% 6.84% 6.85% 10.32%
Average stockholders' equity to average assets 6.24% 7.14% 8.05% 7.89% 5.67%
Stockholders' equity to total assets 6.26% 6.87% 6.93% 9.20% 5.88%
Interest rate spread 2.34% 2.24% 2.31% 2.54% 2.80%
Net interest margin 2.72% 2.64% 2.73% 2.97% 3.18%
Efficiency ratio(2) 48.04% 54.72% 63.33% 63.84% 56.87%
Non-interest expense to average assets 1.41% 1.55% 1.86% 2.13% 2.03%
Net interest income to non-interest expense 1.89x 1.65x 1.42x 1.34x 1.52x
Average earning assets to average interest-
bearing liabilities 1.08x 1.08x 1.10x 1.11x 1.08x
ASSET QUALITY RATIOS
Non-performing loans to total loans(3)(4) 0.74% 1.31% 3.01% 3.49% 4.00%
Non-performing assets to total assets(4) 0.49% 0.87% 1.67% 2.24% 3.31%
Net charge-offs to average loans(3) 0.02% 0.14% 0.34% 0.35% 0.46%
Allowance for possible loan losses to total loans(3) 0.84% 0.93% 1.01% 1.28% 1.18%
Allowance for possible loan losses to
non-performing loans(3)(4) 113.79% 70.94% 33.46% 36.72% 29.36%
REGULATORY CAPITAL RATIOS(5)
Leverage capital ratio 6.43% 6.75% 7.60% 9.23% 6.00%
Total risk-based capital ratio 17.86% 18.20% 18.77% 19.74% 12.14%
</TABLE>
(1) 1993 earnings per share data is presented only for the period subsequent to
the conversion on June 29, 1993. Because the 1993 extraordinary charges and
accounting changes occurred prior to June 29, 1993 the earnings per share
data presented exclude the effects of these items.
(2) The efficiency ratio measures non-interest expense as a percentage of the
sum of net interest income and non-interest income, excluding net gains on
asset sales.
(3) Reflects the effects of reclassifying in-substance foreclosed loans from
other real estate owned to mortgage loans on real estate in the amount of
$5,069,000 as of December 31, 1992.
(4) Non-performing loans excludes loans which have been restructured and are
accruing and performing in accordance with the restructured terms.
Restructured, accruing loans totaled $5,297,000, $6,391,000, $6,251,000,
$4,813,000 and $14,405,000 at December 31, 1996, 1995, 1994, 1993 and 1992,
respectively.
(5) The Bank's leverage capital ratio and total risk-based capital ratio was
6.07% and 16.86%, respectively, at December 31, 1996, 6.27% and 16.93%,
respectively, at December 31, 1995, 6.68% and 16.49%, respectively, at
December 31, 1994, and 7.67% and 16.38%, respectively, at December 31,
1993. The ratios at December 31, 1992 are for the Bank only. See "Liquidity
and Capital Resources Regulatory Capital Position" for additional
information regarding Bank capital levels.
7
<PAGE> 8
T R Financial Corp. & Subsidiaries
GLOSSARY OF FINANCIAL TERMS
Allowance for Possible Loan Losses
A balance sheet account which is an estimation of possible loan losses. The
provision for possible loan losses is added to the allowance account while
charge-offs decrease the account. Recoveries on loans previously charged off
increase the allowance.
Basis Point
The smallest measure used in quoting interest rate yields. One basis point is
0.01% of yield. Thus a yield that moves from 7.00% to 7.50% moves up 50 basis
points.
Book Value Per Share
Total stockholders' equity divided by number of shares of common stock
outstanding. Common stock outstanding, for financial reporting purposes,
excludes stock held in treasury and may also exclude unallocated shares of
common stock held by a company's employee stock ownership plan.
Charge-Offs
Portions of loan balances or escrow advances written off against the allowance
for possible loan losses, rather than charged to current earnings, once a loan
is deemed to be uncollectible.
Core Deposits
Deposits that are traditionally stable, generally consisting of savings
accounts, NOW accounts and non-interest-bearing demand accounts.
Cost of Funds
The interest cost associated with interest-bearing liabilities. A cost of funds
ratio represents the ratio of interest expense to average interest-bearing
liabilities for the period.
Earning Assets
Interest- or dividend-bearing assets, including loans and securities.
Earnings Per share
Net income divided by weighted average shares of common stock outstanding and
dilutive common stock equivalents, for example stock options. Common stock
outstanding is reduced by stock held in treasury and the unallocated shares of
common stock held by a company's employee stock ownership plan.
Efficiency Ratio
A ratio of non-interest expense as a percentage of the sum of net interest
income and non-interest income, excluding net gains on asset sales.
Employee Stock Ownership Plan (ESOP)
A type of tax-qualified retirement plan for employees that maintains individual
accounts on behalf of each plan participant and annually credits individual
accounts with contributions which are invested in company common stock.
Federal Funds
Generally one-day loans of excess reserves from one bank to another. When a bank
buys (borrows) federal funds, these funds are called "federal funds purchased."
When it sells (lends) them, they are called "federal funds sold."
Foreclosed Assets
Property acquired because the borrower defaulted on the loan.
Interest Rate Sensitivity Gap
Interest rate sensitivity gap is the difference between the estimated amount of
earning assets maturing or repricing within a specific time period and the
estimated amount of interest-bearing liabilities maturing or repricing within
that time period.
Leverage Ratio
A ratio of equity to assets, and defined as period-end Tier 1 capital less
goodwill as a percentage of average assets for the most recent quarter.
Liquidity
The ability of current assets to meet current liabilities when due. The degree
of liquidity of an asset is the period of time anticipated to elapse until the
asset is realized or is otherwise converted into cash. A liquid bank has less
risk of being unable to meet debt than an illiquid one. Also, a liquid bank
generally has more financial flexibility to take on new investment
opportunities.
8
<PAGE> 9
Mortgage Servicing Rights
The rights to service mortgage loans. Rights to service mortgage loans are
acquired through loan origination activities or may be purchased. Mortgage
banking enterprises may purchase and sell mortgage servicing rights.
Net Interest Income
The difference between interest and dividend income on earning assets and
interest expense on interest-bearing liabilities
Net Interest Margin
Net interest income as a percentage of average earning assets for the period.
Net Interest Spread
The difference between the yield on earning assets and the cost of funds ratio.
Non-Performing Assets
Non-performing loans and securities plus foreclosed assets.
Non-Performing Loans
Loans upon which interest income is not currently recognized because of the
borrower's financial problems (non-accrual loans) and loans which are 90 days or
more delinquent and still accruing interest.
Other Real Estate Owned
Real estate which a bank takes or to which it assumes title in order to sell the
property as a result of a loan default.
Provision For Possible Loan Losses
A charge against current period earnings which reflects an estimation of
possible loan losses.
Return on Assets
Net income as a percentage of average total assets for the period. The return on
assets measures profitability in terms of how efficiently assets are being
utilized.
Return on Equity
Net income as a percentage of average total equity. The return on equity
measures profitability in terms of how efficiently equity or capital is being
invested.
Risk-Based Capital
The amount of capital (Tier 1 plus Tier 2 capital) required by federal
regulatory standards, based on a risk-weighting of assets. For example, more
capital is required for an unsecured loan than for investments in U.S.
Government Treasury securities. The required minimum ratio of capital to
risk-weighted assets is 8%.
Securities Sold Under Agreements To Repurchase
Refers to a transaction that is accounted for as a collateralized borrowing in
which a seller-borrower of securities sells those securities to a buyer-lender
with an agreement to repurchase them at a stated price plus interest at a
specified date or in specified circumstances.
Stock Option
Right to purchase or sell a stock at a specified price within a stated period.
Tier 1 Capital
Common stockholders' equity (excluding any net of tax adjustment for net
unrealized appreciation/depreciation in certain securities), qualifying
non-cumulative perpetual preferred stock and minority interest in equity
accounts of consolidated subsidiaries, less any unrealized net loss in
marketable equity securities, goodwill and other disallowed intangibles.
Tier 2 Capital
The allowance for possible loan losses (limited to a certain percentage of
risk-weighted assets), perpetual and long-term preferred stock, hybrid capital
instruments (including perpetual debt and mandatory convertible securities) and
subordinated debt and intermediate-term preferred stock
(subject to certain limitations).
9
<PAGE> 10
T R Financial Corp. & Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
T R Financial Corp. ("T R Financial") was formed on February 12, 1993 in
anticipation of the conversion of Roosevelt Savings Bank (the "Bank") from a New
York State chartered mutual savings bank to a New York State chartered stock
savings bank. On June 29, 1993, the Bank completed its conversion and T R
Financial sold, in its initial public offering, 11,362,000 shares of common
stock at $9.00 per share. Prior to this offering T R Financial had no assets,
liabilities or operations.
While the following discussion of financial condition and results of
operations includes the collective results of T R Financial and the Bank
(collectively the "Company"), this discussion reflects principally the Bank's
activities.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest and dividend income earned
on its loan and securities portfolios and its cost of funds, consisting of the
interest paid on its deposits and borrowings. The Company's operating expenses
principally consist of employee compensation, occupancy, marketing and other
real estate owned expenses and other operating expenses. The Company's results
of operations are also significantly affected by its periodic provisions for
possible loan losses, by write-downs of assets and net gains and losses on sales
of assets. Such results are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities.
The Company and the Bank exceeded their regulatory capital requirements at
December 31, 1996.
Management Strategy
Management's strategy has been to prudently leverage its strong capital position
through asset growth, to increase profitability and to manage its exposure to
fluctuations in interest rates. To accomplish these strategies, the Bank
(1) emphasized the origination of one- to four-family residential, including
co-op, fixed rate mortgages, as well as adjustable rate mortgage ("ARM")
products; (2) emphasized, as an alternative to the origination of loans, the
purchase of U.S. government agency mortgage-backed securities; (3) further
developed its retail banking franchise by attracting deposits which are
competitively priced and are cost effective as a funding source; (4) emphasized
productivity and cost efficiency in the conduct of its operations; and (5)
managed its interest rate risk to appropriately position the Bank in changing
interest rate environments.
Emphasizing Home Lending - The Bank experienced an increase in overall real
estate lending activity during 1996 with the success of correspondent loan
programs with area mortgage brokers and mortgage bankers which were commenced
during 1995 and with a favorable and relatively stable interest rate environment
prevailing during 1996. In addition, the Bank continues to originate commercial
real estate loans on a selective basis. For the year ended December 31, 1996,
41.9% of the Bank's interest income was derived from one- to four-family
residential loans, including loans secured by shares representing co-operative
units ("co-op loans") as compared to 37.2% in 1995. These residential loans have
outstanding balances amounting to $1.36 billion, or 79.3% of total loans, at
December 31, 1996 and are generally considered to involve less risk than other
types of loans. The remaining $354.5 million, or 20.7% of total loans, at
December 31, 1996 consisted of $208.7 million of commercial real estate loans,
$109.2 million of other loans, $24.3 million of multi-family loans and $12.3
million of construction and land development loans. Although these other types
of loans generally have higher yields than one- to four-family residential
mortgage loans, and shorter terms to maturity, which generally improve the
Bank's interest rate sensitivity, they are generally viewed as exposing a lender
to a greater risk of credit loss than one-to four-family residential mortgage
loans and, except
Loan Portfolio Composition
- --------------------------
[PIE CHART]
10
<PAGE> 11
for other loans, typically involve higher loan principal amounts.
The Bank's ratio of non-performing loans to total loans was 0.74% and 1.31%
at December 31, 1996 and 1995, respectively. The decrease in this ratio is
attributable to the Company's overall loan growth and its decrease in
non-performing loans which is attributable to continued improvements in the
local economy and the continued stabilization of real estate market values in
the New York metropolitan region, which includes the Bank's primary lending
area. The ratio of the allowance for possible loan losses to total loans was
0.84% as of December 31, 1996 as compared to 0.93% as of December 31, 1995. A
weakness or deterioration in the economic conditions of the Bank's primary
lending area in the future may result in the Bank experiencing increases in
non-performing loans and non-performing assets. Such increases would likely
result in higher provisions for possible loan losses and reduced levels of
earning assets, which would lower the level of net interest income and possibly
result in higher levels of other real estate owned expense.
Emphasizing Mortgage-Backed Securities - Consistent with management's strategy
of asset growth, the Bank has continued its emphasis on the purchase of U.S.
government agency mortgage-backed securities. For the year ended December 31,
1996, the Bank purchased $350.9 million of fixed rate mortgage-backed securities
which were issued by either the Government National Mortgage Association
("GNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), or Federal National
Mortgage Association ("FNMA").
Total Mortgage-Backed Securities
- --------------------------------
(Billions of dollars)
[BAR CHART]
At December 31, 1996, mortgage-backed securities held to maturity had an
amortized cost of $955.3 million (estimated fair value of $964.0 million) and a
weighted average yield and weighted average life of 7.84% and 6.07 years,
respectively. At December 31, 1996, mortgage-backed securities available for
sale had an amortized cost of $103.4 million (estimated fair value of $104.4
million) and a weighted average yield and weighted average life of 7.75% and
5.24 years, respectively. See "Interest Rate Sensitivity" for a discussion of
the potential impact of changes in interest rates on mortgage-backed securities
and other interest-earning assets.
Enhancing the Retail Banking Franchise - During 1996 the Bank placed major
emphasis on marketing deposit products to attract a cost effective mix of
funding sources to complement its existing core deposit relationships. In this
regard, management has emphasized offering an array of deposit products to meet
the varying needs and preferences of its customers at rates and maturities which
are both competitive and cost effective. For the year ended December 31, 1996,
due to depositors increased $305.2 million to $2.3 billion and, as a result, the
Bank's average deposits per branch increased from $135.9 million at December 31,
1995 to $156.2 million at December 31, 1996.
At December 31, 1996, the Bank had core deposits of $651.5 million as
compared to $624.5 million at December 31, 1995. Core deposits as a percentage
of total deposits decreased during 1996 from 30.6% at December 31, 1995 to 27.8%
at December 31, 1996 due primarily to the $268.1 million increase in
certificates of deposit to $1.61 billion. While not considered core deposits,
the Bank offers certificates of deposit with three to ten year maturities, which
management views as a stable source of funding. At December 31, 1996, the Bank
had $68.9 million of certificates of deposit with remaining terms to maturity of
more than three years. Additionally, although not considered to be a core
deposit, the Bank offers money market accounts which it believes also provide
the Bank with relatively stable lower cost deposits. At December 31, 1996 and
1995, the Bank's money market account balances were $77.2 million and $67.2
million, respectively, at a weighted average interest rate of 2.21% and 3.19%,
respectively. The Bank has not used brokered deposits as a source of funds.
During 1996, the Bank also utilized longer-term Federal Home Loan Bank of New
York ("FHLB") advances to provide a stable source of additional funds at a fixed
cost to the Bank. At December 31, 1996 and 1995, the Bank had $535.8 million and
$575.6 million, respectively, of FHLB advances with weighted average interest
rates of 5.78% and 5.74% for 1996 and 1995, respectively, and weighted average
number of years to maturity of 2.28 and 2.96 years, respectively.
11
<PAGE> 12
Productivity and Cost Efficiency - The Company's efficiency ratio and ratio of
non-interest expense to average assets are two measures used by the Company to
assess its productivity and cost efficiency. For the years ended December 31,
1996, 1995 and 1994, the Company's efficiency ratio was 48.04%, 54.72% and
63.33%, respectively. The ratio of non-interest expense to average assets was
1.41% for the year ended December 31, 1996 as compared to 1.55% and 1.86% for
the years ended December 31, 1995 and 1994, respectively. The Company's ratio of
1.41% compares favorably to its peer group average of 2.36%, as of September 30,
1996, the date of the latest available report by the Federal Deposit Insurance
Corporation ("FDIC"). The Company's improved efficiency ratios reflect the
ongoing evaluation and monitoring of expenses, the lowering of FDIC assessments
and the efficiencies resulting from the growth in assets and income and the
expansion of the retail banking franchise.
Efficiency Ratio
- ----------------
[BAR CHART]
Managing Interest Rate Risk - The Company's interest bearing liabilities
generally adjust more rapidly in a rising interest rate environment than its
interest earning assets (See "Interest Rate Sensitivity"). As a result, the
Company seeks to reduce its exposure to interest rate risk by increasing the
interest rate sensitivity of its assets. The Company manages the interest rate
sensitivity of its assets through the origination and purchase of adjustable
rate mortgage loans and, to a lesser extent, the purchase of fixed rate
mortgage-backed securities with intermediate-term estimated weighted average
remaining lives. At December 31, 1996, the Company's adjustable rate mortgage
loans comprised 45.9% of total mortgage loans on real estate. At December 31,
1996, the Company's mortgage-backed securities classified held to maturity had
an estimated weighted average remaining life of 6.07 years while such securities
classified available for sale had an estimated weighted average remaining life
of 5.24 years.
In its securities portfolio, the Company has emphasized maintaining adequate
liquidity by classifying certain securities as available for sale and by
maintaining a mix of short-term and intermediate-term maturities. Management
also believes that its policy of enhancing the Company's retail banking
franchise, which provides a lower cost core deposit base, also limits interest
rate risk as these deposits are considered by management to have relatively low
volatility. Interest rate risk can also be managed through certain off-balance
sheet derivative financial instruments such as futures, forward, interest rate
swap or options contracts. Management has not engaged in such derivative
financial instruments in the management of its interest rate risk.
The Company uses earning simulations, as well as gap analysis, to analyze and
project future interest rate risk. Computer generated scenarios are based on
various assumptions, including expected changes in the level of interest rates
and the shape of the yield curve, pricing strategies, growth, and volume and mix
alternatives for various funding and investment strategies. The Company monitors
its exposure to interest rate risk in accordance with Board approved guidelines.
The specific results of interest rate simulation modeling are reviewed at least
annually with the Board of Directors.
Interest Rate Sensitivity
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of earning assets maturing or repricing exceeds the
amount of interest-bearing liabilities maturing or repricing within the same
period. A gap is considered negative when the amount of interest-bearing
liabilities maturing or repricing exceeds the amount of earning assets maturing
or repricing within the same period.
As a result of the Company's one-year negative gap position at December 31,
1996 of 18.47%, the yield on earning assets of the Company will adjust to
changes in interest rates at a slower rate than the cost of the Company's
interest-bearing liabilities. As a consequence, any significant increase in
interest rates may have an adverse effect on the Company's results
12
<PAGE> 13
of operations. Conversely, any significant decline in interest rates may have a
positive impact on the Company's results of operations as the cost of the
Company's interest-bearing liabilities will tend to reprice downward at a faster
rate than the Company's earning assets. Increases in the level of interest rates
also may adversely affect the value of the Company's debt securities and other
earning assets and the ability to sell such assets without realizing losses.
Generally, the value of fixed rate instruments fluctuates inversely with changes
in interest rates. As a result, increases in interest rates could result in
decreases in the carrying value of interest-earning assets which could adversely
affect the Company's results of operations if sold, or in the case of
interest-earning assets classified as available for sale, the Company's equity
if retained.
Increases in interest rates may also affect decisions by the Company to
retain certain securities, such as mortgage-backed securities, in available for
sale or to transfer such securities to held to maturity. While such transfers
would reduce the volatility that fluctuations in market values would have on
stockholders' equity under Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Investments in Certain Debt and Equity Securities," it
would also reduce the ability of these securities to reprice through sales and
purchases of securities at the then current market rates. Reducing the repricing
ability of these securities could adversely affect the Company's results of
operations in view of the Company's negative gap position. However, such
transfers would also reduce the likelihood of significant losses from the sales
of such securities. Increases in interest rates can also affect the type (fixed
or adjustable rate) and amount of loans originated by the Company and the
average life of loans and securities, which can adversely impact the yields
earned on the Company's loan and securities portfolios. The Company transferred
on March 31, 1995 certain mortgage-backed and mortgage related securities from
available for sale to held to maturity. On December 15, 1995, in connection with
a one time opportunity permitted by the Financial Accounting Standards Board
("FASB") and regulatory agencies, the Bank reassessed all security
classifications made under SFAS No. 115 and transferred certain securities from
held to maturity to available for sale. See Note 3 to Notes to Consolidated
Financial Statements.
Certain shortcomings are inherent in the method of analysis presented in the
following "gap" table. For example, although certain assets and liabilities may
have similar maturities or periods of repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates.
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Further, in the event of a change in interest rates, prepayment and early
withdrawal levels may deviate significantly from those assumed in calculating
the "gap" table. For example, as interest rates decrease, borrowers may be
inclined to refinance their debt to take advantage of lower interest rates and
to lock in such rates with fixed rate loans. Finally, the ability of many
borrowers to make payments on their adjustable rate debt may decrease in the
event of an interest rate increase.
The following table sets forth the amounts of earning assets and
interest-bearing liabilities outstanding at December 31, 1996 that are
anticipated by the Company, based upon certain assumptions, to reprice or mature
in each of the future time periods shown. Except as stated below, the amount of
assets and liabilities shown which reprice or mature during a particular period
was determined in accordance with the earlier of the term to repricing or the
contractual terms of the asset or liability. Prepayment assumptions have been
applied in estimating the repricing of the Company's mortgage loans and
mortgage-backed securities classified as held to maturity. The estimated rates
of prepayment assumed for loans and mortgage-backed securities are based upon
coupon rates. The Company utilized historical deposit withdrawal patterns of the
Bank for its deposit decay rate assumptions. For passbook accounts, NOW accounts
and money market accounts in the one year or less category, such rates for the
Bank were 12%, 12% and 22%, respectively. In addition, the Company's securities
held in the available for sale portfolio are assumed to reprice in one year or
less. The assumptions used may not be indicative of future withdrawals of
deposits or prepayments of loans and mortgage-backed securities.
13
<PAGE> 14
<TABLE>
<CAPTION>
====================================================================================================================================
More Than
Due in One One To Five Years More Than
(Dollars in thousands) Year or Less Five Years To Ten Years Ten Years Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Mortgage loans(1) $ 267,262 $ 802,834 $ 437,937 $ 86,946 $1,594,979
Other loans(1) 60,208 45,630 3,245 -- 109,083
Securities held to maturity 130,068 316,843 293,685 268,336 1,008,932
Securities available for sale(4) 441,847 -- -- -- 441,847
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 899,385 1,165,307 734,867 355,282 3,154,841
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
Passbook accounts(2) 72,079 288,316 120,132 120,132 600,659
NOW accounts 995 3,980 1,658 1,659 8,292
Money market accounts 16,990 30,119 15,446 14,674 77,229
Certificate of deposit accounts 1,204,801 386,804 23,197 -- 1,614,802
Borrowings 206,735 405,150 25,950 -- 637,835
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities(3) 1,501,600 1,114,369 186,383 136,465 2,938,817
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ (602,215) $ 50,938 $ 548,484 $218,817 $ 216,024
====================================================================================================================================
Cumulative interest rate sensitivity gap $ (602,215) $ (551,277) $ (2,793) $216,024
====================================================================================================================================
Cumulative rate sensitivity gap
as a percentage of total assets -18.47% -16.91% -0.09% 6.63%
Cumulative earning assets as a
percentage of interest-bearing liabilities 59.90% 78.93% 99.90% 107.35%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of the gap analysis, mortgage and other loans are reduced for
non-accrual loans.
(2) Includes mortgagors' escrow deposits.
(3) Does not include demand accounts, which are non-interest bearing, totalling
$62.1 million at December 31, 1996.
(4) All securities classified available for sale are included in the column "Due
in One Year or Less."
14
<PAGE> 15
Analysis of Net Interest Income
Net interest income represents the difference between income on earning assets
and expense on interest-bearing liabilities. Net interest income depends upon
the volume of earning assets and interest-bearing liabilities and the interest
rates earned or paid on them. The following table sets forth certain information
relating to the Company's average statements of financial condition and its
statements of income for the years ended December 31, 1996, 1995 and 1994, and
reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. Average
balances and yields include non-accrual loans.
<TABLE>
<CAPTION>
====================================================================================================================================
Year Ended December 31,
--------------------------------------------------------------------------------------------
1996 1995
--------------------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Mortgage loans, net(1) $1,482,027 $111,683 7.54% $1,222,184 $92,896 7.60%
Other loans(1) 85,833 6,941 8.09 57,107 4,847 8.49
Mortgage-backed securities(2) 1,007,721 75,799 7.52 841,933 63,829 7.58
Short-term securities(3) 4,983 267 5.36 6,003 359 6.00
Other securities(2) 402,384 23,714 5.89 542,247 32,759 6.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 2,982,948 218,404 7.32 2,669,474 194,690 7.29
Non-earning assets 68,604 80,941
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $3,051,552 $2,750,415
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Passbook accounts $ 564,315 $15,571 2.76% $ 501,698 $13,241 2.64%
NOW accounts 25,172 724 2.88 57,829 1,891 3.27
Money market accounts 80,840 2,228 2.76 57,585 1,778 3.09
Certificate of deposit accounts 1,478,403 83,738 5.66 1,244,198 73,118 5.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,148,730 102,261 4.76 1,861,310 90,028 4.84
Borrowings 607,235 34,909 5.75 600,560 34,277 5.71
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 2,755,965 137,170 4.98 2,461,870 124,305 5.05
Other liabilities(4) 105,265 92,034
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,861,230 2,553,904
Stockholders' equity(5) 190,322 196,511
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $3,051,552 $2,750,415
====================================================================================================================================
Net interest income/
interest rate spread $ 81,234 2.34% $ 70,385 2.24%
- ------------------------------------------------------------------------------------------------------------------------------------
Net earning assets/
net interest margin $ 226,983 2.72% $ 207,604 2.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of earning assets
to interest-bearing liabilities 1.08x 1.08x
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Year Ended December 31,
--------------------------------------------
1994
--------------------------------------------
Average
Average Yield/
Balance Interest Cost
--------------------------------------------
<S> <C> <C> <C>
ASSETS
Earning assets:
Mortgage loans, net(1) $1,117,318 $85,065 7.61%
Other loans(1) 35,824 3,169 8.85
Mortgage-backed securities(2) 456,777 31,688 6.94
Short-term securities(3) 8,200 294 3.59
Other securities(2) 571,008 27,857 4.88
- -------------------------------------------------------------------------------------
Total earning assets 2,189,127 148,073 6.76
Non-earning assets 73,154
- -------------------------------------------------------------------------------------
Total assets $2,262,281
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Passbook accounts $ 523,220 $11,291 2.16%
NOW accounts 33,934 700 2.06
Money market accounts 54,837 1,165 2.12
Certificate of deposit accounts 740,159 39,591 5.35
- -------------------------------------------------------------------------------------
Total interest-bearing deposits 1,352,150 52,747 3.90
Borrowings 632,469 35,574 5.62
- -------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,984,619 88,321 4.45
Other liabilities(4) 88,937
- -------------------------------------------------------------------------------------
Total liabilities 2,073,556
Stockholders' equity(5) 188,725
- -------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $2,262,281
=====================================================================================
Net interest income/
interest rate spread $59,752 2.31%
- -------------------------------------------------------------------------------------
Net earning assets/
net interest margin $204,508 2.73%
- -------------------------------------------------------------------------------------
Ratio of earning assets
to interest-bearing liabilities 1.10x
- -------------------------------------------------------------------------------------
</TABLE>
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Includes securities available for sale, securities held to maturity, net
and Federal Home Loan Bank stock at amortized cost.
(3) Includes commercial paper, bankers' acceptances, interest-earning deposits,
money market instruments and federal funds sold.
(4) Includes $62.1 million, $58.6 million and $55.6 million of
non-interest-bearing demand deposit accounts for the years 1996, 1995 and
1994, respectively.
(5) Excludes net unrealized (depreciation) appreciation in certain securities,
net of tax.
15
<PAGE> 16
Rate/Volume Analysis
The following table presents the extent to which changes in interest rates and
changes in the volume of earning assets and interest-bearing liabilities have
affected the Company's interest income and interest expense during the periods
indicated. Information is provided in each category with respect to (i) changes
attributable to changes in volume (changes in volume multiplied by prior rate),
(ii) changes attributable to changes in rate (changes in rate multiplied by
prior volume), and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
====================================================================================================================================
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Compared to
Year Ended December 31, 1995 Year Ended December 31, 1994
Increase (Decrease) Due to Increase (Decrease) Due to
-------------------------------------------------------------------------------------------------
(in thousands) Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Mortgage loans, net $19,748 $ (961) $18,787 $ 7,980 $ (149) $ 7,831
Other loans 2,439 (345) 2,094 1,884 (206) 1,678
Mortgage-backed securities 12,567 (597) 11,970 26,730 5,411 32,141
Short-term securities (61) (31) (92) (79) 144 65
Other securities (8,448) (597) (9,045) (1,404) 6,306 4,902
- ------------------------------------------------------------------------------------------------------------------------------------
Total 26,245 (2,531) 23,714 35,111 11,506 46,617
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
Deposits:
Passbook accounts 1,653 677 2,330 (465) 2,415 1,950
NOW accounts (1,068) (99) (1,167) 492 699 1,191
Money market accounts 719 (269) 450 58 555 613
Certificate of deposit accounts 13,771 (3,151) 10,620 26,966 6,561 33,527
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 15,075 (2,842) 12,233 27,051 10,230 37,281
Borrowings 381 251 632 (1,793) 496 (1,297)
- ------------------------------------------------------------------------------------------------------------------------------------
Total 15,456 (2,591) 12,865 25,258 10,726 35,984
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in net interest income $10,789 $ 60 $10,849 $ 9,853 $ 780 $10,633
====================================================================================================================================
</TABLE>
Financial Condition
Total assets increased $355.0 million, or 12.2%, to $3.26 billion at December
31, 1996 from $2.90 billion at December 31, 1995, primarily as a result of
management's strategy to leverage its capital position through asset growth.
This growth was funded primarily by attracting new deposits.
Securities available for sale decreased $89.1 million, or 16.8%, to $441.8
million at December 31, 1996 from $531.0 million at December 31, 1995.
Securities held to maturity, net increased $153.3 million, or 17.9%, to $1.01
billion at December 31, 1996 from $855.6 million at December 31, 1995. In total,
for both securities available for sale and held to maturity, bonds and equities
decreased $11.9 million, or 2.9%, to $391.1 million at December 31, 1996 as
compared to $402.9 million at December 31, 1995, and mortgage-backed securities
increased $76.0 million, or 7.7%, to $1.06 billion at December 31, 1996 as
compared to $983.7 million at December 31, 1995. The mortgage-backed securities
purchased in 1996 consisted entirely of fixed rate government agency backed
securities and reflect management's strategy of supplementing loan originations
with mortgage-backed security purchases to manage asset growth. Loans
receivable, net of the allowance for possible loan losses, increased $291.5
million, or 20.7%, to $1.70 billion at December 31, 1996 from $1.41 billion at
December 31, 1995. This increase reflects management's strategy of emphasizing
home lending. Mortgage loans on real estate, net of deferred amounts increased
$250.4 million during 1996, with originations and loan purchases aggregating
$412.9 million for 1996. Other loans, net increased $42.2 million during 1996
with $37.1 million of the increase attributable to automobile leases. The
Company purchases all of its automobile leases from a third party leasing
company (the "Leasing Company"). In January 1997, the Leasing Company announced
that it was being acquired by a commercial bank. Management believes that there
will be no impact on the Company's recorded investment in automobile leases as a
result of the sale of the Leasing Company, but future purchases of automobile
leases from the Leasing Company may be reduced or curtailed.
16
<PAGE> 17
Total deposits increased $305.2 million, or 15.0%, to $2.34 billion at
December 31, 1996 from $2.04 billion at December 31, 1995. This increase was
primarily attributable to the successful marketing efforts for the Bank's
competitively priced deposit products. Of the net deposit inflow experienced
during 1996, $242.6 million, or 79.5%, of the net inflow was attributable to
certificate of deposit accounts with maturities of one year or less. At December
31, 1996 the maturity distribution and weighted average contract interest rates
of the Bank's time deposits were as follows: $1.20 billion, or 74.6%, of time
deposits (5.6% contract rate) mature in one year or less; $235.4 million, or
14.6%, of time deposits (6.0% contract rate) mature in over one to two years;
$105.7 million, or 6.6%, of time deposits (6.3% contract rate) mature in over
two to three years; $45.7 million, or 2.8%, of time deposits (6.5% contract
rate) mature in over three to five years; and $23.2 million, or 1.4%, of time
deposits (6.7% contract rate) mature in over five years. Borrowed funds
increased $43.2 million, or 7.3%, to $637.8 million at December 31, 1996 from
$594.6 million at December 31, 1995. This increase in borrowings is attributable
to a $28.0 million net increase in overnight line of credit ("OLOC") borrowings
from the FHLB and an increase in securities sold under agreements to repurchase
of $55.0 million and was partially offset by a $39.8 million decrease in FHLB
term advances.
Stockholders' equity amounted to $204.0 million at December 31, 1996, or
6.26% of total assets, as compared to $199.7 million at December 31, 1995, or
6.87% of total assets. At December 31, 1996, stockholders' equity includes net
unrealized depreciation in certain securities, net of tax, of $1.5 million for
securities falling under the provisions of SFAS No. 115. At December 31, 1995,
stockholders' equity includes net unrealized appreciation in certain securities,
net of tax, of $4.2 million. Within each category of securities, management
routinely reviews the nature of any unrealized gains or losses and currently
believes that the factors identified as being attributable to the gross
unrealized losses in the Company's portfolios of securities are temporary.
Changes in interest rates, however, also may affect decisions made by the
Company to retain for an extended period of time or transfer certain securities
from available for sale to held to maturity. See "Interest Rate Sensitivity."
During 1996, the Company repurchased 782,000 shares of the Company's common
stock at a total cost of $20.9 million. Stock repurchases represent treasury
stock and are reflected in the Company's consolidated statements of financial
condition as a reduction of stockholders' equity.
Non-Performing Assets
- ---------------------
(Millions of dollars)
[BAR CHART]
Non-performing assets decreased $9.3 million to $15.9 million at December 31,
1996, from $25.2 million at December 31, 1995 due primarily to a $6.1 million
reduction in non-performing loans from $18.7 million at December 31, 1995 to
$12.6 million at December 31, 1996. The reduction in non-performing loans
resulted from a $5.1 million reduction in non-accrual loans from $17.2 million
at December 31, 1995 to $12.1 million at December 31, 1996, and a $1.0 million
decrease in loans 90 days or more delinquent and still accruing interest from
$1.5 million at December 31, 1995 to $0.5 million at December 31, 1996. The
ratio of non-performing assets to total assets decreased to 0.49% at December
31, 1996 from 0.87% at December 31, 1995. The ratio of non-performing loans to
total loans decreased to 0.74% at December 31, 1996 as compared to 1.31% at
December 31, 1995. At December 31, 1996, assets identified as impaired under
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," amounted to
$9.7 million, all of which is included in non-accrual loans. SFAS No. 114 was
adopted by the Company on January 1, 1995.
Comparison of Operating Results for the Years
Ended December 31, 1996 and 1995
General - The Company's net income for the year ended December 31, 1996
increased by $9.6 million, or 45.8%, to $30.5 million from $20.9 million for the
year ended December 31, 1995.
17
<PAGE> 18
Interest Income - Interest income increased by $23.7 million, or 12.2%, from
$194.7 million for 1995 to $218.4 million for 1996 due primarily to an increase
in the average earning assets during the period, and an increase in the average
yield on earning assets. Average earning assets increased $313.5 million to
$2.98 billion for the year ended December 31, 1996 from $2.67 billion for 1995,
reflecting the Company's strategy to leverage its capital position through asset
growth. Of the increase in average earning assets, $259.8 million was
attributable to growth in mortgage loans, $165.8 million was attributable to
growth in mortgage-backed securities and $28.7 million was attributable to
growth in other loans. These increases were partially offset by a $139.9 million
decrease in the average balance of other securities. The average yield on
earning assets increased to 7.32% for the year ended December 31, 1996 as
compared to 7.29% for 1995. This was primarily due to increases in the average
balances of mortgage loans, other loans and mortgage-backed securities which
have yields above the average yield on earning assets.
Interest income from mortgage loans, which accounted for 51.1% and 47.7% of
total interest income in 1996 and 1995, respectively, increased by $18.8
million, or 20.2%, due to a $259.8 million, or 21.3%, increase in the average
balance of mortgage loans which was slightly offset by a 6 basis point decrease
in the average yield on mortgage loans from 7.60% for 1995 to 7.54% for 1996.
Interest income on mortgage-backed securities, the average balance of which
increased by $165.8 million, or 19.7%, from 1995 to 1996, totalled $75.8 million
in 1996, an increase of $12.0 million, or 18.8%, from 1995, while the average
yield decreased 6 basis points to 7.52% for 1996. Interest income from bonds,
equities and other investments decreased $9.1 million, or 27.6%, from $33.1
million for 1995, to $24.0 million for 1996, primarily due to a decrease in the
average yield on such securities of 15 basis points from 6.04% at December 31,
1995 to 5.89% at December 31, 1996.
Interest income from other loans, including consumer loans, increased by $2.1
million from $4.8 million for 1995 to $6.9 million for 1996. This increase
resulted primarily from a $28.7 million, or 50.3%, increase in the average
balance of other loans which was partially offset by a 40 basis point decrease
in the average yield on such loans.
Interest Expense - Interest expense for 1996 increased $12.9 million, or 10.3%,
from $124.3 million for 1995 to $137.2 million for 1996 due primarily to a
$294.1 million increase in average interest-bearing liabilities to $2.76 billion
for 1996 from $2.46 billion during 1995, consistent with the Company's growth
strategy, and partially offset by a 7 basis point decrease in the average rate
paid on interest-bearing liabilities to 4.98% in 1996 from 5.05% in 1995. The
decrease in the 1996 average rate paid on interest-bearing liabilities resulted
primarily from a 22 basis point decrease in the average rate paid on certificate
of deposit accounts. Despite the generally higher market interest rates
prevailing during 1996, this 22 basis point decrease reflects a change in the
mix of certificate of deposit account maturities into shorter-term lower rate
products.
Interest expense on passbook accounts increased $2.3 million, or 17.6%,
primarily as a result of a 12 basis point increase in the average cost of such
deposit accounts, and by a $62.6 million increase in the average balance of such
deposits. Interest expense on NOW accounts decreased $1.2 million, or 61.7%, in
1996 as a result of a 39 basis point decrease in the average cost of such
deposits and a $32.7 million, or 56.5%, decrease in the average balance of these
deposits. Interest expense on money market accounts increased by $450 thousand,
or 25.3%, in 1996 primarily as a result of an increase in the average balance of
these deposits of $23.3 million, or 40.4%. The interest expense on certificate
of deposit accounts increased $10.6 million, or 14.5%, in 1996 to $83.7 million,
primarily due to a $234.2 million, or 18.8%, increase in the average balances of
these deposits offset by a 22 basis point decrease in the average rate paid on
such accounts to 5.66%.
Interest expense on borrowed funds increased $632 thousand, or 1.8%, in 1996
to $34.9 million due to a $6.7 million, or 1.1%, increase in the average balance
of borrowed funds, and a 4 basis point increase in the average rate paid on such
funds to 5.75%. The increase in average balances in 1996 as compared to 1995 was
attributable, in part, to additional borrowings during 1996 from securities sold
under agreements to repurchase having an average balance of $7.4 million.
18
<PAGE> 19
Net Interest Income - Net interest income for 1996 increased $10.8 million, or
15.4%, from $70.4 million for 1995 to $81.2 million for 1996. This increase is
the result of the interest income earned on the higher level of earning assets
that resulted from the Company's year to year growth exceeding the interest
expense on the interest-bearing liabilities used to fund such growth. This
increase in net interest income was also influenced by an increase in the
average interest rate spread to 2.34% for the year ended December 31, 1996 as
compared to 2.24% for the year ended December 31, 1995.
Net Interest Income
- -------------------
(Millions of dollars)
[BAR CHART]
Provision for Possible Loan Losses - The provision for possible loan losses for
1996 decreased $1.7 million from $3.1 million for 1995 to $1.4 million for 1996.
This decrease resulted from management's assessment of the loan portfolio, the
level of the Bank's allowance for possible loan losses and its assessment of the
local economy and market conditions. For the years ended December 31, 1996 and
1995, loan charge-offs, net of recoveries, aggregated $297 thousand and $1.8
million, respectively. At December 31, 1996 and 1995, the allowance for possible
loan losses amounted to $14.4 million and $13.3 million, respectively, and the
ratio of such allowance to non-performing loans was 113.79% at December 31, 1996
as compared to 70.94% at December 31, 1995.
Non-Interest Income - Non-interest income for 1996 increased $2.8 million to
$15.9 million as compared to $13.1 million in 1995. This increase was primarily
attributable to a $2.2 million increase in net gain on securities activities.
Proceeds on sales of securities increased $26.6 million to $387.3 million in
1996 as compared to $360.7 million in 1995. Gain on sales of whole loans
decreased $153 thousand to $2 thousand in 1996 as compared to $155 thousand in
1995. Loan fees and other charges, net, increased $298 thousand, or 5.2%. Other
income increased $487 thousand, or 25.9%, due to a $1.1 million recapture of a
previously established reserve for possible losses on the Bank's claims against
Nationar. See Note 18 to the Company's Notes to Consolidated Financial
Statements. This increase was partially offset by a $185 thousand decrease in
gains and recoveries from the disposition of other real estate owned and a $38
thousand decrease in penalty interest on the early withdrawal of time deposits
by customers.
Non-Interest Expense - Non-interest expense increased $378 thousand, or 0.9%,
from $42.7 million for 1995 to $43.1 million for 1996, while the Company's ratio
of non-interest expenses to average assets decreased from 1.55% for 1995 to
1.41% for 1996.
Salaries and employee benefits expense increased $2.0 million, or 8.6%, from
1995 to 1996, due to higher levels of expenses incurred with certain stock-based
compensation plans and salary increases and partially offset by lower costs
associated with restricted stock plans which are now substantially vested.
Occupancy and equipment expense increased $669 thousand to $5.0 million for 1996
as compared to $4.3 million in 1995 due primarily to a $319 thousand increase in
depreciation due primarily to capital expenditures on technology and building
renovation and increased facilities cost for buildings. Marketing expense
decreased $86 thousand to $2.4 million in 1996 from $2.5 million in 1995 due to
lower levels of marketing activities. Other real estate owned expense decreased
$1.3 million to $1.0 million in 1996. FDIC assessment decreased $2.0 million to
$2 thousand for 1996 due to a decrease in BIF assessment rates. For the year
ended December 31, 1995, such rates were $0.23 per $100 of insured deposits for
the Bank through June 1, 1995, at which time such rates decreased to $0.04 per
$100 of insured deposits. For 1996, the BIF assessment rate for the Bank was
reduced to zero per $100 of insured deposits plus a $2 thousand annual fee.
Other operating expense increased $1.0 million to $9.1 million in 1996 as
compared to $8.1 million in 1995 primarily as a result of higher costs
associated with loan origination activities and higher computer processing
charges.
Provision for Income Taxes - Provision for income taxes increased by $5.4
million from $16.8 million for 1995 to $22.2 million for 1996 due to the higher
level of taxable income in 1996 as compared to 1995. As a percentage of income
before provision for income taxes, however, the provision for income taxes
decreased from 44.5% of pre-tax earnings in 1995 to 42.1% of pre-tax earnings in
1996. This decrease resulted from Federal and New York State legislative changes
regarding tax bad debt reserves.
19
<PAGE> 20
See Note 11 to the Company's Notes to Consolidated Financial Statements.
Comparison of Operating Results for the Years
Ended December 31, 1995 and 1994
General - The Company's net income for the year ended December 31, 1995
increased by $8.5 million, or 68.5%, to $20.9 million from $12.4 million for the
year ended December 31, 1994.
Interest Income - Interest income increased by $46.6 million, or 31.5%, from
$148.1 million for 1994 to $194.7 million for 1995 due primarily to an increase
in the average earning assets during the period, and an increase in the average
yield on earning assets. Average earning assets increased $480.3 million to
$2.67 billion for the year ended December 31, 1995 from $2.19 billion for 1994,
reflecting the Company's strategy to leverage its capital position through asset
growth. Of the increase in average earning assets, 80.2% of the increase, or
$385.2 million, was attributable to the growth in mortgage-backed securities.
The average yield on earning assets increased to 7.29% for the year ended
December 31, 1995 as compared to 6.76% for 1994. This was primarily due to the
purchases of longer-term, higher yielding securities, particularly during the
higher interest rate environment which prevailed in the latter part of 1994 and
early 1995.
Interest income from mortgage loans, which accounted for 47.7% and 57.4% of
total interest income in 1995 and 1994, respectively, increased by $7.8 million,
or 9.2%, due to a $104.9 million increase, or 9.4%, in the average balance of
mortgage loans which was slightly offset by a 1 basis point decrease in the
average yield on mortgage loans from 7.61% for 1994 to 7.60% for 1995. Interest
income on mortgage-backed securities, the average balance of which increased by
$385.2 million, or 84.3%, between 1994 and 1995, consistent with the Company's
growth strategy, totalled $63.8 million in 1995, an increase of $32.1 million,
or 101.4%, from 1994, while the average yield increased 64 basis points to 7.58%
for 1995. Interest income from bonds, equities and other investments increased
$5.0 million, or 17.6%, from $28.2 million for 1994, to $33.1 million for 1995,
primarily due to an increase in the average yield on such securities of 118
basis points from 4.86% at December 31, 1994 to 6.04% at December 31, 1995. This
increase in the average yield reflects this portfolio's ability to reprice more
rapidly in a rising rate environment than the Company's other investments.
Interest income from other loans, including consumer loans, increased by $1.7
million from $3.3 million for 1994 to $4.8 million for 1995. This increase
resulted primarily from a $21.3 million, or 59.4%, increase in the average
balance of other loans which was partially offset by a 36 basis point decrease
in the average yield on such loans.
Interest Expense - Interest expense for 1995 increased $36.0 million, or 40.7%,
from $88.3 million for 1994 to $124.3 million for 1995, due primarily to a
$477.3 million increase in average interest-bearing liabilities to $2.46 billion
for 1995 from $1.98 billion during 1994, consistent with the Company's growth
strategy, and a 60 basis point increase in the average rate paid on
interest-bearing liabilities to 5.05% during 1995 from 4.45% in 1994. The
increase in the 1995 average rate paid on interest-bearing liabilities resulted
primarily from the repricing and growth of certain deposit accounts during a
period of rising interest rates.
Interest expense on passbook accounts increased $2.0 million, or 17.3%,
primarily as a result of a 48 basis point increase in the average cost of such
deposit accounts, partially offset by a $21.5 million decrease in the average
balance of such deposits. Interest expense on NOW accounts increased $1.2
million, or 170.1%, in 1995 as a result of a 121 basis point increase in the
average cost of such deposits and a $23.9 million, or 70.4%, increase in the
average balance of these deposits. Interest expense on money market accounts
increased by $613 thousand, or 52.6%, in 1995 primarily as a result of a 97
basis point increase in the average rate paid on such accounts to 3.09%, and an
increase in the average balance of these deposits of $2.7 million, or 5.0%. The
interest expense on certificate of deposit accounts increased $33.5 million, or
84.7%, in 1995 to $73.1 million, primarily due to a $504.0 million, or 68.1%,
increase in the average balances of these deposits and a 53 basis point increase
in the average rate paid on such accounts to 5.88%.
Interest expense on borrowed funds decreased $1.3 million, or 3.6%, in 1995
to $34.3 million due to a $31.9 million, or 5.0%, decrease in the average
balance of borrowed funds, which was partially offset by a 9 basis point
increase in the average rate paid on
20
<PAGE> 21
such funds to 5.71%. The reduction in average balances in 1995 as compared to
1994 was attributable, in part, to the repayment during 1995 of $50.3 million of
FHLB advances at maturity and lower utilization of OLOC.
Net Interest Income - Net interest income before provision for possible loan
losses for 1995 increased $10.6 million, or 17.8%, from $59.8 million for 1994
to $70.4 million for 1995. This increase is the result of the interest income
earned on the higher level of earning assets that resulted from the Company's
year to year growth exceeding the interest expense on the interest-bearing
liabilities used to fund such growth. This increase in net interest income was
partially offset by a reduction in the average interest rate spread to 2.24% for
the year ended December 31, 1995 as compared to 2.31% for the year ended
December 31, 1994. The Bank's strategy, including funding its asset growth with
various deposit products which bear interest at rates which are generally above
the Bank's average cost of funds, had the effect of narrowing the Company's net
interest rate spread; however, this strategy resulted in an overall increase in
net interest income.
Provision for Possible Loan Losses - The provision for possible loan losses for
1995 increased $800 thousand from $2.3 million for 1994 to $3.1 million for
1995. This increase resulted from management's assessment of the loan portfolio,
the level of the Bank's allowance for possible loan losses and its assessment of
the local economy and market conditions. Despite the decrease in non-performing
loans at December 31, 1995 as compared to December 31, 1994, the provision for
possible loan losses increased as a result of management's assessment of the
continued weakness in the local economy and market conditions and the overall
growth in the Bank's loan portfolio. For the years ended December 31, 1995 and
1994, loan charge-offs net of recoveries aggregated $1.8 million and $4.0
million, respectively. At December 31, 1995 and 1994, the allowance for possible
loan losses amounted to $13.3 million and $12.0 million, respectively, and the
ratio of such allowance to non-performing loans was 70.94% at December 31, 1995
as compared to 33.46% at December 31, 1994.
Non-Interest Income - Non-interest income for 1995 increased $5.9 million to
$13.1 million as compared to $7.2 million in 1994. This increase was primarily
attributable to a $4.8 million increase in net gain on securities activities.
Sales of securities increased $97.1 million to $360.7 million in 1995 as
compared to $263.6 million in 1994. In addition, the securities sold in 1995 had
longer remaining terms to maturity as compared to those sold in 1994, thereby
contributing to higher net gains. During 1995, the Company recorded losses of
$599,000 relating to its investments in Nationar's common stock, preferred stock
and subordinated capital debentures which partially offset the higher net gains
on securities activities. See Note 19 to the Company's Notes to Consolidated
Financial Statements. Gain on sales of whole loans increased $37 thousand to
$155 thousand in 1995 as compared to $118 thousand in 1994. Loan fees and other
charges, net, increased $21 thousand or 0.4%. Other income increased $1.0
million, or 114.2%, due to a $531 thousand increase in gains on the sale of
other real estate owned, a $215 thousand increase in penalty interest on the
early withdrawal of time deposits by customers and a $335 thousand refund of
property taxes on Bank owned properties that were reassessed.
Non-Interest Expense - Non-interest expense increased $666 thousand, or 1.6%,
from $42.0 million for 1994 to $42.7 million for 1995, while the Company's ratio
of non-interest expenses to average assets decreased from 1.86% for 1994 to
1.55% for 1995.
Salaries and employee benefits expense increased $1.4 million, or 6.2%, from
1994 to 1995, due to higher levels of expenses incurred with certain stock-based
compensation plans and salary increases. Occupancy and equipment expense
increased $324 thousand to $4.3 million for 1995 as compared to $4.0 million in
1994 due primarily to higher utility, depreciation and rental costs. While the
Bank opened two new branch offices during 1995, the effect on such costs in 1995
was not material. Marketing expense decreased $458 thousand to $2.5 million in
1995 from $2.9 million in 1994 due to careful management of marketing
activities. Other real estate owned expense decreased $8 thousand to $2.2
million in 1995. FDIC assessment decreased $998 thousand to $2.0 million for
1995 as compared to $3.0 million for 1994 due to a reduction in the assessment
effective June 1, 1995 from $0.23 per
21
<PAGE> 22
$100 of insured deposits to $0.04 per $100 of insured deposits. Other operating
expense increased $428 thousand to $8.1 in 1995 as compared to $7.7 million in
1994 primarily as a result of a $660 thousand provision for possible loss
recorded in 1995 relating to the Bank's claim to recover the frozen deposit
balances at Nationar. See Note 19 to the Company's Notes to Consolidated
Financial Statements.
Provision for Income Taxes - Provision for income taxes increased by $6.6
million from $10.3 million for 1994 to $16.8 million for 1995 due to the higher
level of taxable income in 1995 as compared to 1994. See Note 11 to the
Company's Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
General - Following the completion of the Bank's conversion and T R Financial's
stock offering in June 1993, T R Financial's principal business was that of its
subsidiary, the Bank. T R Financial invested 50% of the net proceeds from the
stock offering in the Bank and initially invested the remaining proceeds in
short-term securities, corporate debt obligations, money market investments and
mortgage-backed securities. The Bank can pay dividends to T R Financial, to the
extent such payments are permitted by law or regulation, which serves as an
additional source of liquidity.
Dividend History
- ----------------
(per share)
[BAR CHART]
T R Financial's liquidity is available to, among other things, support future
expansion of operations or diversification into other banking related
businesses, to pay dividends or repurchase its common stock. On April 16, 1996,
T R Financial's Board of Directors authorized its sixth repurchase program
covering the repurchase of up to 894,809 shares of T R Financial common stock.
As of December 31, 1996, 217,000 of such shares had been repurchased.
During 1996, T R Financial utilized $20.9 million of its liquidity to
repurchase 782,000 shares of Common Stock, resulting in cumulative aggregate
repurchases since T R Financial's stock offering of 2,784,369 shares at a total
cost of $53.2 million.
During 1996, T R Financial's Board of Directors declared and paid to
stockholders four quarterly cash dividends aggregating $0.68 per share or $5.6
million. Dividends paid on unallocated shares of Common Stock held by the ESOP
were used to reduce required Company contributions to the ESOP. On January 23,
1997, the Board of Directors of T R Financial declared a quarterly cash dividend
of $0.22 per share to stockholders of record on February 14, 1997 which was paid
on March 3, 1997.
Restrictions on the amount of dividends T R Financial and the Bank may
declare can affect T R Financial's liquidity and cash flow needs. Dividend
payments by T R Financial must be within certain guidelines of the Federal
Reserve Board which provide, among other things, that dividends generally should
be paid only from current earnings. In addition, under Delaware law, T R
Financial may only pay dividends from its capital surplus or, if no such surplus
exists, from its net profits for the current and preceding year.
The Bank's ability to pay dividends to T R Financial is also subject to
certain restrictions. Under the New York State Banking Law, dividends may be
declared and paid only out of the net profits of the Bank. The approval of the
Superintendent of Banks of the State of New York (the "Superintendent") is
required if the total of all dividends declared in any calendar year will exceed
the net profits for that year plus the retained net profits of the preceding two
years, less any required transfers. In addition, no dividends may be declared,
credited or paid if the effect thereof would cause the Bank's capital to be
reduced below the amount required by the Superintendent or the FDIC. During
1996, the Board of Directors of the Bank declared and paid five dividends
totalling $22.0 million. On January 23, 1997, the Board of Directors of the Bank
declared a cash dividend of $3.0 million. This dividend was paid to T R
Financial on March 3, 1997.
The Bank's primary sources of funds are deposits, FHLB borrowings, securities
sold under agreements to repurchase and proceeds from principal and interest
payments on loans, mortgage-backed securities and debt securities. Proceeds from
the sale of securities available for sale and, to a lesser extent, loans are
also sources of funding. While maturities and scheduled amortization of loans
and investments are predictable sources of funds, deposit flows and mortgage
22
<PAGE> 23
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The primary investing activities of the Company are the origination or
purchase of mortgage loans and the purchase of securities, including
mortgage-backed securities. During the years ended December 31, 1996, 1995 and
1994, the Bank originated or purchased real estate loans totalling $412.9
million, $352.5 million and $250.6 million, respectively. During those same
periods, the Company purchased securities, including mortgage-backed securities,
totalling $701.8 million, $759.4 million and $878.2 million, respectively.
For the years ended December 31, 1996, 1995 and 1994, the Bank experienced
net increases in deposits, including the effect of interest credited, of $305.2
million, $342.0 million and $478.6 million, respectively, due to the emphasis
placed by management on enhancing the Bank's retail banking franchise. For the
year ended December 31, 1996, the Bank received $759.5 million of proceeds from
sales and maturities of securities and principal collections on real estate
loans. For the years ended December 31, 1995 and 1994, such proceeds amounted to
$743.8 million and $511.2 million, respectively.
The Company's most liquid assets are cash and cash equivalents, short-term
securities, securities available for sale and securities held to maturity due
within one year. The levels of these assets are dependent on the Company's
operating, financing, lending and investing activities during any given period.
At December 31, 1996, cash and cash equivalents, short-term securities,
securities available for sale and securities held to maturity due in one year or
less, totalled $495.1 million, or 15.2% of total assets.
Liquidity management for the Company is both a daily and long-term component
of the Company's management strategy. Excess funds are generally invested in
short-term and intermediate-term securities. In the event that the Company
should require funds beyond its ability to generate them internally, additional
sources of funds are available through the use of FHLB borrowings and through
the use of securities sold under agreements to repurchase. In addition, the Bank
may access funds, if necessary, through a $100 million OLOC and a $100 million
one-month borrowing facility from the FHLB.
At December 31, 1996, the Bank had outstanding loan commitments of $89.9
million and $15.9 million of outstanding commitments to fund unused lines of
credit. The Bank anticipates that it will have sufficient funds available to
meet its current loan commitments. Certificates of deposit which are scheduled
to mature in one year or less from December 31, 1996 totalled $1.20 billion.
Based on its most recent experience and pricing strategy, management believes
that a significant portion of such deposits will remain with the Bank.
Regulatory Capital Position - The Bank is subject to minimum regulatory capital
requirements imposed by the FDIC which vary according to an institution's
capital level and the composition of its assets. An insured institution is
required to maintain core capital of not less than 3.0% of total assets plus an
additional amount of at least 100 to 200 basis points ("leverage capital
ratio"). An insured institution must also maintain a ratio of total capital to
risk-based assets of 8.0%. Although the minimum leverage capital ratio is 3.0%,
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
stipulates that an institution with less than a 4.0% leverage capital ratio is
deemed to be an "undercapitalized" institution which results in the imposition
of regulatory restrictions. The Bank's capital ratios qualify it to be deemed
"well capitalized" under FDICIA. In addition, the Company's capital ratios
exceed the minimum regulatory capital requirements imposed by the Federal
Reserve Board, which are substantially similar to the requirements of the FDIC.
See Note 13 to the Notes to the Consolidated Financial Statements for the Bank's
and T R Financial's regulatory capital positions and ratios at December 31,
1996.
Impact of Inflation and Changing Prices
The Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly all the assets
and liabilities of the Company are monetary in nature. As a result, interest
rates have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.
23
<PAGE> 24
Impact of New Accounting Standards
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. This approach requires the
recognition of financial assets and servicing assets that are controlled by the
reporting entity, the derecognition of financial assets when control is
surrendered, and the derecognition of liabilities when they are extinguished.
Specific criteria are established for determining when control has been
surrendered in the transfer of financial assets. In December 1996, the FASB
delayed the effective date of FASB No. 125 for transactions involving securities
lending, repurchase agreements, dollar-rolls and similar transactions. See Note
17 to Notes to Consolidated Financial Statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is effective for any stock awards granted by the Company
after December 15, 1994. SFAS No. 123 establishes a fair value based method
rather than an intrinsic value based method to account for stock-based
compensation arrangements. Based upon the status of the Company's current
stock-based compensation plans, the Company does not expect SFAS No. 123 to have
a significant effect on its financial statements. However, management expects to
continue with the intrinsic value approach, as permitted, for future stock
awards, if any. Use of the intrinsic value approach will require the Company to
provide pro forma disclosure of the effect that the use of the fair value based
method would have had on net income and earnings per share. See Note 17 to Notes
to Consolidated Financial Statements for additional disclosure.
Market for Common Stock
The Board of Directors of T R Financial Corp. has declared quarterly cash
dividends since its first declaration on October 25, 1994 of $0.05 per share.
During 1996, the Board of Directors declared four quarterly cash dividends as
shown in the table below. The Board will review the dividend regularly and hopes
to maintain a regular quarterly dividend in the future, based upon the Company's
earnings, financial condition and other factors. See "Liquidity and Capital
Resources" and Note 12 to Notes to Consolidated Financial Statements for a
discussion of restrictions on the Company's ability to pay dividends.
As of February 26, 1997, there were 941 stockholders of record of the
Company. The following table sets forth for each of the periods the high and low
stock prices of T R Financial common stock as reported by the Nasdaq national
market system under the symbol "ROSE," as well as dividends declared during such
periods. Price information appears in major newspapers under the symbols
"T RFinlCp" or "T RFin."
================================================================================
For the Quarter Ended
---------------------------------------------
12/31/96 9/30/96 6/30/96 3/31/96
- --------------------------------------------------------------------------------
High $36 1/8 $29 7/8 $28 1/8 $26 3/4
Low $28 3/4 $26 $24 3/4 23 1/4
- --------------------------------------------------------------------------------
Dividends $0.20 $0.18 $0.16 $0.14
- --------------------------------------------------------------------------------
12/31/95 9/30/95 6/30/95 3/31/95
- --------------------------------------------------------------------------------
High $27 1/2 $26 1/8 $19 7/8 $17
Low $22 1/4 $17 1/4 $15 $13
- --------------------------------------------------------------------------------
Dividends $0.12 $0.10 $0.08 $0.07
================================================================================
24
<PAGE> 25
T R Financial Corp. & Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
============================================================================================================================
(in thousands, except share amounts) December 31, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 18,128 $ 21,204
Securities available for sale:
Bonds and equities 337,446 304,154
Mortgage-backed securities 104,401 226,842
- ----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 441,847 530,996
- ----------------------------------------------------------------------------------------------------------------------------
Securities held to maturity, net (estimated fair value of $1,017,702 and $880,197
at December 31, 1996 and 1995, respectively):
Bonds 53,632 98,792
Mortgage-backed securities 955,300 756,831
- ----------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity, net 1,008,932 855,623
- ----------------------------------------------------------------------------------------------------------------------------
Loans receivable 1,716,182 1,423,574
Allowance for possible loan losses (14,370) (13,267)
- ----------------------------------------------------------------------------------------------------------------------------
Loans receivable, net 1,701,812 1,410,307
- ----------------------------------------------------------------------------------------------------------------------------
Other real estate owned, net 3,264 6,547
Banking house and equipment, net 13,320 11,877
Accrued interest receivable 21,517 20,223
Federal Home Loan Bank stock, at cost 33,390 33,603
Deferred tax asset, net 6,668 4,410
Other assets 10,749 9,833
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $3,259,627 $2,904,623
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to depositors $2,343,513 $2,038,341
Borrowed funds 637,835 594,563
Mortgagors' escrow deposits 19,585 16,852
Accounts payable and accrued expenses 11,190 12,987
Official checks outstanding 24,251 25,102
Accrued taxes payable -- 3,095
Other liabilities 19,215 13,999
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,055,589 2,704,939
- ----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued; -- --
Common stock, $.01 par value, 30,000,000 shares authorized; 11,362,000 shares
issued; 8,787,020 shares and 9,480,557 shares outstanding at December 31, 1996
and December 31, 1995, respectively 114 114
Additional paid-in-capital 104,993 101,063
Retained earnings, partially restricted 157,716 133,111
Net unrealized (depreciation) appreciation in certain securities, net of tax (1,501) 4,230
Less:
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") (5,650) (6,763)
Unearned common stock held by Bank's Recognition and Retention Plans and Trusts (RRP's) (346) (907)
Common stock held by Bank's Supplemental Executive Retirement Plan and Trust,
at cost (39,096 shares and 25,110 shares at December 31, 1996 and 1995, respectively) (721) (351)
Treasury stock, at cost (2,574,980 shares and 1,881,443 shares at
December 31, 1996 and 1995, respectively) (50,567) (30,813)
- ----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 204,038 199,684
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $3,259,627 $2,904,623
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 26
T R Financial Corp. & Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
=================================================================================================================================
For the Year Ended December 31,
----------------------------------
(in thousands, except per share amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Mortgage loans $ 111,683 $ 92,896 $ 85,065
Mortgage-backed securities 75,799 63,829 31,688
Bonds, equities and other investments 23,981 33,118 28,151
Other loans 6,941 4,847 3,169
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest income 218,404 194,690 148,073
- ---------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 102,261 90,028 52,747
Borrowed funds 34,909 34,277 35,574
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest expense 137,170 124,305 88,321
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income 81,234 70,385 59,752
Provision for possible loan losses 1,400 3,050 2,250
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 79,834 67,335 57,502
- ---------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Loan fees and other charges, net 6,036 5,738 5,717
Net gain on securities activities 7,511 5,309 474
Gain on sales of whole loans 2 155 118
Other income 2,370 1,883 879
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 15,919 13,085 7,188
- ---------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 25,561 23,545 22,167
Occupancy and equipment expense 5,016 4,347 4,023
Marketing expense 2,398 2,484 2,942
Other real estate owned expense 951 2,222 2,230
FDIC assessment 2 1,955 2,953
Other operating expense 9,135 8,132 7,704
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 43,063 42,685 42,019
- ---------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 52,690 37,735 22,671
Provision for income taxes 22,175 16,810 10,256
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 30,515 $ 20,925 $ 12,415
=================================================================================================================================
Net income per common and common equivalent share $ 3.44 $ 2.20 $ 1.24
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 27
T R Financial Corp. & Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=================================================================================================================================
For the Year Ended December 31,
----------------------------------
(in thousands, except per share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (PAR VALUE: $.01)
Balance at beginning and end of year $ 114 $ 114 $ 114
- ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 101,063 99,076 97,903
Tax benefits attributable to vested RRP shares and stock option exercises 1,255 404 360
Excess of ESOP compensation cost measured using fair value
of stock over its related cost 2,305 1,401 644
Common stock acquired by Supplemental Executive
Retirement Plan and Trust 370 182 169
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 104,993 101,063 99,076
- ---------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, PARTIALLY RESTRICTED
Balance at beginning of year 133,111 115,912 103,995
Net income 30,515 20,925 12,415
Cash dividends declared on common stock ($0.68 per share, $0.37
per share and $0.05 per share in 1996, 1995 and 1994, respectively) (5,580) (3,315) (460)
Loss on reissuances of treasury stock (330) (411) (38)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 157,716 133,111 115,912
- ---------------------------------------------------------------------------------------------------------------------------------
NET UNREALIZED (DEPRECIATION) APPRECIATION
IN CERTAIN SECURITIES, NET OF TAX
Balance at beginning of year 4,230 (9,839) 2,045
Net unrealized appreciation in securities reclassified available for sale, net of tax 1,105 6,219 --
Change in net unrealized (depreciation) appreciation in certain securities, net of tax (6,836) 7,850 (11,884)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (1,501) 4,230 (9,839)
- ---------------------------------------------------------------------------------------------------------------------------------
UNALLOCATED COMMON STOCK HELD BY ESOP
Balance at beginning of year (6,763) (7,956) (9,118)
Amortization relating to allocation of stock held by ESOP 1,113 1,193 1,162
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (5,650) (6,763) (7,956)
- ---------------------------------------------------------------------------------------------------------------------------------
UNEARNED COMMON STOCK HELD BY BANK'S RRP'S
Balance at beginning of year (907) (1,988) (3,354)
Amortization relating to the earned portion of RRP stock 561 1,081 1,366
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (346) (907) (1,988)
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK HELD BY BANK'S SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN AND TRUST
Balance at beginning of year (351) (169) --
Common stock acquired (370) (182) (169)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (721) (351) (169)
- ---------------------------------------------------------------------------------------------------------------------------------
TREASURY STOCK, AT COST
Balance at beginning of year (30,813) (17,383) (6,847)
Common stock acquired at cost (20,879) (14,843) (10,661)
Common stock reissued for options exercised 1,125 1,413 125
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (50,567) (30,813) (17,383)
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity $ 204,038 $ 199,684 $ 177,767
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 28
T R Financial Corp. & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
=================================================================================================================================
For the Year Ended December 31,
----------------------------------
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 30,515 $ 20,925 $ 12,415
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses 1,400 3,050 2,250
Provision for possible other real estate owned losses 195 432 198
Depreciation of banking house and equipment 1,751 1,432 1,212
Gain on calls of securities (38) (4) (8)
Net gain on sales of securities available for sale (7,469) (5,276) (432)
Gain on sales of whole loans (2) (155) (118)
Net gain on sale of other real estate owned (424) (724) (361)
Amortization of net deferred loan origination costs 291 600 444
Amortization of premiums in excess of (less than) accretion of discounts 1,133 (12) 336
Income taxes deferred and tax benefits attributable to stock plans 3,501 1,801 639
Amortization relating to allocation and earned portions of stock plans 3,979 3,675 3,172
Increase/decrease in:
Money market investments -- -- 20,988
Accrued interest Receivable (1,294) (1,978) (3,901)
Accounts payable and accrued expenses (1,797) (257) (917)
Official checks outstanding (851) 2,396 959
Other assets (916) (5,061) (124)
Accrued taxes payable (3,095) 1,089 621
Other liabilities 5,216 4,519 102
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 32,095 26,452 37,475
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for the purchase of:
Securities held to maturity and FHLB Capital Stock (335,655) (419,609) (553,540)
Securities available for sale (366,166) (339,754) (324,631)
Banking house and equipment (3,194) (2,596) (2,479)
Proceeds from:
Redemption of FHLB Capital Stock and calls of securities 29,541 16,600 11,776
Sales of securities available for sale 387,273 360,678 263,600
Repayments on securities 217,199 279,891 132,817
Sales of whole loans 550 19,978 8,473
Principal collected on real estate loans 155,012 103,273 114,771
Sales of other real estate owned 9,876 18,321 7,071
Principal collected on other loans 22,499 17,071 15,280
Real estate loans originated and purchased (412,882) (352,526) (250,591)
Other loans originated and purchased (64,737) (40,247) (23,346)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (360,684) (338,920) (600,799)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
28
<PAGE> 29
T R Financial Corp. & Subsidiaries
<TABLE>
<CAPTION>
=================================================================================================================================
For the Year Ended December 31,
----------------------------------
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Interest credited to deposits $ 81,605 $ 69,528 $ 39,766
Net deposits in savings accounts, certificates of deposit accounts,
money market accounts and checking accounts 223,567 272,454 438,848
Net proceeds from exercise of stock options 795 1,002 87
Net deposits to (withdrawals from) escrow accounts 2,733 (335) 4,307
Net proceeds from (repayments of) short-term borrowed funds 63,685 (38,500) 41,500
Repayments of long-term borrowed funds (77,113) (50,250) (33,500)
Proceeds from long-term borrowed funds 56,700 58,113 72,000
Purchase of treasury stock (20,879) (14,843) (10,661)
Cash dividends paid (5,580) (3,315) (460)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 325,513 293,854 551,887
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,076) (18,614) (11,437)
Cash and cash equivalents at beginning of year 21,204 39,818 51,255
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 18,128 $ 21,204 $ 39,818
=================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Income taxes $ 24,468 $ 13,930 $ 10,178
Interest on deposits and borrowed funds $ 55,565 $ 54,778 $ 48,082
=================================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Additions to other real estate owned, net $ 6,364 $ 18,041 $ 6,366
March 31, 1995 transfer of securities from available for sale to held to maturity,
at estimated fair value -- $ 97,948 --
December 15, 1995 transfer of securities from held to maturity to
available for sale, at amortized cost -- $ 282,762 --
Securitization of real estate loans into available for
sale mortgage-backed securities -- $ 5,903 --
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 30
T R Financial Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
NOTE 1
Summary of Significant Accounting Policies and Related Matters
In June 1993 Roosevelt Savings Bank (the "Bank") converted from a state
chartered mutual savings bank to a state chartered stock savings bank. In
anticipation of the conversion, T R Financial Corp. ("T R Financial" or the
"Parent") was organized under Delaware law and on June 29, 1993 sold 11,362,000
shares of common stock ("Common Stock") at a price of $9.00 per share resulting
in net proceeds of $98,017,000. Concurrent with the sale of Common Stock, T R
Financial utilized one half of the net proceeds to acquire all of the capital
stock of the Bank. With the completion of the conversion, T R Financial operates
as a bank holding company with its business consisting primarily of the business
of the Bank.
The Bank's primary business activities include attracting deposits from the
general public and originating residential property loans (one- to four-family
home mortgages, co-operative apartment and multi-family property loans). The
Bank also makes commercial real estate loans and consumer loans. Deposits at the
Bank are insured up to applicable limits by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation ("FDIC"). The Bank is a New York State
chartered savings bank and is subject to comprehensive regulation, examination
and supervision by the New York State Banking Department and the FDIC. T R
Financial is subject to comprehensive regulation, examination and supervision by
the Board of Governors of the Federal Reserve System.
(a) Principles of Consolidation and Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of T R Financial, its
wholly-owned subsidiary the Bank, and the Bank's wholly-owned subsidiaries
(collectively the "Company"). All significant intercompany transactions and
balances have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses for the periods. Actual results
could differ from those estimates.
Material estimates that are particularly susceptible to change in the
near-term relate to the determination of the allowance for possible loan losses.
In connection with the determination of the adequacy of the allowance for
possible loan losses, management makes periodic provisions for possible loan
losses based upon its evaluation of the Bank's loan portfolio. Management
believes that the amounts of allowance for possible loan losses as presented in
these consolidated financial statements are adequate. While management utilizes
available information to recognize losses on loans, future additions to the
allowance may be necessary based on unanticipated changes in economic
conditions, particularly in the New York metropolitan area. In addition, the New
York State Banking Department and the FDIC, as integral parts of their
examination processes, periodically review the Bank's allowance for possible
loan losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examinations.
A substantial portion of the Bank's loans is secured primarily by properties
located in the New York metropolitan area. Accordingly, the ultimate
collectibility of a substantial portion of the Bank's loan portfolio is
susceptible to changes in market conditions in that area.
(b) Disclosures about Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments,"
requires disclosures about derivative financial instruments such as futures,
forward, interest rate swap or option contracts, and other financial instruments
with similar characteristics. The Company has not utilized derivative financial
instruments falling under the scope of SFAS No. 119.
30
<PAGE> 31
(c) Cash Flows
For the purpose of reporting cash flows, the Company considers all short-term
investments with a maturity of three months or less from the date of purchase to
be cash equivalents.
The Bank securitized portfolio mortgage loans of $5,903,000 during 1995, into
Federal National Mortgage Association ("FNMA") mortgage-backed securities. These
transactions were not considered cash transactions and, accordingly, do not
appear on the consolidated statements of cash flows. There were no such
transactions during 1996 or 1994.
(d) Debt and Equity Securities
Gains and losses on the sales of securities are determined using the specific
identification method. With respect to unrealized gross losses in the securities
portfolios, the Company follows a policy of reserving for specific securities
when, in the opinion of the Company's management, the securities may have
experienced a decline in value that is other than temporary. Such losses are
reflected in non-interest income.
The Company classifies its securities purchases as either held to maturity,
available for sale or trading based upon determinations made at the time of
purchase.
Securities Available for Sale - Securities classified available for sale
include marketable equity securities, bonds and other debt and mortgage-backed
securities to be held for indefinite periods of time, including securities that
management intends to use as part of its asset/liability strategy, or that may
be sold in response to changes in interest rates, changes in prepayment risk,
the need to increase regulatory capital or other similar factors. Securities
classified as available for sale are carried at estimated fair value with the
unrealized appreciation (depreciation) on such securities, net of tax, reported
as a separate component of stockholders' equity.
Securities Held to Maturity - Securities classified as held to maturity are
stated at amortized cost (unpaid principal in the case of mortgage-backed
securities), adjusted for amortization of premiums and accretion of discounts,
as the Company has the intent and ability to hold these securities until
maturity. Premiums and discounts on these securities are recognized in interest
income using the level-yield method over the period to maturity, adjusted in the
case of mortgage-backed securities for anticipated prepayments. For securities
transferred from available for sale to held to maturity, the fair value of the
securities on the date of transfer represents the new cost basis of the
securities.
Trading Account Securities - Securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
account securities and are carried at estimated fair value. Net unrealized gains
and losses are included in non-interest income. Interest on trading account
securities is included in interest income.
Federal Home Loan Bank Stock - In connection with the Bank's borrowings from
the Federal Home Loan Bank of New York ("FHLB"), the Bank is required to
purchase shares of FHLB non-marketable capital stock at par. Such shares are
redeemed by FHLB at par with reductions in the Bank's borrowing levels.
(e) Securities Sold Under Agreements to Repurchase
The Company enters into sales of securities under agreements to repurchase only
with selected dealers and banks. Such agreements are treated as financings and
the obligations to repurchase securities sold are reflected as a liability in
the Company's consolidated statements of financial condition. The securities
underlying the agreements remain in the asset accounts.
(f) Loans Receivable
Loans receivable are held for investment and are carried at unpaid principal
balances net of any deferred loan origination fees or costs and unearned income.
Effective January l, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures." In accordance with
the provisions of these statements, the Company measures and records all
impaired loans, as defined in SFAS No. 114, based upon the fair value of the
underlying collateral less estimated selling costs if liquidation of the
collateral is expected to collect the loan. Restructured loans, as defined in
SFAS No. 114, are measured and recorded at the present value of the expected
future cash flows discounted at the loan's original effective interest rate. The
adoption of SFAS Nos. 114 and 118 did not have a material effect on the
Company's consolidated financial condition or results of operations.
Discounts on other loans are recognized over the lives of the loans using the
level-yield method.
31
<PAGE> 32
Loan fees and certain direct loan origination costs are deferred. Net
deferred fees or costs are recognized in income using the level-yield method
over the contractual life of each loan. It is the Bank's policy to cease
amortizing net fees or costs on non-accruing loans.
Provisions for possible loan losses are estimated periodically and are
charged to operations based on management's evaluation of the loan portfolio.
The allowance for possible loan losses is based on a periodic analysis of the
loan portfolios and reflects amounts which, in management's judgment, are
adequate to provide for possible loan losses in the existing portfolios. In
evaluating the portfolios, management takes into consideration numerous factors
such as the Bank's loan growth, prior loss experience, present and potential
risks of the loan portfolio and current economic conditions. Loans are charged
off against the allowance for possible loan losses when the collectibility of
loan principal is unlikely. Recoveries of loans previously charged off are
credited to the allowance.
The Bank generally continues accruing interest on all delinquent secured real
estate loans until either foreclosure proceedings have been commenced or the
loan is 120 days past due. The Bank accrues interest on all other delinquent
loans until the loan is 120 days past due. The Bank reverses any previously
accrued interest upon the commencement of foreclosure proceedings when the
outstanding loan balance exceeds 90% of the appraised value of the property.
(g) Other Real Estate Owned, net
Real estate acquired through foreclosure is reported at the lower of cost or
estimated fair value at the time of foreclosure less estimated selling costs.
Subsequent declines in estimated fair value, certain costs relating to holding
properties, and gains or losses resulting from disposition of properties are
recognized in the current period's operations.
(h) Banking House and Equipment, net
Banking house and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are computed using the
straight-line method over the estimated useful life of each type of asset.
Improvements to banking houses are depreciated over the remaining estimated
useful life of the building. Leasehold improvements are amortized on the
straight-line method over the shorter of their estimated useful life or the term
of the lease.
(i) Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax return.
Federal income tax expense or benefit is allocated among the consolidated group
on the basis of their individual taxable income or loss. Provisions for income
taxes are based upon results of operations reported for financial statement
purposes. Deferred income taxes are provided for significant temporary
differences.
Under SFAS No. 109, "Accounting for Income Taxes," the Company utilizes an
asset and liability approach for accounting for income taxes. Deferred tax
assets and liabilities are measured based on enacted tax laws. Deferred tax
assets are reduced by a valuation allowance, if necessary, for the amount of
such benefits that are not expected to be realized based on available evidence.
(j) Employee Stock Ownership Plan
Effective January 1, 1994 the Company adopted the provisions of Statement of
Position ("SOP") 93-6, "Employers' Accounting for Employee Stock Ownership
Plans," to measure compensation expense attributable to the allocation of Common
Stock held by the Company's Employee Stock Ownership Plan (the "ESOP"). SOP 93-6
requires that compensation expense be computed on the basis of shares allocated
by the ESOP multiplied by the average fair value of the allocated shares during
the period. SOP 93-6 also requires that only shares which have been allocated to
participant accounts be considered outstanding for earnings per share
computations.
(k) Earnings Per Share
Earnings per share are computed by dividing income before extraordinary charges
and net income by the weighted average number of shares of Common Stock and
dilutive common stock equivalents outstanding. For the years ended December 31,
1996, 1995 and 1994, the weighted average number of shares of Common Stock and
common stock equivalents outstanding was 8,864,004, 9,512,853 and 10,054,626,
respectively. In accordance with the provisions of SOP 93-6, such shares have
been reduced by the weighted average number of unallocated shares of Common
Stock held by the ESOP of 689,426, 819,317 and 948,363 for the years ended
December 31, 1996, 1995 and 1994, respectively.
32
<PAGE> 33
(l) Treasury Stock
Repurchases of Common Stock are accounted for under the cost method, whereby
shares repurchased are recorded as treasury stock at cost.
NOTE 2
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1996 and 1995 are summarized as
follows:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Cash and cash items $12,189 $16,111
Due from banks 5,939 5,093
- --------------------------------------------------------------------------------
$18,128 $21,204
================================================================================
NOTE 3
Debt and Equity Securities
Included in the Company's available for sale and held to maturity securities
portfolios are mortgage-backed securities which, except for collateralized
mortgage obligations ("CMOs"), represent participating interests in pools of
first mortgage loans. These mortgage-backed securities have been issued and are
backed by Government National Mortgage Association ("GNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC") or FNMA. The CMOs held by the Company represent
securities that are collateralized with FHLMC mortgage-backed securities.
On March 31, 1995, the Company transferred into its held to maturity
securities portfolio, at estimated fair value, certain FHLMC and FNMA
mortgage-backed securities and CMO's which were previously classified as
available for sale. The Company transferred these securities because it had no
further intention of possibly selling these securities. The following is a
summary of the securities transferred:
March 31, 1995 Transfer
================================================================================
Amortized Estimated Gross Unrealized
(in thousands) Cost Fair Value Gains Losses
- --------------------------------------------------------------------------------
Securities transferred
from available for
sale to held to
maturity
FNMA, net $ 13,024 $ 12,245 -- $ (779)
FHLMC, net 79,733 73,403 -- (6,330)
CMOs, net 12,709 12,300 -- (409)
- --------------------------------------------------------------------------------
Total transferred
March 31, 1995 $105,466 $ 97,948 -- $ (7,518)
================================================================================
The unrealized loss associated with the securities transferred amounted to
$7,518,000 and is being amortized over the estimated remaining lives of the
related securities. At December 31, 1996 and 1995, $4,606,000 and $6,579,000,
respectively of unrealized losses remain.
In connection with the FASB's issuance of its SFAS No. 115 Implementation
Guide in November 1995, the Company, as permitted, made a one-time reassessment
of all of its security classifications. In evaluating the interest rate
environment at that time and the Company's asset and liability position, the
Company transferred, at estimated fair value, on December 15, 1995, securities
from the held to maturity portfolio to the available for sale portfolio. As more
fully discussed below, certain mortgage-backed securities were included in both
the March 31, 1995 and December 15, 1995 transfers. The following summarizes the
securities transferred:
December 15, 1995 Transfer
================================================================================
Amortized Estimated Gross Unrealized
(in thousands) Cost Fair Value Gains Losses
- --------------------------------------------------------------------------------
Securities transferred
from held to maturity
to available for sale
United States
Government
obligations $109,917 $112,897 $3,109 $(129)
Federal agency
obligations 20,000 19,965 214 (249)
Industrial and
financial
corporation
bonds 25,412 26,155 743 --
Mortgage-backed
securities
FNMA, net(1) 21,592 22,157 707 (142)
FHLMC, net(1) 25,541 27,056 1,515 --
GNMA, net 71,918 74,104 2,186 --
CMOs, net(1) 8,382 8,673 291 --
- --------------------------------------------------------------------------------
Total transferred
December 15, 1995 $282,762 $291,007 $8,765 $(520)
================================================================================
(1) Amortized cost has been reduced by unrealized losses, net of subsequent
accretion, relating to certain securities which had been transferred from
available for sale to held to maturity on March 31, 1995. As of December 15,
1995, the amortized cost of securities has been reduced as follows: FNMA by
$691,000, FHLMC by $1,936,000 and CMO's by $273,000. These unrealized losses
aggregating $2,900,000 which have been recorded, net of $1,290,000 of tax,
as a reduction of stockholders' equity in the accompanying consolidated
statement of financial condition in connection with the March 31, 1995
transfer will, in the event these securities are sold, reduce the realized
gain or increase the realized loss of the related securities sold.
33
<PAGE> 34
The following tables set forth certain information regarding the amortized
cost, estimated fair values and gross unrealized gains and losses on debt and
equity securities of the Company at December 31, 1996 and December 31, 1995:
December 31, 1996
================================================================================
Amortized Estimated Gross Unrealized
(in thousands) Cost Fair Value Gains Losses
- --------------------------------------------------------------------------------
Available for Sale:
Bonds and equities
United States
Government
obligations $ 214,989 $ 214,585 $ 448 $ (852)
Federal agency
obligations 98,057 97,074 138 (1,121)
Industrial,
financial
corporation
and other
bonds 4,059 4,126 67 --
Common and
preferred stocks 19,448 21,661 2,237 (24)
- --------------------------------------------------------------------------------
Total bonds and
equities 336,553 337,446 2,890 (1,997)
- --------------------------------------------------------------------------------
Mortgage-backed
securities:
FNMA, net(1) 17,393 17,453 259 (199)
GNMA, net 60,259 60,552 422 (129)
FHLMC, net(1) 25,717 26,396 807 (128)
- --------------------------------------------------------------------------------
Total mortgage-
backed
securities 103,369 104,401 1,488 (456)
- --------------------------------------------------------------------------------
Total available
for sale $ 439,922 $ 441,847 $ 4,378 $(2,453)
================================================================================
Held to Maturity, net
Bonds
Federal agency
obligations $ 6,000 $ 5,926 $ -- $ (74)
Public utility
bonds 1,001 947 -- (54)
Municipal bonds 6,921 7,102 182 (1)
Industrial and
financial
corporation
bonds 39,710 39,690 169 (189)
- --------------------------------------------------------------------------------
Total bonds 53,632 53,665 351 (318)
- --------------------------------------------------------------------------------
Mortgage-backed
securities:
FNMA, net 98,178 96,258 239 (2,159)
GNMA, net 755,479 764,530 13,296 (4,245)
FHLMC, net(2) 98,737 100,211 1,474 --
CMO, net(2) 2,906 3,038 132 --
- --------------------------------------------------------------------------------
Total mortgage-
backed
securities 955,300 964,037 15,141 (6,404)
- --------------------------------------------------------------------------------
Total held to
maturity, net $1,008,932 $1,017,702 $15,492 $(6,722)
================================================================================
(1) Includes securities which were transferred on December 15, 1995 from held to
maturity to available for sale after having been previously transferred on
March 31, 1995 from available for sale to held to maturity. As of December
31, 1996 the amortized cost of these securities was reduced by $1,666,000 of
gross unrealized losses existing as of March 31, 1995, adjusted for
subsequent accretion and sales of these securities.
(2) Includes securities which were transferred on March 31, 1995 from available
for sale to held to maturity. As of December 31, 1996 the amortized cost of
these securities was reduced by $2,940,000 of gross unrealized losses
existing as of March 31, 1995, adjusted for subsequent accretion.
December 31, 1995
================================================================================
Amortized Estimated Gross Unrealized
(in thousands) Cost Fair Value Gains Losses
- --------------------------------------------------------------------------------
Available for Sale:
Bonds and equities
United States
Government
obligations $178,699 $182,584 $ 4,088 $ (203)
Federal agency
obligations 82,318 83,139 956 (135)
Public utility
bonds 804 795 7 (16)
Industrial,
financial
corporation
and other
bonds 26,420 27,289 869 --
Common and
preferred stocks 9,067 10,347 1,322 (42)
- --------------------------------------------------------------------------------
Total bonds
and equities 297,308 304,154 7,242 (396)
- --------------------------------------------------------------------------------
Mortgage-backed
securities:
FNMA, net(1) 48,717 50,379 1,750 (88)
GNMA, net 125,056 128,569 3,575 (62)
FHLMC, net(1) 37,546 39,343 1,841 (44)
CMO's, net(1) 8,235 8,551 316 --
- --------------------------------------------------------------------------------
Total mortgage-
backed
securities 219,554 226,842 7,482 (194)
- --------------------------------------------------------------------------------
Total available
for sale $516,862 $530,996 $14,724 $ (590)
================================================================================
Held to Maturity, net:
Bonds
Federal agency
obligations $ 14,424 $ 14,432 $ 24 $ (16)
Public utility
bonds 1,050 1,021 1 (30)
Municipal bonds 7,962 8,208 258 (12)
Industrial and
financial
corporation
bonds 75,131 75,048 378 (461)
Canadian bonds 225 243 18 --
- --------------------------------------------------------------------------------
Total bonds 98,792 98,952 679 (519)
- --------------------------------------------------------------------------------
Mortgage-backed
securities:
FNMA, net 109,281 109,210 664 (735)
GNMA, net 533,301 553,292 20,595 (604)
FHLMC, net(2) 111,347 115,630 4,450 (167)
CMO, net(2) 2,902 3,113 211 --
- --------------------------------------------------------------------------------
Total mortgage-
backed
securities 756,831 781,245 25,920 (1,506)
- --------------------------------------------------------------------------------
Total held to
maturity, net $855,623 $880,197 $26,599 $(2,025)
================================================================================
(1) Includes securities which were transferred on December 15, 1995 from held to
maturity to available for sale after having been previously transferred on
March 31, 1995 from available for sale to held to maturity. As of December
31, 1995 the amortized cost of these securities was reduced by $2,873,000 of
gross unrealized losses existing as of March 31, 1995, adjusted for
subsequent accretion.
(2) Includes securities which were transferred on March 31, 1995 from available
for sale to held to maturity. As of December 31, 1995 the amortized cost of
these securities was reduced by $3,706,000 of gross unrealized losses
existing as of March 31, 1995, adjusted for subsequent accretion.
34
<PAGE> 35
A gross realized gain of $5,654,000 on the sale of bond and equity
securities, a $168,000 gross realized loss on the sale of bond and equity
securities, a net gain of $4,000 on trading account securities and a $38,000
gross realized gain on calls of securities held to maturity are included in the
determination of net income for 1996. A gross realized gain of $4,599,000 and a
gross realized loss of $226,000 on the sale of bond and equity securities, a
$599,000 loss relating to certain Nationar investments, a net gain of $29,000 on
trading account securities and a $4,000 gross realized gain on calls of
securities held to maturity are included in the determination of net income for
1995. A gross realized gain of $441,000 and a gross realized loss of $171,000 on
the sale of bond and equity securities, a gross realized gain of $34,000 on the
sale of trading account securities and an $8,000 gross realized gain on the call
of a security held to maturity are included in the determination of net income
for 1994. There were realized net gains of $1,983,000, $1,502,000 and $162,000
on the sale of mortgage-backed securities included in the determination of net
income in 1996, 1995 and 1994, respectively.
At December 31, 1996, the maturities of debt securities available for sale
and held to maturity, excluding mortgage-backed securities, are as follows:
================================================================================
Available for Sale Held to Maturity
-----------------------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value
- --------------------------------------------------------------------------------
Within 1 year $ 11,994 $ 11,978 $34,400 $34,439
After 1 year through
5 years 288,242 286,829 14,326 14,424
After 5 years through
10 years 16,869 16,978 2,488 2,352
After 10 years -- -- 2,418 2,450
- --------------------------------------------------------------------------------
Total $317,105 $315,785 $53,632 $53,665
================================================================================
At December 31, 1996 and 1995, the net unrealized depreciation/appreciation
relating to certain securities that have been included as a separate component
of stockholders' equity amounted to a net unrealized loss of $1,501,000, and a
net unrealized gain of $4,230,000, respectively. Such amounts are net of
$1,180,000 and $3,324,000, respectively, of related income taxes. While the
Company maintains a trading account, there were no open positions in this
account at December 31, 1996 or 1995.
The Company's available for sale and held to maturity securities portfolios
may experience substantial volatility in estimated fair values. Declines in the
estimated fair values of securities during 1996 and 1995 have been directly
attributable to the effects that rises in interest rates during 1996 and 1995
had on the Company's portfolio of debt securities. As of December 31, 1996, the
remaining gross unrealized losses in both securities portfolios are considered
by management of the Company to be temporary.
Included in securities held to maturity at December 31, 1996 and 1995 are
callable stepup notes which represent general U.S. Government agency obligations
which provide annual fixed rate step ups of interest and are callable at par
after one year and in six month intervals thereafter. At December 31, 1996 and
1995 the amortized cost and estimated fair values of these notes aggregated
$6,000,000 and $5,926,000, respectively, in 1996 and $14,424,000 and $14,432,000
respectively, in 1995. The notes held as of December 31, 1996 mature in 1999 and
have a weighted average rate of 5.73%.
The Company loans U.S. Government obligations to specified brokerage houses.
These loaned securities are collateralized with cash at 102% of their estimated
fair value or with government securities. To protect the Company's investment,
the agreements contain provisions to increase the collateral obtained, should
the estimated fair value of the collateral received decline or the estimated
fair value of the security loaned increase. Upon termination of the loan, the
Company's securities are returned.
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Estimated fair value of securities
loaned at December 31 $136,413 $88,707
- --------------------------------------------------------------------------------
Maximum amount of securities
loaned outstanding at any
month-end during the year
ended December 31 $178,098 $240,824
================================================================================
Income on loaned securities of $151,000, $206,000 and $289,000 is included in
the determination of net income in 1996, 1995 and 1994, respectively.
35
<PAGE> 36
NOTE 4
Loans Receivable, net
Loans receivable, net as of December 31, 1996 and 1995 consists of the
following:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Mortgage loans on real estate, net
One- to four-family $ 1,156,944 $ 973,086
Multi-family 24,324 23,745
Co-op 200,462 137,972
Commercial 208,689 214,208
Construction and land development 12,309 5,147
- --------------------------------------------------------------------------------
Total mortgage loans on real estate 1,602,728 1,354,158
- --------------------------------------------------------------------------------
Less:
Deferred income (21) (27)
Net deferred loan origination costs 4,236 2,392
- --------------------------------------------------------------------------------
4,215 2,365
- --------------------------------------------------------------------------------
Total mortgage loans on real estate,
net of deferred amounts 1,606,943 1,356,523
- --------------------------------------------------------------------------------
Other loans, net
Student loans 2,649 3,029
Consumer loans 23,909 18,342
Automobile leases 86,527 46,285
Loans on savings accounts 3,345 3,373
Overdraft loans 696 706
Property improvement loans 153 107
Business loans 222 332
- --------------------------------------------------------------------------------
Total other loans 117,501 72,174
- --------------------------------------------------------------------------------
Less:
Unearned discount (8,262) (5,123)
- --------------------------------------------------------------------------------
Total other loans, net 109,239 67,051
- --------------------------------------------------------------------------------
Loans receivable,
net of deferred amounts 1,716,182 1,423,574
Less:
Allowance for possible loan losses (14,370) (13,267)
- --------------------------------------------------------------------------------
Loans receivable, net $1,701,812 $1,410,307
================================================================================
Mortgage loans on real estate include approximately $735,607,000 and
$575,071,000 of adjustable rate mortgage loans at December 31, 1996 and 1995,
respectively.
The principal amount of non-accrual mortgage loans amounted to approximately
$11,964,000 and $17,067,000 at December 31, 1996 and 1995, respectively. The
principal amount of non-accrual other loans at December 31, 1996 and 1995 was
$156,000 and $164,000, respectively. The contractual amount of interest that
would have been recorded on non-accrual loans during the years ended December
31, 1996, 1995 and 1994 if the loans had been current in accordance with their
original terms was approximately $1,181,000, $1,132,000, and $2,663,000,
respectively. The amount of income actually recorded on such loans was
approximately $584,000, $88,000, and $236,000 in 1996, 1995 and 1994,
respectively.
As of December 31, 1996 and 1995, the recorded amount of loans identified as
impaired pursuant to SFAS No. 114 was $9,669,000 and $13,936,000, respectively.
Where the Company expects to rely on the underlying collateral for collection of
an impaired loan, the Company has written down the loan's recorded amount by any
excess of the loan's recorded investment over the estimated fair value of the
collateral less estimated selling costs. Therefore, the Company does not
maintain a reserve for impaired loans. Of the total impaired loans at December
31, 1996 and 1995, $9,669,000 and $13,629,000, respectively, are non-accrual
loans and the remaining $307,000 in 1995 represents one accruing loan which was
restructured during 1995 and was performing in accordance with its restructured
terms. For the years ended December 31, 1996 and 1995, the average balance of
impaired loans was $7,778,000 and $17,470,000, respectively.
The principal amount of restructured loans amounted to approximately
$6,251,000 at December 31, 1994. The contractual amount of interest that would
have been recorded on restructured loans during the year ended December 31, 1994
if the loans had been current in accordance with their original terms was
approximately $502,000. The amount of income actually recorded on such loans was
approximately $442,000.
During 1996 and 1995, the Bank sold without recourse approximately $548,000
and $19,823,000, respectively, of mortgage loans and retained the rights to
service these loans. Servicing fee income of $556,000, $595,000 and $678,000 is
included in loan fees and other charges, net in the accompanying consolidated
statements of income for 1996, 1995 and 1994, respectively. At December 31, 1996
and 1995 the Bank serviced approximately $137,554,000 and $157,132,000,
respectively, of mortgage loans which the Bank originated and which it now
services for others.
The Bank has sold loans with recourse obligations and has retained servicing
on these loans which have outstanding principal balances of $10,382,000 at
December 31, 1996. As of December 31, 1996, the maximum exposure under the
Bank's recourse obligation is $5,308,000. Under the Bank's recourse agreements,
the Bank is obligated to revert to the investor the amount of the contractual
principal and interest due (less a servicing fee), regardless of whether these
payments are actually received from the borrower and the Bank assumes within the
maximum exposure limits the risk of loss associated with any resulting
foreclosure actions. In connection with management's review of the adequacy of
the allowance for possible loan losses, management does not believe that there
is any material risk of loss associated with the Bank's recourse obligations.
36
<PAGE> 37
NOTE 5
Allowance for Possible Loan Losses
Activity in the allowance for possible loan losses is summarized as follows for
the years ended December 31:
================================================================================
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Balance at beginning of year $ 13,267 $ 12,045 $ 13,760
Provisions charged to income 1,400 3,050 2,250
Charge-offs (538) (3,019) (4,347)
Recoveries 241 1,191 382
- --------------------------------------------------------------------------------
Balance at end of year $ 14,370 $ 13,267 $ 12,045
================================================================================
NOTE 6
Other Real Estate Owned, net
Other real estate owned, net as of December 31, 1996 and 1995 consists of the
following:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Property type
One- to four-family $ 892 $1,485
Co-op 643 817
Commercial -- 2,610
Land 1,898 1,950
- --------------------------------------------------------------------------------
Subtotal 3,433 6,862
Less valuation allowance 169 315
- --------------------------------------------------------------------------------
Balance at end of year $3,264 $6,547
================================================================================
NOTE 7
Banking House and Equipment, net
Banking house and equipment, at cost, net of accumulated depreciation and
amortization at December 31, 1996 and 1995 is as follows:
================================================================================
Estimated
(in thousands) Useful Life 1996 1995
- --------------------------------------------------------------------------------
Banking house 40-60 years $7,393 $7,466
Furniture and equipment 6-10 years 4,839 3,183
Automobiles 3 years 63 115
Leasehold
improvements Term of lease 1,025 1,113
- --------------------------------------------------------------------------------
$13,320 $11,877
================================================================================
Depreciation and amortization of banking house and equipment, included in
occupancy and equipment expense, was approximately $1,751,000, $1,432,000 and
$1,212,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 8
Accrued Interest Receivable
Accrued interest receivable at December 31, 1996 and 1995 is as follows:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Bonds $ 5,720 $ 5,755
Mortgage-backed securities 6,896 6,372
Mortgage loans on real estate 8,604 7,885
Other loans 297 211
- --------------------------------------------------------------------------------
Balance at end of year $21,517 $20,223
================================================================================
NOTE 9
Deposits
Deposit balances at December 31, 1996 and 1995 are summarized as follows:
================================================================================
Weighted Weighted
Average Average
Interest Interest
Yield Yield
Dec. 31, Dec. 31,
(dollars in thousands) 1996 1995 1996 1995
- --------------------------------------------------------------------------------
Savings accounts 2.92% 2.74% $ 581,074 $ 501,467
Certificates of deposit 5.72 5.83 1,614,802 1,346,661
Money market accounts 2.21 3.19 77,229 67,163
- --------------------------------------------------------------------------------
4.88 4.93 2,273,105 1,915,291
Interest bearing demand deposits 2.97 3.13 8,292 64,409
Non-interest bearing demand deposits -- -- 62,116 58,641
- --------------------------------------------------------------------------------
Total deposits $2,343,513 $2,038,341
================================================================================
37
<PAGE> 38
At December 31, 1996 and 1995, scheduled maturities of certificates of
deposit were approximately as follows:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Within 12 months $1,204,801 $ 962,200
Beyond 12 months and within
36 months 341,057 241,002
Beyond 36 months 68,944 143,459
- --------------------------------------------------------------------------------
Total $1,614,802 $1,346,661
================================================================================
The aggregate amount of certificates of deposit with balances greater than
$100,000 at December 31, 1996 and 1995 are summarized as follows:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Within 12 months $109,708 $ 75,744
Beyond 12 months 50,311 43,678
- --------------------------------------------------------------------------------
Total $160,019 $119,422
================================================================================
The FDIC insures deposits of account holders generally up to $100,000 per
insured depositor. To provide for this insurance, the Bank must pay a risk-based
annual assessment which considers the financial soundness of the institution and
capitalization level. In September 1995, the FDIC reduced its deposit insurance
assessment. As a well capitalized institution, the Bank is assessed at the
FDIC's lowest assessment level. Retroactive to June 1, 1995, the rate for well
capitalized institutions was reduced from $0.23 per $100 of insured deposits to
$0.04 per $100 of insured deposits. As a result, the Bank received a refund in
September 1995 of $1,145,000 for previously paid 1995 FDIC assessments. At
December 31, 1996, the Bank was assessed at the FDIC's lowest assessment level
of zero per $100 of insured deposits plus a $2,000 annual fee. Interest expense
on deposit balances is summarized as follows for the years ended December 31:
================================================================================
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Savings accounts $ 15,571 $13,241 $11,291
NOW accounts 724 1,891 700
Certificates of deposit and
money market accounts 85,966 74,896 40,756
- --------------------------------------------------------------------------------
$102,261 $90,028 $52,747
================================================================================
NOTE 10
Borrowed Funds
At December 31, 1996 and 1995, the Company was obligated under the following:
<TABLE>
<CAPTION>
===============================================================================================================
Weighted Weighted
Average Average
Interest Yield Interest Yield
(dollars in thousands) Dec. 31, 1996 Dec. 31, 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities sold under agreements to repurchase
Due within one year 5.54% --% $ 35,000 $ --
Due between one and five years 5.80 -- 20,000 --
FHLB advances/overnight borrowings:
Due within one year 6.05 5.41 171,735 96,113
Due between one and five years 5.81 5.78 385,150 424,800
Due after five years 6.01 5.98 25,950 73,650
- ---------------------------------------------------------------------------------------------------------------
Total borrowed funds 5.86% 5.74% $637,835 $594,563
===============================================================================================================
</TABLE>
FHLB advances and FHLB overnight line of credit borrowings are secured under
an assignment arrangement of eligible collateral, primarily mortgage loans, in
an amount equal to 110% of outstanding advances.
The Bank maintains a $100,000,000 overnight line of credit with the FHLB.
Included in borrowed funds at December 31, 1996 and 1995 are $47,000,000 and
$19,000,000, respectively, of borrowings drawn under this line at an interest
rate of 7.125% at December 31, 1996 and 5.938% at December 31, 1995. In
addition, the Bank may access funds through a $100,000,000 one month facility
from the FHLB.
At December 31, 1996, securities sold under agreements to repurchase were
collateralized by U.S. Treasury obligations having an estimated fair value of
$56,141,000. For the year ended December 31, 1996, the maximum amount
outstanding at any month end and the average balance of securities sold under
agreements to repurchase were $55,000,000 and $7,392,000, respectively. Interest
expense on borrowings for the year ended December 31, 1996 includes $411,000 of
interest expense for securities sold under agreements to repurchase. There were
no securities sold under agreements to repurchase during 1995 or 1994.
38
<PAGE> 39
NOTE 11
Income Taxes
Total income tax expense for the years ended December 31, 1996, 1995 and 1994,
are allocated as follows:
================================================================================
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Provision for income tax
expense $ 22,175 $ 16,810 $ 10,256
Income tax (benefit) expense
attributable to net
unrealized appreciation
or depreciation in
certain securities (4,504) 11,214 (9,529)
Tax benefit attributable
to stock-based
compensation plans (1,255) (404) (360)
- --------------------------------------------------------------------------------
$ 16,416 $ 27,620 $ 367
================================================================================
For the years ended December 31, 1996, 1995 and 1994, provisions for income tax
expense, included in the consolidated statements of income, are comprised of the
following amounts:
================================================================================
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Current
Federal $15,114 $ 11,903 $ 7,181
State and local 4,815 3,510 3,354
- --------------------------------------------------------------------------------
19,929 15,413 10,535
- --------------------------------------------------------------------------------
Deferred
Federal 1,582 973 (189)
State and local 664 424 (90)
- --------------------------------------------------------------------------------
2,246 1,397 (279)
- --------------------------------------------------------------------------------
$22,175 $ 16,810 $ 10,256
================================================================================
The income tax provision for the years ended December 31, 1996, 1995 and 1994
was higher than the statutory United States Federal income tax rate. The reasons
for the differences are as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
% of % of % of
pre-tax pre-tax pre-tax
(dollars in thousands) Amount earnings Amount earnings Amount earnings
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate $ 18,442 35.0% $ 13,207 35.0% $ 7,935 35.0%
State and local taxes, net of Federal
income tax benefit 3,084 5.9 2,557 6.8 2,121 9.3
ESOP expense 794 1.5 481 1.3 225 1.0
Tax exempt income (146) (0.3) (160) (0.4) (162) (0.7)
Dividends received deduction (132) (0.3) (117) (0.3) (118) (0.5)
Other, net 133 0.3 842 2.2 255 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
$ 22,175 42.1% $ 16,810 44.6% $ 10,256 45.2%
====================================================================================================================================
</TABLE>
Under section 593 of the Internal Revenue Code, thrift institutions such as
the Bank, which meet certain definitional tests, primarily relating to their
assets and the nature of their business, were permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions may,
within specified limitations, be deducted in arriving at their taxable income.
The Bank's deduction with respect to "qualifying loans," which are generally
loans secured by certain interests in real property, was, prior to January 1,
1996, computed using an amount based on the Bank's actual loss experience (the
"Experience Method"), or a percentage equal to 8% of the Bank's taxable income
(the "PTI Method"), computed without regard to this deduction and with
additional modifications and reduced by the amount of any permitted additions to
the non-qualifying reserve. Similar deductions for additions to the Bank's bad
debt reserve were permitted under the New York State Bank Franchise Tax and the
New York City Banking Corporation Tax; however, for purposes of these taxes, the
effective allowable percentage under the PTI method was 32% rather than 8%.
Under the Small Business Job Protection Act of 1996 (the "1996 Act"), which
was enacted in August 1996, section 593 of the Code was amended and the Bank, as
a "large bank" (one with assets having an adjusted basis of more than $500
million), is no longer permitted to make additions to its tax bad debt reserve,
is permitted to deduct bad debts only as they occur and is required to recapture
(that is, take into taxable income) over a multi-year period, beginning with the
Bank's taxable year beginning on January 1, 1996, the excess of the balance of
its bad debt reserves (other than the supplemental reserve) as of December 31,
1995 over the balance of such reserves as of December 31, 1987, or over a lesser
period if the Bank's loan portfolio has decreased since December 31, 1987.
However, such recapture requirements are suspended for each of the two
successive taxable years beginning January 1, 1996 in
39
<PAGE> 40
which the Bank originates a minimum amount of certain residential loans based
upon the average of the principal amounts of such loans made by the Bank during
its six taxable years preceding January 1, 1996. At December 31, 1995 the
balance of the Bank's federal bad debt reserves were $9,367,000 which exceeded
the balance of such amount at December 31, 1987 by $1,831,000. The New York
State tax law has been amended to prevent a similar recapture of the Bank's bad
debt reserve, and to permit continued future use of the bad debt reserve
methods, for purposes of determining the Bank's New York State tax liability.
The Bank's officers and industry leaders continue to seek such amendments to the
New York City law; however, the Company cannot predict whether such changes to
New York City law will be adopted and, if so, in what form. The Company reduced
its provision for income taxes for the year ended December 31, 1996 by
$1,065,000 principally as a result of the change in New York State bad debt tax
legislation.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below.
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Deferred tax assets:
Provision for possible loan losses $ 4,656 $ 3,952
Mark to market adjustments on held
for sale securities 438 189
Net unrealized depreciation in
certain securities 1,180 --
Postretirement benefits 3,732 3,607
Premium amortization 2,596 3,774
Other expenses not currently deductible 377 1,135
Other 1,230 1,451
- --------------------------------------------------------------------------------
Total gross deferred tax assets 14,209 14,108
Less valuation allowance 1,600 1,600
- --------------------------------------------------------------------------------
Deferred tax assets 12,609 12,508
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Income accretion 1,997 2,010
Net deferred origination costs 2,464 1,720
Accrued pension expense 831 500
Other 649 544
Net unrealized appreciation in certain
securities -- 3,324
- --------------------------------------------------------------------------------
Deferred tax liabilities 5,941 8,098
- --------------------------------------------------------------------------------
Net deferred tax assets $ 6,668 $ 4,410
================================================================================
NOTE 12
Stockholders' Equity
Retained Earnings, Partially Restricted - Prior to the initial public offering
and as part of the subscription and community offerings, in order to grant
priority to eligible depositors in accordance with applicable law and
regulation, the Bank established a liquidation account at the time of
conversion, in an amount equal to the Bank's capital at December 31, 1992. In
the unlikely event of a complete liquidation of the Bank (and only in such an
event), eligible depositors who continue to maintain accounts shall be entitled
to receive a distribution from the liquidation account. The liquidation account
will be reduced annually to the extent that eligible account holders have
reduced their qualifying deposits as of each anniversary date. Subsequent
increases will not restore an eligible account holder's interest in the
liquidation account. The balance of the liquidation account was $16,406,000 at
December 31, 1996.
Dividend Restrictions - The ability of T R Financial to pay dividends depends
upon, among other things, dividend payments by the Bank to T R Financial which
is T R Financial's primary source of income. The Bank may not declare or pay a
cash dividend on, or repurchase any of, its Common Stock if the effect thereof
would cause its net worth to be reduced below the amount required for the
liquidation account or applicable regulatory capital maintenance requirements or
if such declaration and payment would otherwise violate regulatory requirements.
For the years ended December 31, 1996 and 1995, T R Financial paid $5,580,000
and $3,315,000 of dividends, respectively, exclusive of unallocated Common Stock
held by the ESOP, representing $0.68 and $0.37 per share of Common Stock
outstanding, respectively.
Treasury Stock - During the years ended December 31, 1996, 1995 and 1994, T R
Financial repurchased 782,000, 788,500 and 678,869 shares, respectively, of
Common Stock at a total cost of $20,879,000, $14,843,000 and $10,661,000,
respectively, in each year. These repurchases may be used to, among other
things, satisfy obligations arising from T R Financial's stock option plans.
40
<PAGE> 41
NOTE 13
Regulatory Capital
On August 9, 1989, the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 ("FIRREA") was signed into law imposing more stringent capital
requirements upon savings institutions than those previously in effect. On
December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") became law. The FDICIA, among other things, imposed a number of
new mandatory supervisory measures on insured depository institutions such as
the Bank. The FDICIA also established a system of prompt corrective action to
resolve the problems of undercapitalized institutions. The FDIC adopted final
rules, effective December 19, 1992, which require it to take certain supervisory
actions against undercapitalized institutions, the severity of which depends
upon the institution's degree of capitalization. The adopted rules create five
categories consisting of "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Regulatory action taken will depend on the level of
capitalization of the institution and may range from restrictions on capital
distributions and dividends to seizure of the institution. Generally, subject to
a narrow exception, the FDICIA requires the banking regulator to appoint a
receiver or conservator for an institution that is critically undercapitalized
within 90 days after becoming critically undercapitalized. The FDICIA authorizes
the banking regulators to specify the ratio of tangible capital to assets at
which an institution becomes critically undercapitalized and requires that such
ratio be no less than 2% of assets. The final rule also allows the regulator to
downgrade an institution that meets certain minimum capital requirements but is
otherwise in a "less than satisfactory" condition, which may result in an
otherwise "adequately capitalized" institution with other problems being
classified as "undercapitalized."
The FDICIA also requires that the risk-based capital standards account for
interest rate risk. The FDIC, along with the other federal banking agencies,
have adopted regulations providing that the agencies will take account of the
exposure of a bank's capital and economic value to the risks of changes in
interest rates in assessing a bank's capital adequacy. According to the
agencies, applicable considerations include the quality of the bank's interest
rate risk management process, the overall financial condition of the bank and
the level of other risks at the bank for which capital is needed. Institutions
with significant interest rate risk may be required to hold additional capital.
The federal agencies have also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy. The agencies have determined not to proceed
with a previously issued proposal to develop a supervisory framework for
measuring interest rate risk and an explicit capital component for interest rate
risk.
The final rules adopted by the FDIC, on September 15, 1992, to implement the
prompt corrective action section of the FDICIA generally provide that an insured
institution that has risk-based capital of less than 8.0% or a leverage ratio
that is less than 4.0% would be considered to be "undercapitalized," an insured
institution that has risk-based capital less than 6.0% or a leverage ratio that
is less than 3.0% would be considered to be "significantly undercapitalized" and
an insured institution that has a tangible capital to assets ratio equal to or
less than 2.0% would be deemed to be "critically undercapitalized." Generally,
under the rule, an insured institution that is "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized" becomes
immediately subject to certain regulatory restrictions, including, but not
limited to, restrictions on growth, investment activities, capital
distributions, and affiliate transactions. The filing of a capital restoration
plan is also required. In addition, "critically undercapitalized" institutions
must receive prior written approval from the FDIC to engage in any material
transaction other than the normal course of business. At December 31, 1996 the
Bank was a "well capitalized" institution under the definitions as adopted and
was in compliance with all regulatory capital requirements. In addition, the
Company's capital ratios exceed the minimum regulatory capital requirements
imposed by the Federal Reserve Board, which are substantially similar to the
requirements of the FDIC. The following table sets forth the Bank's and T R
Financial's regulatory capital positions and ratios at December 31, 1996:
41
<PAGE> 42
<TABLE>
<CAPTION>
==============================================================================================================
T R Financial
Bank (consolidated)
------------------------------------------------
Total Total
Leverage Risk-Based Leverage Risk-Based
(dollars in thousands) Capital Capital Capital Capital
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stockholders' equity at December 31, 1996 $191,577 $191,577 $204,038 $204,038
Net unrealized depreciation in certain securities, net of tax 1,387 1,387 1,501 1,501
Allowance for possible loan losses -- 14,370 -- 14,370
- --------------------------------------------------------------------------------------------------------------
Regulatory capital position 192,964 207,334 205,539 219,909
Minimum required regulatory capital (3% and 8%, respectively
at December 31, 1996)(1) 95,421 98,391 95,907 98,495
- --------------------------------------------------------------------------------------------------------------
Excess $ 97,543 $108,943 $109,632 $121,414
==============================================================================================================
Regulatory capital ratio 6.07% 16.86% 6.43% 17.86%
==============================================================================================================
</TABLE>
(1) Applying the 4% leverage capital ratio imposed by FDICIA, the Bank' leverage
capital requirement at December 31, 1996, was $127.2 million and as of such date
the Bank exceeded the requirement by $65.7 million. T R Financial's leverage
capital requirement, applying the 4% leverage capital ratio, was $127.9 million
at December 31, 1996 and as of such date T R Financial exceeded this requirement
by $77.7 million.
NOTE 14
Retirement Plans
Pension Plan - The Bank has a qualified noncontributory defined benefit pension
plan (the "Plan") covering substantially all full-time employees that satisfy
the eligibility requirements. The Plan is administered by a committee appointed
by the Bank's Board of Directors. Contributions required to support the Plan are
actuarially determined.
The components of net pension expense as determined by the Plan's actuary at
the most recent September 30 valuation dates are as follows:
================================================================================
Sept. 30, Sept.30, Sept. 30,
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost-benefits earned
during the period $ 783 $ 675 $ 713
Interest cost on projected
benefit obligation 1,224 1,152 1,016
Amortization of unrecognized
past service liability (13) (13) 61
Amortization of unrecognized
loss 91 176 194
Return on plan assets (2,226) (2,717) 80
Amortization of unrecognized
transition asset (241) (241) (241)
Deferred investment gain (loss) 771 1,521 (1,260)
- --------------------------------------------------------------------------------
Net pension expense $ 389 $ 553 $ 563
================================================================================
A comparison of accumulated plan benefit obligation and plan net assets as of
the most recent actuarial valuation dates is as follows:
================================================================================
Sept. 30, Sept. 30,
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
plan benefit obligations:
Vested benefit obligation $ 13,598 $ 12,975
Nonvested benefit obligation 948 975
- --------------------------------------------------------------------------------
14,546 13,950
Effect of projected future
compensation levels 2,976 2,776
- --------------------------------------------------------------------------------
Projected benefit obligation for service
rendered to date 17,522 16,726
Market value of plan net assets,
consisting principally of mutual
fund investments 18,763 16,470
- --------------------------------------------------------------------------------
Plan assets greater (less) than projected
benefit obligation 1,241 (256)
Unrecognized transition asset being
amortized over ten years (72) (313)
Unrecognized net loss from past
experience different from that assumed
and effects of changes in assumptions 1,032 2,446
Unrecognized past service cost (83) (96)
- --------------------------------------------------------------------------------
Prepaid pension expense included
in other assets $ 2,118 $ 1,781
================================================================================
Assumptions used to develop the net
periodic pension costs were:
Assumed rate of return on investments 9.00% 9.00%
Rate of increase in salary scale 5.50% 5.50%
Settlement rate 7.75% 7.50%
================================================================================
The projected benefit obligation represents the obligation to plan members for
services already rendered and then increases that obligation for projected
future compensation levels.
Defined Contribution Plan - The Bank also maintains a qualified defined
contribution and thrift savings plan under Section 401(k) of the Internal
42
<PAGE> 43
Revenue Code. All regular, full time employees are eligible for voluntary
participation after one year of continuous service. The plan is effectuated
through a trust established by the Bank. Under this plan, participants may
contribute from 2% to 6% (8% until March 29, 1994) of their base pay and the
Bank makes 50% (100% until March 29, 1994) matching discretionary contributions
of up to 3% (6% until March 29, 1994) of the participant's base pay. The Bank
made matching contributions of $332,000, $306,000 and $357,000, for the years
ended December 31, 1996, 1995 and 1994, respectively.
NOTE 15
Post Retirement Health Care and Life Insurance Benefits
The Bank currently provides post retirement health and life insurance benefits
to substantially all of its employees who were employed by the Bank prior to
April 1, 1993. Retirees covered by this plan are eligible to receive medical
coverage for themselves and their spouses and are eligible to receive life
insurance.
Retiree contributions cover approximately 20% to 25% of the required
premiums. The current cash cost per year of the medical coverage provided is
approximately $325,000. Employees who retired subsequent to January 1, 1979 and
receive benefits under the Bank's pension plan are eligible to be covered under
the Bank's Group Life Insurance Plan ("GLIP"). Retiree life insurance benefits
are calculated based upon the employee's basic annual earnings immediately
preceding the date of their retirement, subject to certain limitations included
in the benefits formula, as described in the GLIP. The current cost per year of
these benefits is approximately $38,000. The Bank may from time to time revise
its policies with respect to post retirement health and life insurance benefits,
including, among other things, provisions for eligibility and retiree
contributions.
The unfunded status of the plan at December 31, 1996 and 1995 is as follows:
================================================================================
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
postretirement benefit obligation $ 8,552 $ 8,441
Unrecognized net loss (2,832) (3,412)
Unrecognized prior service benefit 2,804 3,174
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the accompanying
consolidated statement of
financial condition $ 8,524 $ 8,203
================================================================================
Net periodic postretirement benefit cost included in salaries and employee
benefits in the accompanying consolidated statements of income for the years
ended December 31, 1996, 1995 and 1994 is comprised of the following components:
================================================================================
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost-benefits earned
during the year $ 242 $ 233 $ 274
Interest cost on accumulated
postretirement
benefit obligation 593 536 492
Amortization of unrecognized
net loss 241 121 242
Amortization of unrecognized
prior service benefit (369) (369) (369)
- --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 707 $ 521 $ 639
================================================================================
For measurement purposes, a 10% annual rate of increase in the per capita
cost of covered benefits ("health care cost trend rate") was assumed for 1996;
with the rate assumed to gradually decrease to 5% by the year 2001 and remain at
that level thereafter. This rate assumption has a significant effect on the
estimate of the accumulated postretirement benefit obligation and aggregate
service and interest cost components of net periodic post-retirement benefit
cost. A one percentage point increase in the health care cost trend rate would
increase the accumulated postretirement benefit obligation by 14.0% as of
December 31, 1996 while the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year ended
December 31, 1996 would increase 19.3%. The discount rate used in determining
the accumulated postretirement benefit obligation was 7.5% and 7.0%,
respectively, at December 31, 1996 and 1995.
NOTE 16
Stock Plans
Stock Option Plans - In connection with the conversion and initial public
offering, T R Financial adopted and its stockholders ratified at a special
meeting of stockholders held on December 13, 1993 two stock option plans: the T
R Financial Corp. 1993 Incentive Stock Option Plan (the "ISO Plan") which
reserved 688,275 shares of Common Stock for issuance and the T R Financial Corp.
1993 Stock Option Plan for Outside Directors (the "Directors' Plan") which
reserved 404,224 shares of Common Stock for issuance. Upon completion of the
conversion and initial public offering on June 29, 1993,
43
<PAGE> 44
T R Financial granted at an exercise price of $9.00 per share (the initial
public offering price of the Common Stock) options covering 687,235 shares and
363,254 shares, pursuant to the ISO Plan and the Directors' Plan, respectively.
As of December 31, 1996, there have been no grants of stock options made
subsequent to June 29, 1993.
Under the ISO Plan, all officers and employees of the Company are eligible to
participate. The ISO Plan provides that the exercise price of options granted
may not be less than the fair market value of the Common Stock on the date of
grant and that options generally expire upon the earlier of ten years from the
date of the grant or from three to twelve months following an optionee's
termination of employment with the Company.
While the options granted under the ISO Plan generally vest over a one to
five year period, certain events such as death, disability, retirement of an
optionee or change in control, result in immediate vesting. Under the Directors'
Plan, outside directors of T R Financial are eligible to receive non-statutory
options. The Directors' Plan provides that the exercise price of options granted
be equal to the fair market value on the date of grant and that the options
expire on the earlier of ten years from the date of the grant or one year
following the date on which an optionee ceases to be a Director. A summary of
transactions for the ISO Plan and Directors' Plan for the years ended December
31, 1996, 1995 and 1994 is as follows:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
ISO Plan
Outstanding at
beginning of year 613,179 665,412 684,255
Exercised (17,235) (49,938) (4,034)
Forfeited (2,681) (2,295) (14,809)
- --------------------------------------------------------------------------------
Outstanding at end of year
($9.00 per share) 593,263 613,179 665,412
================================================================================
Currently exercisable at
December 31, 1996 554,068
================================================================================
Directors' Plan
Outstanding at
beginning of year 296,300 357,554 363,254
Exercised (71,228) (61,254) (5,700)
Forfeited -- -- --
- --------------------------------------------------------------------------------
Outstanding at end of year
($9.00 per share) 225,072 296,300 357,554
================================================================================
Currently exercisable at
December 31, 1996 225,072
================================================================================
Employee Stock Ownership Plan and Trust - In connection with the conversion and
initial public offering, T R Financial established the T R Financial Corp.
Employee Stock Ownership Plan for full time employees of the Company having at
least one year of credited service. On June 29, 1993, the ESOP purchased
1,081,575 shares of Common Stock at $9.00 per share, representing $9,734,175,
from T R Financial in its initial public offering. The shares are allocated to
participants' accounts annually through December 31, 2003 on the basis of
compensation taken into account under the ESOP. Participants vest in the shares
allocated to their respective accounts over a seven year period. Any forfeited
shares are allocated to the then remaining participants in the same proportion
as contributions. For the years ended December 31, 1996, 1995 and 1994, 123,684,
132,584 and 129,038 shares, respectively, were allocated to current
participants. As of December 31, 1996 and 1995, 627,753 and 751,437 shares
remained unallocated, respectively. The trustee for the ESOP must vote all
allocated shares held in the ESOP trust in accordance with the instructions of
the participants. Unallocated shares held by the ESOP trust are voted by the
trustee in a manner calculated to most accurately reflect the results of
allocated ESOP shares voted, subject to the requirements of the Employee
Retirement Income Security Act of 1974, as amended.
The ESOP purchased the 1,081,575 shares of Common Stock using the proceeds
from a $9,734,175 promissory note payable to T R Financial (the "Promissory
Note"). The Promissory Note is collateralized by the unallocated shares of
Common Stock held by the ESOP and provides for forty equal quarterly principal
installments plus interest at prime plus 1.50% (9.75% and 10.00% at December 31,
1996 and 1995, respectively) to be made to T R Financial commencing September
30, 1993. Under the terms of the ESOP, the Company makes contributions to the
ESOP sufficient in amount to cover all payments of interest and principal as
they become due. These contributions are reduced, however, by any investment
earnings realized thereon and any dividends paid on unallocated shares of common
stock held by the ESOP. As a result, contributions to the ESOP were reduced in
1996, 1995 and 1994 by $513,000, $328,000 and $51,000, respectively. The number
of shares released annually is based upon the ratio of the current year's
principal and interest to the current and all projected future years' principal
and interest. The ESOP also provides that the Company may make additional
contributions at its sole discretion. For the years ended December 31, 1996,
1995 and
44
<PAGE> 45
1994, the Company made contributions of $1,144,000, $1,460,000 and
$1,686,000, respectively, which were used by the ESOP to repay principal of
$973,000 in 1996, 1995 and 1994 and interest of $684,000, $815,000 and $763,000
in 1996, 1995 and 1994, respectively. The Company recognizes expense relating to
the ESOP on the basis of the shares allocated to participant accounts multiplied
by the average fair value of the Common Stock during the period. For the years
ended December 31, 1996, 1995 and 1994, the average quoted price of the Common
Stock was $27.64, $19.56 and $13.99 per share, respectively. Accordingly,
salaries and employee benefits in the accompanying consolidated statements of
income for the years ended December 31, 1996, 1995 and 1994 include $3,419,000,
$2,593,000 and $1,806,000, respectively, of expense relating to the benefits
provided under the ESOP. For the years ended December 31, 1996, 1995 and 1994,
the average interest rate under the Promissory Note was 9.82%, 10.30% and 8.59%,
respectively.
Recognition and Retention Plans - In connection with the conversion and initial
public offering, the Bank adopted and T R Financial stockholders ratified at a
special meeting of stockholders on December 13, 1993 two recognition and
retention plans: the Roosevelt Savings Bank Recognition and Retention Plan for
Officers (the "Officers' RRP") which authorized the granting of up to 284,050
shares of Common Stock and the Roosevelt Savings Bank Recognition and Retention
Plan for Outside Directors (the "Directors' RRP") which authorized the granting
of up to 152,950 shares of Common Stock. The purpose of these plans,
collectively the "RRP's," is to provide officers and outside directors of the
Bank with a proprietary interest in the Company in a manner designed to
encourage their retention with the Bank. Upon completion of the conversion and
initial public offering on June 29, 1993, the Bank contributed $3,933,000 to the
RRP's to enable the RRP's to purchase an aggregate of 437,000 shares of Common
Stock at the initial public offering price of $9.00 per share. This contribution
represents deferred compensation which was initially recorded as a reduction of
stockholders' equity and is ratably charged to expense over the vesting period
of the actual stock awards. On June 29, 1993, 284,050 shares and 137,450 shares
of Common Stock, respectively, were awarded under the Officers' RRP and
Directors' RRP. Of these awards, 331,915 shares and 89,585 shares, respectively,
generally vest annually on the anniversary date of the grant over three years
and five years. For the years ended December 31, 1996, 1995 and 1994, salaries
and employee benefits in the accompanying consolidated statements of income
include $561,000, $1,081,000 and $1,366,000, respectively, of expense relating
to the awards under the RRP's. During 1996, 1995 and 1994, 108,409, 127,195 and
154,243 shares, respectively, were vested and distributed. During 1994, 5,790
awarded shares were forfeited. No awarded shares were forfeited during 1996 or
1995.
Supplemental Executive Retirement Plan and Trust - The Company maintains a
non-qualified plan, the Supplemental Executive Retirement Plan and Trust (the
"SERP"), to compensate participants in the Company's benefit plans that are
limited by section 415 of the Internal Revenue Code. At December 31, 1996 and
1995, this plan maintains $1,343,000 and $766,000, respectively, of trust held
assets. Trust held assets at December 31, 1996 and 1995 include $721,000 and
$351,000, respectively, of Common Stock, at cost. This represents 39,096 shares
and 25,110 shares of Common Stock at December 31, 1996 and 1995, respectively.
The cost of such shares are reflected as contra-equity and additional
paid-in-capital in the accompanying consolidated statements of financial
condition. The remaining assets in the SERP at December 31, 1996 and 1995 of
$622,000 and $415,000, respectively, are reflected as other assets and other
liabilities in the accompanying consolidated statements of financial condition.
NOTE 17
Recent Accounting Pronouncements
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. This approach, after a
transfer of financial assets, requires the recognition of financial assets and
servicing assets that are controlled by the reporting entity and the liabilities
it has incurred. It also requires the derecognition of financial assets when
control is surrendered, and the derecognition of liabilities when they are
extinguished. SFAS No. 125
45
<PAGE> 46
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings.
Liabilities and derivatives incurred or obtained by transferors in
conjunction with the transfer of financial assets are required to be measured at
fair value, if practicable. Servicing assets and other retained interests in
transferred assets are required to be measured by allocating the previous
carrying amount between the assets sold, if any, and the interest that is
retained, if any, based on the relative fair value of the assets at the date of
the transfer. Servicing assets retained are subsequently subject to amortization
and assessment for impairment.
SFAS No. 125 provides implementation guidance for: assessing isolation of
transferred assets; accounting for transfers of partial interests; servicing of
financial assets; securitizations; transfers of sales-type and direct financing
lease receivables; securities lending transactions; securities sold under
agreements to repurchase and other repurchase agreements (including "dollar
rolls" and "wash sales"); loan syndications and participations; risk
participations in banker's acceptances; factoring arrangements; transfers of
receivables with recourse; and extinguishment of liabilities.
A number of existing FASB statements are superseded (SFAS Nos. 76 and 77) or
amended (SFAS Nos. 65, 115 and 122) by SFAS No. 125. SFAS No. 125 amends SFAS
No. 115 to prohibit the classification of a debt security as held to maturity if
it can be prepaid or otherwise settled in such a way that the holder of the
security would not recover substantially all of its recorded investment. In
December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125." As amended, SFAS No. 125 is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996 except that its provisions with
respect to securities lending, repurchase agreements and dollar-roll
transactions are effective for transfers occurring after December 31, 1997. The
adoption of SFAS No. 125, as amended, is not expected to have a material effect
on the Company's results of operations but may require the recording of
additional financial assets and liabilities relating to syndicated lending and
securities lending arrangements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method rather than an
intrinsic value based method to account for stock-based compensation
arrangements and applies to all stock awards granted after December 15, 1994. As
of December 31, 1996, all of the Company's stock awards were granted prior to
the December 15, 1994 effective date of this statement. The Company expects,
however, to continue with the intrinsic value approach promulgated by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," for
any future stock option awards. If the fair value based method is not adopted,
SFAS No. 123 requires proforma disclosure, with comparative amounts for the
comparable prior year period, of net income and earnings per share assuming the
fair value based method was adopted.
Based upon the status of the Company's current stock-based compensation
plans, the Company does not expect SFAS No. 123 to have a significant effect on
its financial statements. However, the Company's expectation to continue with
the intrinsic value approach for future stock awards, if any, would require pro
forma disclosure of what its effect would have been on net income and earnings
per share if the fair value based method had been adopted.
NOTE 18
Disclosures About Fair Value of Financial Instruments
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," requires
that the Company disclose estimated fair values for its financial instruments.
Fair value estimates, methods, and assumptions are set forth below.
Cash, Cash Equivalents, and Securities
The carrying amounts for cash and cash equivalents approximate fair value as
they mature in 90 days or less and do not present unanticipated credit concerns.
The fair values of held to maturity securities and available for sale securities
are estimated based on bid quotations received from securities dealers or from
prices obtained from firms specializing in providing securities pricing
services. The following table represents the amortized cost and estimated fair
values of cash, cash equivalents, and securities at December 31, 1996 and 1995:
46
<PAGE> 47
<TABLE>
<CAPTION>
============================================================================================================
1996 1995
------------------------------------------------------------------------
Amortized Estimated Amortized Estimated
(in thousands) Cost Fair Value Cost Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 18,128 $ 18,128 $ 21,204 $ 21,204
Held to maturity securities, net 1,008,932 1,017,702 855,623 880,197
Available for sale securities 439,922 441,847 516,862 530,996
- ------------------------------------------------------------------------------------------------------------
Total securities $1,466,982 $1,477,677 $1,393,689 $1,432,397
============================================================================================================
</TABLE>
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as commercial real estate
and residential mortgage loans. Each loan category is further segmented into
fixed and adjustable rate interest terms and by performing and non-performing
categories. For performing residential mortgage loans, fair values
are estimated by discounting contractual cash flows through the estimated
maturity using discount rates and prepayment estimates based on secondary market
sources adjusted to reflect differences in servicing and credit costs. The
estimated fair value of remaining performing loans is calculated by discounting
scheduled cash flows using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. Fair values for
non-performing real estate loans are based on recent appraisals.
================================================================================
December 31, 1996 December 31, 1995
--------------------------------------------------
Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------
Mortgage loans $1,606,943 $1,602,123 $1,356,523 $1,360,693
Other loans 109,239 108,851 67,051 66,418
- --------------------------------------------------------------------------------
Total loans $1,716,182 $1,710,974 $1,423,574 $1,427,111
================================================================================
Deposit Liabilities
All deposits, except certificates of deposit, are subject to rate changes at any
time, and therefore are considered to be carried at estimated fair value. The
fair value of certificates of deposit at December 31, 1996 and 1995 was
estimated by computing the present value of contractual future cash flows for
each certificate. The present value rate utilized was the rate offered by the
Bank at December 31, 1996 and 1995 on certificates with an initial maturity
equal to the remaining term to maturity of the existing certificates. At
December 31, 1996 the carrying amount and estimated fair value of the Company's
certificates of deposit were $1,614,802,000 and $1,620,074,000, respectively. At
December 31, 1995, the carrying amount and estimated fair value of the Company's
certificates of deposit were $1,346,661,000 and $1,355,014,000, respectively.
Borrowed Funds
The fair value of borrowings was estimated at $631,899,000 and $595,904,000,
respectively, at December 31, 1996 and 1995 representing the amount estimated to
be required to extinguish the borrowings as of those dates. The estimated fair
values of borrowings are valued using estimated discounted cash flow analyses
based on the current incremental borrowing rates for similar types of borrowing
arrangements.
Limitations
SFAS No. 107 requires disclosures of the estimated fair value of financial
instruments. Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument nor
the resultant tax ramifications or transaction costs. Because no market exists
for a significant portion of the Company's financial instruments, fair value
estimates are based on judgments regarding current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off balance sheet financial
instruments without attempting to estimate the value of anticipated
47
<PAGE> 48
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has a mortgage servicing
department that contributes fee income annually. The mortgage servicing
department is not considered a financial instrument, and as such its value has
not been incorporated into the fair value estimates. Other significant assets of
the Company that are not considered financial assets include banking house and
equipment and deferred tax assets. In addition, the tax ramifications related to
the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered.
Commitments
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates.
The commitments existing at December 31, 1996 would be offered at
substantially the same rates and under substantially the same terms that would
be offered by the Bank at December 31, 1996 to the counterparties. Therefore,
the carrying value of existing commitments is considered to be equivalent to the
estimated fair value as of December 31, 1996.
NOTE 19
Commitments and Contingencies
(a) Commitments
At December 31, 1996, commitments to originate mortgage loans at fixed rates
were approximately $37,073,000 with stated rates ranging from 6.9% to 9.5% and
commitments to originate adjustable rate mortgages were approximately
$51,189,000 at stated rates ranging from 7.0% to 9.0%. In connection with
certain of its loan products, the Company had, at December 31, 1996, $15,915,000
of outstanding commitments to fund unused lines of credit. In addition, at
December 31, 1996, the Company had two commitments totaling $1,595,000 to
participate in the funding of community development housing. The interest rate
at which these commitments will be funded has not yet been determined. At
December 31, 1996, the Company had commitments to purchase $22,000,000 par value
of GNMA mortgage-backed securities. These securities were settled in January
1997.
The Company also has lease commitments on banking house premises. Total
rental expense relating to these commitments for the years ended December 31,
1996, 1995 and 1994 was approximately $537,000, $457,000 and $387,000,
respectively. The aggregate minimum annual rental commitments at December 31,
1996 are as follows:
================================================================================
Years ending December 31, (in thousands)
- --------------------------------------------------------------------------------
1997 $ 406
1998 408
1999 415
2000 366
2001 319
Thereafter 387
- --------------------------------------------------------------------------------
Total $2,301
================================================================================
(b) Contingency-Nationar
On February 6, 1995, the Superintendent of Banks of the State of New York took
possession of Nationar, a check-clearing and trust company, freezing all of
Nationar's assets. The Company used Nationar for certain depository and
collection services. As a result, the Company maintained deposit balances with
Nationar and had certain stock investments and subordinated capital debentures
in Nationar.
For the year ending December 31, 1995, the consolidated statements of income
included in net gain on securities activities, a loss of $599,000 relating to
possible losses on the Company's Nationar investments and included in other
operating expense $660,000 in possible losses relating to the ultimate recovery
of frozen balances in Nationar.
In June 1996, the Company received the first distribution of approximately
40% of its deposit claims. This was followed by two additional distributions in
November and December of 1996. These liquidating distributions in 1996, which
totalled $3,572,000, covered 100% of the Company's deposit claim balances and
100% of the collateral portion of the Company's subordinated capital debenture
claims. In December 1996, as a result of these distributions, the Company
reversed $1,100,000 of its reserves and recognized this amount in other income
in the consolidated statement of income.
In January 1997, the Superintendent reported that he intended to apply during
the first quarter of 1997 for judicial approval of a partial dividend to the
holders of Nationar's subordinated capital debentures but that the timing of
such dividend had yet to be determined. The Company, however, has either fully
collected or charged-off its remaining Nationar
48
<PAGE> 49
claims and accordingly, any such future distribution, which is not expected to
be material, will increase recorded income.
(c) Other Contingencies
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, after consultation with legal
counsel, the financial position of the Company will not be affected materially
by the outcome of such legal proceedings.
NOTE 20
Parent Company Only Financial Information
T R Financial Corp. was formed on February 12, 1993 and operates a wholly-owned
subsidiary, Roosevelt Savings Bank. The earnings of the Bank are recognized by
T R Financial using the equity method of accounting. Accordingly, earnings
of the Bank are recorded as increases in T R Financial's investment in the
Bank. The following are the condensed financial statements for T R Financial
Corp. (Parent Company only) as of December 31, 1996 and 1995, and for the
years ended December 31, 1996, 1995 and 1994.
T R Financial Corp.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
====================================================================================================================================
(in thousands) December 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Deposits with the Bank $ 3,825 $ 1,353
Deposits with other financial institutions 98 45
Securities available for sale:
U.S. Government obligations (amortized cost of $2,004 and $5,954 at December 31, 1996 and
1995, respectively) 2,002 5,999
Equities (amortized cost of $92) -- 101
Mortgage-backed securities:
FHLMC (amortized cost of $4,351 and $4,906 at December 31, 1996 and 1995, respectively) 4,223 4,861
GNMA (amortized cost of $1,547 and $2,002 at December 31, 1996 and 1995, respectively) 1,472 1,941
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 7,697 12,902
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued interest receivable 74 91
Investment in the Bank 191,577 184,829
Receivable from the Bank 814 550
Other assets 182 72
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $204,267 $199,842
====================================================================================================================================
Liabilities and stockholders' equity
Accrued taxes payable $ 60 $ --
Accrued expenses 169 158
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 229 158
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 204,038 199,684
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $204,267 $199,842
====================================================================================================================================
</TABLE>
49
<PAGE> 50
T R Financial Corp.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
====================================================================================================================================
For the Year Ended December 31
------------------------------------------
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Interest income $ 1,401 $ 2,018 $ 2,034
Dividend received from the Bank 22,000 5,250 1,000
Other fee income 1 4 12
Gain on sale of securities 76 -- 13
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 23,478 7,272 3,059
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on borrowings 20 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 20 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expense:
Salaries and employee benefits 68 81 16
Equipment expense 15 15 15
Other operating expense 947 1,160 1,152
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense 1,050 1,256 1,183
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity in undistributed earnings of the Bank 22,428 6,016 1,876
Provision for income taxes 186 342 380
- ------------------------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed earnings of the Bank 22,242 5,674 1,496
- ------------------------------------------------------------------------------------------------------------------------------------
Equity in undistributed earnings of the Bank 8,273 15,251 10,919
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $30,515 $20,925 $12,415
====================================================================================================================================
</TABLE>
T R Financial Corp.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
====================================================================================================================================
For the Year Ended December 31
------------------------------------------
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income: $ 30,515 $ 20,925 $ 12,415
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Equity in undistributed earnings of the Bank (8,273) (15,251) (10,919)
Amortization of premiums in excess of (less than) accretion of discounts 19 78 (370)
Gain on sales of securities (76) -- (13)
Increase (decrease) in liabilities 71 158 (2,737)
Decrease (increase) in receivables and other assets (25) (13) 113
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 22,231 5,897 (1,511)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of securities available for sale (5,004) (20,165) (23,077)
Maturities of securities available for sale 3,969 27,730 14,552
Sale of securities available for sale 6,146 -- 18,405
Net repayment of advances to the Bank 847 970 1,396
Payment for banking houses and equipment -- -- (11)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 5,958 8,535 11,265
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from the issuance of common stock and exercise of stock options 795 1,002 87
Purchase of treasury stock (20,879) (14,843) (10,661)
Cash dividend paid (5,580) (3,315) (460)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (25,664) (17,156) (11,034)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,525 (2,724) (1,280)
Cash and cash equivalents at beginning of period 1,398 4,122 5,402
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,923 $ 1,398 $ 4,122
====================================================================================================================================
</TABLE>
50
<PAGE> 51
NOTE 21
Selected Quarterly Financial Data (Unaudited)
The following table is a summary of operations by quarter for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended
---------------------------------------------------------------------------------------------
(in thousands) 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95 6/30/95 3/31/95
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 57,031 $ 55,295 $ 53,920 $ 52,158 $ 51,808 $ 50,000 $ 47,894 $ 44,988
Interest expense 36,209 35,033 33,348 32,580 33,316 32,085 30,675 28,229
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income 20,822 20,262 20,572 19,578 18,492 17,915 17,219 16,759
Provision for possible loan losses 200 200 500 500 450 1,050 950 600
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 20,622 20,062 20,072 19,078 18,042 16,865 16,269 16,159
Non-interest income (expense):
Loan fees and other charges, net 1,640 1,405 1,544 1,447 1,446 1,656 1,360 1,276
Net gain (loss) on
securities activities 985 1,767 2,004 2,755 2,216 910 2,285 (102)
(Loss) gain on sales of whole loans (1) -- 2 1 7 133 15 --
Other income 1,285 410 258 417 285 851 365 382
Salaries and employee benefits (6,660) (6,397) (6,178) (6,326) (6,186) (5,845) (5,751) (5,763)
Occupancy and
equipment expense (1,288) (1,235) (1,196) (1,297) (1,171) (1,037) (1,072) (1,067)
Marketing expense (567) (560) (603) (668) (476) (573) (649) (786)
Other real estate owned expense (109) (181) (292) (369) (617) (615) (653) (337)
FDIC assessment(1) -- (1) -- (1) (192) 84 (923) (924)
Other operating expense (2,211) (2,162) (2,611) (2,151) (1,798) (1,745) (2,716) (1,873)
-----------------------------------------------------------------------------------------------------------------------------------
Income before provision for income
taxes 13,696 13,108 13,000 12,886 11,556 10,684 8,530 6,965
Provision for income taxes(2) 5,893 4,794 5,786 5,702 5,204 4,750 3,782 3,074
-----------------------------------------------------------------------------------------------------------------------------------
Net income $ 7,803 $ 8,314 $ 7,214 $ 7,184 $ 6,352 $ 5,934 $ 4,748 $ 3,891
====================================================================================================================================
Net income per share $ 0.88 $ 0.94 $ 0.82 $ 0.80 $ 0.67 $ 0.63 $ 0.50 $ 0.40
====================================================================================================================================
</TABLE>
(1) Includes a $1,145,000 refund of FDIC insurance assessment in the three
months ended September 30, 1995.
(2) For the three months ended September 30, 1996, the provision for income
taxes was reduced by $1,065,000 principally as a result of a change in New
York State bad debt tax legislation (Note 11).
51
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
The Board of Directors
T R Financial Corp.:
We have audited the accompanying consolidated statements of financial condition
of T R Financial Corp. and subsidiaries ("Company") as of December 31, 1996 and
1995 and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1996 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Jericho, New York
January 23, 1997
52
<PAGE> 53
T R Financial Corp. & Subsidiaries
DIRECTORS AND OFFICERS
Board of Directors
Maureen E. Clancy
Secretary, Treasurer and Partner,
Clancy & Clancy Brokerage Ltd.
Robert F. Eisen, Sr.
Retired President,
Greenwood Mills, Inc.
Michael P. Galgano
Retired Senior Vice President,
Dorman & Wilson, Inc.
Leonard Genovese
Chairman, President and CEO,
Genovese Drug Stores, Inc.
Edward J. Kowatch
Retired Chairman and CEO,
Retirement System for Savings Institutions
Ernest L. Loser
Retired Senior Vice President,
Chase Manhattan Bank, N.A.
John C. Mesloh
Retired Vice President,
Pfizer, Inc.
A. Gordon Nutt
President and Chief Administrative Officer
James E. Orr, Jr.
Retired Chairman and CEO,
Busby Metals, Inc.
John M. Tsimbinos
Chairman of the Board and Chief Executive Officer
Spiros J. Voutsinas
President,
Omega Capital Inc.
Office of the Chairman
John M. Tsimbinos
Chairman of the Board and Chief Executive Officer
A. Gordon Nutt
President and Chief Administrative Officer
Dennis E. Henchy
Executive Vice President and Chief Financial Officer
William R. Kuhn
Executive Vice President and Chief Real Estate Lending Officer
John J. De Russo
Senior Vice President and Strategic Planning/
Special Projects Officer/Training & Development
Ira H. Kramer
Senior Vice President and Corporate Secretary
Senior Vice Presidents
Daphne E. Heslop, Internal Audit
Joseph T. Javitz, Mortgage Originations/
Mortgage Servicing
Anthony P. Mallia, Retail Banking Division/
Customer Service/Security
Walter G. Mullins, Marketing/
Centralized Services
Gerard L. Treglia, Systems/Legal Research
Vice Presidents
Elaine E. Cordiello, Human Resources
Janeth Duque, Compliance
John P. Forsberg, Commercial Real Estate
Albert F. Intreglia, Securities & Investments
Edwin J. Lawrence, Securities & Investments
William Mackey, Financial Budgeting
& Reporting
Daniel E. Martin, CRA/Community
Development
Martin W. McAleer, Jr., MIS
Rosemary Roser, Accounting
Thomas Savoca, Consumer Lending
Christine M. Thiel, Mortgage Servicing
53
<PAGE> 54
T R Financial Corp. & Subsidiaries
STOCKHOLDER INFORMATION
Executive Office
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
(516) 742-9300
Investor Relations
Stockholders, investors and analysts interested in additional information about
T R Financial Corp. are invited to contact:
Theodore S. Ayvas
Assistant Vice President
Investor Relations
1122 Franklin Avenue
Garden City, New York 11530
(516) 739-4219
Transfer Agent and Registrar
Stockholders are asked to contact the Bank's transfer agent, Chase Mellon
Shareholder Services, for consolidation of accounts, changes of registration,
address corrections or replacement of lost stock certificates.
Chase Mellon Shareholder Services
P.O. Box 590
Ridgefield Park, NJ 07660
1-(800) 851-9677
Stock Listing
T R Financial Corp., the holding company for Roosevelt Savings Bank, is traded
and quoted on the Nasdaq National Market System under the symbol "ROSE". Price
information appears daily in the Wall Street Journal under "T R FinlCp" and in
other newspapers as "T R Fin".
T R Financial Corp. on the Internet
T R Financial information can be accessed through our internet web site located
at http://www.trfin.com. Access is provided to our most recent news and earnings
releases, annual report, mid year reports, 10K and 10Q regulatory filings,
investor research coverage, stock quotes, and 180 day market performance charts.
The site also allows access into Roosevelt Savings Bank product offerings.
Independent Auditors
KPMG Peat Marwick LLP
One Jericho Plaza
Jericho, New York 11753
Annual Meeting
The 1997 Annual Meeting of Stockholders will be held on April 21, 1997 at 9:30
a.m. at the Westbury Manor, Jericho Turnpike, Westbury, New York.
54
<PAGE> 55
T R Financial Corp. & Subsidiaries
ROOSEVELT SAVINGS BANK LOCATIONS
[MAP OF LONG ISLAND]
Administrative Headquarters
1122 Franklin Avenue
Garden City, New York 11530
Customer Service and Information:
(516) 877-1010 or
(718) 347-1010
Nassau County
Garden City
1. 1122 Franklin Ave.
2. 108 Seventh Street
Bellmore
3. Sunrise Highway at
Bellmore Avenue
Massapequa Park
4. 4848 Merrick Road
New Hyde Park
5. Jericho Turnpike at
South 12th Street
Hewlett
6. 1280 Broadway
Brooklyn
Gates Avenue
7. Gates Avenue at
Broadway
Marine Park
8. Avenue U at Nostrand Avenue
Queens County
Union Turnpike
9. Springfield Blvd. at Union Turnpike
Bellerose
10. 247-53 Jamaica Ave.
Howard Beach
11. 156-02 Cross Bay Boulevard
Deepdale
12. Long Island Expressway at 254th Street
Suffolk County
Deer Park
13. Deer Park Avenue at Bay Shore Road
14. Deer Park Avenue at Fairview Avenue
Dix Hills
15. 600 Old Country Road
This Annual Report serves as the Bank's Annual Disclosure Statement for purposes
of the regulations of the Federal Deposit Insurance Corporation ("FDIC"). This
statement has not been reviewed or confirmed for accuracy by the FDIC.
<PAGE> 56
[LOGO] T R FINANCIAL
CORP.
1122 FRANKLIN AVENUE
GARDEN CITY, NEW YORK 11530
(516) 742-9300
<PAGE> 1
T R FINANCIAL CORP.
ORGANIZATION CHART
DECEMBER 31, 1996
T R Financial Corp. (active)
- owns 100% of Roosevelt Savings Bank
Roosevelt Savings Bank (active)
- owns 100% of the following subsidiary corporations
Anaconda Enterprises, Inc. (active)
BSR, Inc. (active)
Bellingham Corp. (inactive)
155 East 33rd Street Corp. (inactive)
Oyster Bay Holding Corp. (inactive)
Rokings Holding Corp. (inactive)
Roosevelt Abstract Corp. (inactive)
Roosevelt Land Corp. (active)
Roosevelt Service Corp. (active)
Rosouth Holding Corp. (inactive)
VBF Holding Corp. (inactive)
All companies listed above are located at:
1122 Franklin Avenue
Garden City, NY 11530
Note: During 1995, Roosevelt Savings Bank's 100% owned
subsidiary, 250 Jericho Enterprises, Inc. Was dissolved.
<PAGE> 1
KPMG Peat Marwick LLP
INDEPENDENT AUDITORS' CONSENT
The Stockholders and the Board of Directors of T R Financial Corp.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-65134, 33- 65136, 33-77992, 33-77994 and 33-96152) on Form S-8 of T R
Financial Corp. of our report dated January 23, 1997, relating to the
consolidated statements of financial condition of T R Financial Corp. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1996, which report is
incorporated by reference to the December 31, 1996 Annual Report on Form 10-K of
T R Financial Corp.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed statement of financial condition and the consolidated
condensed statement of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 18,128
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 441,847
<INVESTMENTS-CARRYING> 1,008,932
<INVESTMENTS-MARKET> 1,017,702
<LOANS> 1,716,182
<ALLOWANCE> 14,370
<TOTAL-ASSETS> 3,259,627
<DEPOSITS> 2,343,513
<SHORT-TERM> 47,685
<LIABILITIES-OTHER> 74,241
<LONG-TERM> 590,150
0
0
<COMMON> 114
<OTHER-SE> 203,924
<TOTAL-LIABILITIES-AND-EQUITY> 3,259,627
<INTEREST-LOAN> 118,624
<INTEREST-INVEST> 99,780
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 218,404
<INTEREST-DEPOSIT> 102,261
<INTEREST-EXPENSE> 137,170
<INTEREST-INCOME-NET> 81,234
<LOAN-LOSSES> 1,400
<SECURITIES-GAINS> 7,511
<EXPENSE-OTHER> 43,063
<INCOME-PRETAX> 52,690
<INCOME-PRE-EXTRAORDINARY> 30,515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,515
<EPS-PRIMARY> 3.44
<EPS-DILUTED> 3.44
<YIELD-ACTUAL> 2.72
<LOANS-NON> 12,120
<LOANS-PAST> 509
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,707
<ALLOWANCE-OPEN> 13,267
<CHARGE-OFFS> 538
<RECOVERIES> 241
<ALLOWANCE-CLOSE> 14,370
<ALLOWANCE-DOMESTIC> 14,370
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
[LOGO]
1122 FRANKLIN AVENUE
GARDEN CITY, NEW YORK 11530
(516) 742-9300
March 19, 1997
Dear Stockholder:
You are invited to attend the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of T R Financial Corp. (the "Company"), which will be held on
April 21, 1997 at 9:30 a.m. New York time at the Westbury Manor, Jericho
Turnpike, Westbury, New York. Enclosed are a Notice of the 1997 Annual Meeting
of Stockholders, Proxy Statement for the Annual Meeting, Proxy Card and 1996
Annual Report to Stockholders.
At the Annual Meeting you will be asked to consider and vote upon: (1)
the election of four directors, each to serve for a three-year term expiring in
2000; (2) the ratification of the appointment of the firm of KPMG Peat Marwick
LLP as independent auditors for the Company for the year ending December 31,
1997; (3) the approval of the Amended and Restated T R Financial Corp. 1993
Incentive Stock Option Plan; and (4) the approval of the Roosevelt Savings Bank
Performance Compensation Plan. In addition, management will report on the
operations and activities of the Company, and there will be an opportunity for
you to ask questions about the Company's business.
The Board of Directors of the Company has determined that an
affirmative vote on each proposal to be considered at the Annual Meeting is in
the best interests of the Company and unanimously recommends a vote "FOR" each
proposal.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS
URGES YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL NOT PREVENT YOU FROM
VOTING IN PERSON AT THE ANNUAL MEETING, BUT WILL ASSURE THAT YOUR VOTE IS
COUNTED IF YOU ARE UNABLE TO ATTEND. IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE
NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM
YOUR RECORD HOLDER IN ORDER TO BE ADMITTED TO THE ANNUAL MEETING AND TO VOTE AT
THE ANNUAL MEETING. Examples of such documentation include a broker's statement,
letter or other document confirming your ownership of shares of the Company.
On behalf of the Board of Directors and the employees of T R Financial
Corp. and Roosevelt Savings Bank, I wish to thank you for your continued
support.
Sincerely,
/s/ John M. Tsimbinos
---------------------
John M. Tsimbinos
Chairman of the Board and
Chief Executive Officer
<PAGE> 2
[LOGO]
1122 FRANKLIN AVENUE
GARDEN CITY, NEW YORK 11530
(516) 742-9300
NOTICE OF THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") of T R Financial Corp. (the "Company") will be held on
April 21, 1997 at 9:30 a.m. New York time at the Westbury Manor, Jericho
Turnpike, Westbury, New York for the following purposes:
1. To elect four directors, each to serve for a three-year term
expiring at the 2000 annual meeting and until their respective
successors have been duly elected and qualified;
2. To ratify the appointment of the firm of KPMG Peat Marwick LLP
as independent auditors for the Company for the year ending
December 31, 1997;
3. To approve the Amended and Restated T R Financial Corp. 1993
Incentive Stock Option Plan;
4. To approve the Roosevelt Savings Bank Performance Compensation
Plan; and
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
As of the date hereof, the Board of Directors is not aware of
any such other business.
Pursuant to the Bylaws of the Company, the Board of Directors has fixed
the close of business on March 5, 1997 as the record date for the determination
of stockholders entitled to notice of and to vote at the Annual Meeting and at
any adjournment or postponement thereof. A list of stockholders entitled to vote
at the Annual Meeting will be available for inspection at 1122 Franklin Avenue,
Garden City, New York, for a period of ten days prior to the Annual Meeting and
will also be available at the Annual Meeting.
A copy of the 1996 Annual Report to Stockholders of the Company, which
for purposes of the regulations of the Federal Deposit Insurance Corporation
serves as the Annual Disclosure Statement of Roosevelt Savings Bank, a wholly
owned subsidiary of the Company, accompanies this Notice of the 1997 Annual
Meeting of Stockholders. Stockholders may obtain, free of charge, an additional
copy of the Annual Report by writing to Theodore S. Ayvas, Assistant Vice
President, Roosevelt Savings Bank, 1122 Franklin Avenue, Garden City, New York
11530, or calling (516) 739-4219.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS
URGES YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors,
/s/ Ira H. Kramer
-------------------
Ira H. Kramer
Corporate Secretary
Garden City, New York
March 19, 1997
<PAGE> 3
[LOGO]
1122 FRANKLIN AVENUE
GARDEN CITY, NEW YORK 11530
(516) 742-9300
------------------------
PROXY STATEMENT FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1997
GENERAL INFORMATION
GENERAL
This Proxy Statement and the accompanying Proxy Card are being mailed
to stockholders of T R Financial Corp. ("T R Financial" or the "Company") on or
about March 19, 1997 in connection with the solicitation of proxies by the Board
of Directors of the Company to be used at the 1997 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on April 21, 1997 at 9:30 a.m.
New York time at the Westbury Manor, Jericho Turnpike, Westbury, New York, and
at any adjournment or postponement thereof.
As more fully described in this Proxy Statement, the purpose of the
Annual Meeting is (1) to elect four directors, each to serve for a three-year
term expiring at the 2000 annual meeting and until their respective successors
have been duly elected and qualified; (2) to ratify the appointment of the firm
of KPMG Peat Marwick LLP as independent auditors for the Company for the year
ending December 31, 1997; (3) to approve the Amended and Restated T R Financial
Corp. 1993 Incentive Stock Option Plan; (4) to approve the Roosevelt Savings
Bank Performance Compensation Plan; and (5) to transact such other business as
may properly come before the Annual Meeting or any adjournment or postponement
thereof. As of the date hereof, the Board of Directors is not aware of any such
other business.
RECORD DATE AND VOTING
The Board of Directors of the Company has fixed the close of business
on March 5, 1997 as the record date (the "Record Date") for the determination of
the holders of the Company's issued and outstanding common stock, par value $.01
per share (the "Common Stock") entitled to receive notice of and to vote at the
Annual Meeting. Only holders of Common Stock at the close of business on the
Record Date will be entitled to vote at the Annual Meeting and at any
adjournment or postponement thereof. At the close of business on the Record
Date, there were 8,806,244 shares of Common Stock outstanding. The presence, in
person or by proxy, of the holders of at least a majority of the total number of
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum thereat.
Each holder of shares of Common Stock outstanding on the Record Date
will be entitled to one vote for each share held of record (except for shares
held in excess of the Limit, as defined below) upon each matter properly
submitted at the Annual Meeting and at any adjournment or postponement thereof.
As
<PAGE> 4
provided in the Company's Certificate of Incorporation, record holders of Common
Stock who beneficially own in excess of 10% of the outstanding shares of Common
Stock (the "Limit") are not entitled to any vote with respect to the shares held
in excess of the Limit. A person or entity is deemed to beneficially own shares
owned by an affiliate as well as persons acting in concert with such person or
entity. The Company's Certificate of Incorporation authorizes the Board of
Directors (i) to make all determinations necessary to implement and apply the
Limit, including determining whether persons or entities are acting in concert
and (ii) to demand that any person who is reasonably believed to beneficially
own Common Stock in excess of the Limit supply information to the Company to
enable the Board of Directors to implement and apply the Limit.
If the enclosed Proxy Card is properly executed and received by the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions indicated thereon. IF
NO INSTRUCTIONS ARE GIVEN, EXECUTED PROXIES WILL BE VOTED FOR ELECTION OF EACH
OF THE FOUR NOMINEES FOR DIRECTOR, AND FOR EACH OF THE OTHER PROPOSALS SET FORTH
IN THE ACCOMPANYING NOTICE OF THE 1997 ANNUAL MEETING OF STOCKHOLDERS.
Management is not aware of any matters other than those set forth in
the Notice of the 1997 Annual Meeting of Stockholders that may be brought before
the Annual Meeting. If any other matters properly come before the Annual
Meeting, the persons named in the accompanying Proxy Card will vote the shares
represented by all properly executed proxies on such matters in such manner as
shall be determined by a majority of the Board of Directors of the Company.
VOTE REQUIRED
The vote required for each proposal is set forth in the discussion of
such proposal under the caption "-- Vote Required."
REVOCABILITY OF PROXIES
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may revoke
a proxy at any time prior to its exercise by (1) filing a written notice of
revocation with the Corporate Secretary of the Company, (2) delivering to the
Corporate Secretary of the Company prior to the Annual Meeting a duly executed
proxy bearing a later date or (3) attending the Annual Meeting, filing a written
notice of revocation with the secretary of the meeting and voting in person. IF
YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL
NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO BE ADMITTED TO
THE ANNUAL MEETING AND TO VOTE AT THE ANNUAL MEETING. Examples of such
documentation include a broker's statement, letter or other document confirming
your ownership of shares of the Company.
SOLICITATION OF PROXIES
The Company will bear the cost of soliciting proxies from its
stockholders. In addition to the solicitation of proxies by mail, D.F. King &
Co., Inc., a proxy solicitation firm, will assist the Company in soliciting
proxies for the Annual Meeting and will be paid a fee estimated to be $5,500,
plus out-of-pocket expenses. Proxies may also be solicited personally, by
telephone, facsimile or other means by directors, officers and employees of the
Company or its subsidiaries, without additional compensation. The Company will
also request persons, firms and corporations holding shares in their names or in
the name of their nominees, which are beneficially owned by others, to forward
proxy materials to and obtain proxies from such beneficial owners, and will
reimburse such record holders for their reasonable expenses incurred in
connection therewith.
2
<PAGE> 5
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Officers and employees of the Bank and the Company are eligible to be
granted stock options under the T R Financial Corp. 1993 Incentive Stock Option
Plan, as amended and restated ("Option Plan"), which is subject to stockholder
approval. See "Proposal 3 -- Approval of the Amended and Restated T R Financial
Corp. 1993 Incentive Stock Option Plan." Certain officers of the Bank and the
Company are eligible to be granted awards under the Roosevelt Savings Bank
Performance Compensation Plan ("Performance Compensation Plan"), which is
subject to stockholder approval. See "Proposal 4 -- Approval of the Roosevelt
Savings Bank Performance Compensation Plan."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the Company's
outstanding shares of Common Stock as of February 28, 1997. Other than those
persons listed below, the Company is not aware of any person who is the
beneficial owner of more than 5% of the Company's outstanding shares of Common
Stock as of February 28, 1997. For the purposes of the following table and the
table set forth under "Stock Ownership of Management," in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a person is deemed to "beneficially own" any securities (a) over which
such person has, directly or indirectly, sole or shared voting or investment
power, or (b) of which such person has the right to acquire beneficial
ownership, including the right to acquire beneficial ownership by the exercise
of stock options, within 60 days after February 28, 1997. As used herein,
"voting power" includes the power to vote, or direct the voting of, such
securities, and "investment power" includes the power to dispose, or direct the
disposition of, such securities.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OWNERSHIP OF
TITLE OF CLASS NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF SECURITY OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING(1)
----------- ------------------- --------- --------------
<S> <C> <C> <C>
Common Stock T R Financial Corp. 1,058,969(2) 12.0%
Employee Stock Ownership Plan
and Trust (the "ESOP")
1122 Franklin Avenue
Garden City, New York 11530
Common Stock John M. Tsimbinos 587,778(3) 6.5%
Chairman of the Board and
Chief Executive Officer
T R Financial Corp.
1122 Franklin Avenue
Garden City, New York 11530
Common Stock Private Capital Management, Inc. 488,300(4) 5.5%
3003 Tamiami Trail North
Naples, Florida 34103
</TABLE>
- ------------------------
(1) Calculated based upon 8,806,152 shares of Common Stock outstanding as
of February 28, 1997, except that the percentage with respect to Mr.
Tsimbinos has been calculated on the basis of such number of shares
outstanding, plus 262,014 shares which Mr. Tsimbinos has the right to
acquire within 60 days after February 28, 1997 by the exercise of stock
options.
(footnotes continued on next page)
3
<PAGE> 6
(2) The Administrative Committee of the Company, consisting of Messrs.
Eisen, Galgano, Genovese, Kowatch, Loser, Orr and Voutsinas, all of
whom are non-employee directors, administers the ESOP as a committee.
An unrelated third party, State Street Bank and Trust Company, is the
trustee for the ESOP (the "ESOP Trustee"). The Administrative Committee
may instruct the ESOP Trustee regarding investment of funds contributed
to the ESOP. Each member of the Administrative Committee disclaims
beneficial ownership of the shares of Common Stock held in the ESOP.
Common Stock purchased by the ESOP is released from a suspense account
and allocated to participants annually based on contributions made to
the ESOP by the Company. Shares released from the suspense account are
allocated among participants in proportion to their compensation, as
defined in the ESOP, for the year the contributions are made, up to the
limits permitted under the Internal Revenue Code of 1986, as amended
(the "Code"). The ESOP Trustee must vote all allocated shares held in
the ESOP in accordance with the instructions of participants. Shares of
Common Stock are allocated to participants under the ESOP as of
December 31st of each year. As of December 31, 1996, 431,216 shares of
Common Stock in the ESOP had been allocated, but not distributed, to
participants. Under the ESOP, unallocated shares will be voted by the
ESOP Trustee in a manner calculated to most accurately reflect the
voting instructions received from participants regarding the allocated
shares so long as such vote is in accordance with the requirements of
the Employee Retirement Income Security Act of 1974, as amended.
(3) Includes 262,014 shares which Mr. Tsimbinos has the right to acquire
beneficial ownership of by the exercise of stock options granted
pursuant to the Option Plan at the time of the Company's initial public
offering in 1993. Also includes (a) 7,499 shares held in trust pursuant
to the ESOP that have been allocated to Mr. Tsimbinos's account and as
to which he has sole voting power but no investment power, except in
limited circumstances, (b) 27,862 shares held in the Employer Stock
Fund of the Roosevelt Savings Bank Salary Reduction Plan in RSI
Retirement Trust (the "401(k) Plan") as to which he has shared voting
and investment power, (c) 37,323 shares held in the Supplemental
Executive Retirement Plan of Roosevelt Savings Bank (the "SERP") as to
which he has sole investment but no voting power and (d) 25,500 shares
as to which he otherwise shares voting and investment power. See
"Election of Directors -- Executive Compensation -- 1993 Incentive
Stock Option Plan," "-- 401(k) Plan" and "-- Employee Stock Ownership
Plan."
(4) Based on information in a Schedule 13G, dated February 14, 1997, filed
by Private Capital Management, Inc., an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, as amended.
Private Capital Management, Inc. has shared dispositive power over all
of the shares shown.
4
<PAGE> 7
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the shares
of Common Stock beneficially owned by each director of the Company, by each
Named Executive Officer of the Company identified in the Summary Compensation
Table included on page 15 of this Proxy Statement and all directors and
executive officers of the Company or the Company's wholly owned subsidiary,
Roosevelt Savings Bank (the "Bank"), as a group as of February 28, 1997. Except
as otherwise indicated, each person and each group shown in the table has sole
voting and investment power with respect to the shares of Common Stock
indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OWNERSHIP
BENEFICIAL OWNERSHIP OF COMMON
NAME TITLE(1) (2)(3)(4)(5)(6)(7) STOCK OUTSTANDING (8)
---- -------- ------------------ ---------------------
<S> <C> <C> <C>
John M. Tsimbinos Chairman of the Board and Chief 587,778 6.5%
Executive Officer, Director
A. Gordon Nutt President and Chief Administrative 125,981 1.4%
Officer, Director
Maureen E. Clancy Director 33,342 *
Robert F. Eisen, Sr. Director 41,667 *
Michael P. Galgano Director 49,924 *
Leonard Genovese Director 32,235 *
Edward J. Kowatch Director 18,666 *
Ernest L. Loser Director 31,151 *
John C. Mesloh Director 32,652 *
James E. Orr, Jr. Director 54,535 *
Spiros J. Voutsinas Director 42,486 *
William R. Kuhn Executive Vice President and 106,060 1.2%
Chief Real Estate Lending Officer
Dennis E. Henchy Executive Vice President and 105,652 1.2%
Chief Financial Officer
John J. DeRusso Senior Vice President 5,501 *
Ira H. Kramer Senior Vice President and 50,930 *
Corporate Secretary
All directors and executive officers as a group
(15 persons) 1,318,560(9) 13.9%
</TABLE>
- ------------------------
* Less than 1% of outstanding Common Stock.
(1) Titles are for both the Company and the Bank.
(2) The figures shown include shares with the right to acquire beneficial
ownership by the exercise of stock options pursuant to the Option Plan
or the T R Financial Corp. 1993 Stock Option Plan for Outside Directors
(the "Directors' Option Plan") as follows: Mr. Tsimbinos, 262,014
shares; Mr. Nutt, 65,550 shares; Ms. Clancy, 20,485 shares; Mr. Eisen,
20,447 shares; Mr. Galgano, 25,947 shares; Mr. Genovese, 20,485 shares;
Mr. Kowatch, 15,947 shares; Mr. Loser, 20,485 shares; Mr. Mesloh,
20,485 shares; Mr. Orr, 34,140 shares; Mr. Voutsinas, 20,485 shares;
Mr. Kuhn, 65,550 shares; Mr. Henchy, 65,550 shares; Mr. Kramer, 29,565
shares; and all directors and executive officers as a group, 687,135
shares. See "Election of Directors -- Directors' Compensation --
Directors' Option Plan" and "-- Executive Compensation -- 1993
Incentive Stock Option Plan."
(footnotes continued on next page)
5
<PAGE> 8
(3) The figures shown include shares held in trust pursuant to the ESOP
that have been allocated as of December 31, 1996 to individual accounts
as follows: Mr. Tsimbinos, 7,499 shares; Mr. Nutt, 7,499 shares; Mr.
Kuhn, 7,393 shares; Mr. Henchy, 7,300 shares; Mr. DeRusso, 1,693; Mr.
Kramer, 6,502 shares; and all directors and executive officers as a
group, 37,886 shares. Such persons have sole voting power but no
investment power, except in limited circumstances, as to such shares.
The figures shown do not include 627,753 shares held in trust pursuant
to the ESOP that have not been allocated to any individual's account
and as to which the members of the Company's Administrative Committee
(consisting of Messrs. Eisen, Galgano, Genovese, Kowatch, Loser, Orr
and Voutsinas) may be deemed to share investment power, and as to which
each of the participants identified in the table may be deemed to share
voting power, thereby causing each such person to be deemed a
beneficial owner of such shares. Each of the members of the
Administrative Committee and the participants included in the table
disclaims beneficial ownership of the unallocated shares in the ESOP.
See "Election of Directors -- Executive Compensation -- Employee Stock
Ownership Plan."
(4) The figures shown include shares held in the Employer Stock Fund of the
401(k) Plan as to which each person identified has shared voting and
investment power as follows: Mr. Tsimbinos, 27,862 shares; Mr. Nutt,
13,678 shares; Mr. Kuhn, 12,502 shares; Mr. Henchy, 12,561 shares; Mr.
DeRusso, 479 shares; and Mr. Kramer, 4,819 shares; and all executive
officers as a group, 71,901 shares. See "Election of Directors --
Executive Compensation -- 401(k) Plan."
(5) The figures shown include shares held in the SERP as to which each
person identified has sole investment but no voting power as follows:
Mr. Tsimbinos, 37,323 shares; Mr. Nutt, 5,848 shares; Mr. Kuhn, 4,019
shares; Mr. Henchy, 3,751 shares; Mr. DeRusso, 329; and Mr. Kramer, 257
shares; and all executive officers as a group, 51,527 shares. See
"Election of Directors -- Retirement Plan and Supplemental Executive
Retirement Plan -- Supplemental Executive Retirement Plan."
(6) The figures shown include shares over which individuals share voting
and investment power (other than as disclosed in notes 3, 4 and 5) as
follows: Mr. Tsimbinos, 25,500 shares; Mr. Nutt, 5,000 shares; Ms.
Clancy, 5,107 shares; Mr. Eisen, 2,900 shares; Mr. Galgano, 8,300
shares; Mr. Loser, 2,916 shares; Mr. Orr, 6,475 shares; Mr. Voutsinas,
1,516 shares; Mr. Kuhn, 5,936 shares; Mr. Henchy, 750 shares; and Mr.
Kramer, 697 shares; and all executive officers as a group, 65,097
shares.
(7) The figures shown include shares held under the Roosevelt Savings Bank
Recognition and Retention Plan for Officers (the "Officers' RRP"), over
which each individual has sole voting power but no investment power, as
follows: Mr. Kramer, 7,097 shares. See "Election of Directors --
Executive Compensation -- Bank Recognition and Retention Plan for
Officers."
(8) Percentages with respect to each person or group of persons have been
calculated on the basis of 8,806,152 shares of Common Stock, the number
of shares of Common Stock outstanding as of February 28, 1997, plus the
number of shares of Common Stock which such person or group of persons
has the right to acquire within 60 days after February 28, 1997 by the
exercise of stock options.
(9) The figure shown includes 65,097 shares over which the Company's
directors and executive officers share voting and investment power
(other than as disclosed in notes 3, 4 and 5). The figure shown also
includes 7,097 shares allocated to Mr. Kramer and held in trust
pursuant to the Officers' RRP, as to which such executive officer has
sole voting power but no investment power. The figure shown does not
include 5,790 shares of unallocated stock held in trust pursuant to the
Officers' RRP, as to which the executive officers with restricted stock
awards have shared voting power but no investment power, thereby
causing each such person to be deemed a beneficial owner of such
unallocated shares. The figure shown also does not include 15,500
shares of unallocated stock held in trust pursuant to the Roosevelt
Savings Bank Recognition and Retention Plan for Outside Directors (the
"Directors' RRP"), as to which the members of the Company's
Administrative Committee may be deemed to share investment power and
voting power, thereby causing each member of the Administrative
Committee to be deemed a beneficial owner of such unallocated shares.
Each of the directors and executive officers included in the table
disclaims beneficial ownership of the unallocated shares under the
Officers' RRP and under the Directors' RRP. The Directors' RRP was
terminated in January 1997, and all assets remaining in the trust for
the Directors' RRP will be returned to the Bank. See "Election of
Directors -- Executive Compensation -- Bank Recognition and Retention
Plan for Officers."
6
<PAGE> 9
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Certificate of Incorporation and Bylaws of the Company provide that
the Board of Directors shall be divided into three classes. The directors of
each class serve for a term of three years, with one class elected each year. In
all cases, directors serve until their successors are elected and qualified.
Currently, the Board of Directors of the Company consists of 11 members.
The terms of four directors expire at the Annual Meeting. Each of the
four incumbent directors, John M. Tsimbinos, Edward J. Kowatch, James E. Orr,
Jr. and Spiros J. Voutsinas, has been nominated by the Board of Directors,
acting as the Nominating Committee, to be re-elected at the Annual Meeting, each
to serve for a three-year term expiring at the 2000 annual meeting and until
their successors are otherwise duly elected and qualified. Each nominee has
consented to being named in this Proxy Statement and to serve if elected.
However, if any nominee should become unable to serve, the proxies received in
response to this solicitation that were voted in favor of such nominee will be
voted for the election of such other person as shall be designated by the Board
of Directors of the Company, unless the Board of Directors shall determine to
further reduce the number of directors pursuant to the Bylaws of the Company. In
any event, proxies cannot be voted for a greater number of persons than the four
nominees named.
VOTE REQUIRED
Directors are elected by a plurality of the votes cast in person or by
proxy at the Annual Meeting. The holders of Common Stock may not vote their
shares cumulatively for the election of directors. Shares underlying broker
non-votes or held in excess of the Limit will not be counted as having been
voted in person or by proxy and will have no effect on the election of
directors.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to each
nominee for election as a director and each continuing director whose term does
not expire at the Annual Meeting. There are no arrangements or understandings
between the Company and any director or nominee pursuant to which such person
was elected or nominated to be a director of the Company. For information with
respect to security ownership of directors, see "General Information -- Stock
Ownership of Management."
<TABLE>
<CAPTION>
END OF DIRECTOR
NAME AGE(1) TERM POSITION HELD WITH THE COMPANY SINCE(2)
---- ------ ---- ------------------------------ --------
<S> <C> <C> <C> <C>
NOMINEES FOR A THREE-YEAR
TERM EXPIRING IN 2000
John M. Tsimbinos 59 1997 Chairman of the Board, Chief 1982
Executive Officer and Director
Edward J. Kowatch 72 1997 Director 1988
James E. Orr, Jr. 73 1997 Director 1978
Spiros J. Voutsinas 63 1997 Director 1992
</TABLE>
(table continued on next page)
7
<PAGE> 10
<TABLE>
<CAPTION>
END OF DIRECTOR
NAME AGE(1) TERM POSITION HELD WITH THE COMPANY SINCE(2)
---- ------ ---- ------------------------------ --------
<S> <C> <C> <C> <C>
CONTINUING DIRECTORS
A. Gordon Nutt 62 1998 President, Chief Administrative 1991
Officer and Director
Maureen E. Clancy 64 1999 Director 1993
Robert F. Eisen, Sr. 76 1999 Director 1987
Michael P. Galgano 71 1998 Director 1986
Leonard Genovese 64 1999 Director 1992
Ernest L. Loser 71 1999 Director 1992
John C. Mesloh 62 1998 Director 1992
</TABLE>
- ------------------------
(1) At February 28, 1997.
(2) Includes terms as trustee of the Bank and of predecessor affiliated
institutions prior to the incorporation of the Company on February 12,
1993.
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
NOMINEES FOR ELECTION AS DIRECTORS
JOHN M. TSIMBINOS, Chairman of the Board and Chief Executive Officer of
the Company, has been a Director of the Bank since July 20, 1982, having
commenced his employment with the Bank on February 24, 1982. On April 1, 1983,
he became President and Chief Executive Officer, serving in such capacity until
December 15, 1992, when he was elected Chairman of the Board and Chief Executive
Officer of the Bank. Mr. Tsimbinos has over 35 years of experience in the
banking industry. He is a director of America's Community Bankers and serves on
various committees thereof. He also serves on various committees of the
Community Bankers Association of New York State. Mr. Tsimbinos is a director of
Institutional Investors Capital Appreciation Fund, Inc., which is a registered
investment company under the Investment Company Act of 1940, as amended. He also
serves on the boards of various other business, professional, community and
philanthropic organizations, such as Golden Eagle Sales Corp., a wholly owned
subsidiary of Columbian Mutual Life Insurance Company, and the Advisory Board of
the Neighborhood Housing Services of New York City, Inc. Mr. Tsimbinos has also
served as a director and Vice Chairman of the Federal Home Loan Bank of New York
and as Chairman of its Executive Committee. Mr. Tsimbinos was an adjunct
professor at Queens College and taught evening and Saturday courses in money and
banking, corporate finance and economics from 1964 to 1972. He has a B.A. from
The City College of New York, and an M.B.A. in Finance and Investments from the
Baruch School of Business and Public Administration. He has also studied at the
Graduate School of Savings Banking at Brown University and the program for
management development at the Harvard Business School.
EDWARD J. KOWATCH has been a Director of the Bank since February 16,
1988. Mr. Kowatch currently serves as Chairperson of the Loan and Investment
Committee of the Bank. Mr. Kowatch retired as Chief Executive Officer of the
Retirement System for Savings Institutions. He is presently a director of and
consultant for Retirement System Group, Inc., which provides retirement and
investment related services. Mr. Kowatch is a former director of Ban Ser Corp.,
which provides insurance products and services.
JAMES E. ORR, JR. has been a Director of the Bank since June 14, 1978.
Mr. Orr currently serves as Chairperson of the Executive Committee of the Bank.
He is the retired Chairman and Chief Executive Officer of Busby Metals, Inc. of
Hauppauge, New York, a distributor of metal products. He continues as a
consultant to Busby Metals. He is a former Trustee of the Copper and Brass
Servicenter Association, and a former Chairman of Zoning Appeals of the
Incorporated Village of Garden City, New York.
8
<PAGE> 11
SPIROS J. VOUTSINAS has been a Director of the Bank since February 18,
1992. He is currently President of Omega Capital, Inc., a real estate
development and syndication firm. He is a member of the board of the Hellenic
American Chamber of Commerce. Mr. Voutsinas retired in 1988 as an executive vice
president and director of a major New York savings institution with over 28
years of experience in the banking industry.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE NOMINEES FOR ELECTION AS DIRECTORS.
CONTINUING DIRECTORS
A. GORDON NUTT, President and Chief Administrative Officer of the
Company, has been a Director of the Bank since May 21, 1991, and was elected
President and Chief Administrative Officer of the Bank on December 15, 1992. In
1983, Mr. Nutt joined the Bank as a Senior Vice President and Chief
Administrative Officer. Mr. Nutt has over 35 years experience in the banking
industry and has held a variety of senior level management positions. He has a
B.A. from Brooklyn College and has completed the Graduate School of Savings
Banking program at Brown University.
MAUREEN E. CLANCY has been a Director of the Bank since May 18, 1993.
She has been a licensed insurance broker since 1959. Ms. Clancy is the
Secretary-Treasurer of Clancy & Clancy Brokerage Ltd., an insurance agency
established in 1956. Ms. Clancy served as Trustee of the Village of Garden City
from 1986-1990 and was deputy mayor from 1989-1990. She is a past President of
the Mineola-Garden City Rotary Club and is serving as President of the Garden
City Chamber of Commerce for the 1995-1997 term.
ROBERT F. EISEN, SR. has been a Director of the Bank since June 16,
1987. He serves as Chairperson of the Audit Committee of the Company and the
Bank. Mr. Eisen retired as President of Greenwood Mills, Inc., a textile
manufacturer, and was a registered lobbyist representing the textile industry in
Washington, D.C. Mr. Eisen served as a trustee for a major savings institution
and also as a director of Londontown Manufacturing Company before joining the
Board of Roosevelt Savings Bank. He holds an Honorary Doctorate Degree in
Commercial Science from St. John's University.
MICHAEL P. GALGANO has been a Director of the Bank since February 18,
1986. Mr. Galgano was a principal with Dorman & Wilson, Inc., a mortgage banking
firm, and retired as a Senior Vice President and regional manager of the Long
Island office after having been employed at such company for over 24 years. He
currently has his own real estate financial consulting practice. He is an MAI
designated member of the Appraisal Institute and has the designation of CRE in
the American Society of Real Estate Counselors. Mr. Galgano is a past Chairman
of the Real Estate Practitioners' Institute at Long Island University and also
served as mayor of the Incorporated Village of Brookville, New York for over 15
years.
LEONARD GENOVESE has been a Director of the Bank since June 16, 1992.
He is currently Chairman, President and Chief Executive Officer of Genovese Drug
Stores, Inc. At the present time, he is also Chairman of St. Christopher-Ottilie
Services for Children and Families and a board member of the National
Association of Chain Drug Stores, Kellwood Company, AID Auto Stores and the
National Center for Disability Services.
ERNEST L. LOSER has been a Director of the Bank since March 17, 1992.
Mr. Loser serves as Chairperson of the Human Resources Committee and the
Compensation Committee of the Company and the Bank. He retired as a Senior Vice
President in charge of the Institutional Trust Group for The Chase Manhattan
Bank, N.A., where he had been employed for 35 years.
JOHN C. MESLOH has been a Director of the Bank since July 21, 1992. Mr.
Mesloh currently serves as Chairperson of the Planning Committee of the Bank. He
retired as a Vice President from the New York City office of Pfizer, Inc., a
pharmaceutical manufacturer, after 23 years of service. Mr. Mesloh is a
certified public accountant and is a member of the Financial Executives
Institute. He is a past President of the Board of the Lutheran Church of
Resurrection, Garden City. Mr. Mesloh is a former member of the Garden City
9
<PAGE> 12
Board of Education and was President of the Garden City Athletic Association. He
is currently President of T&C Restorations, Inc. in Mineola.
BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors met five times during 1996. The Board
of Directors has appointed the Administrative Committee, Audit Committee and
Compensation Committee as standing committees. The Board of Directors serves as
the Nominating Committee. Additional committees may be authorized by the Board
of Directors. During 1996, all directors of the Company and the Bank attended at
least 75% (except Mr. Genovese, who attended at least 71%) of the total meetings
held during the period of their service on the Board of Directors of each of the
Company and the Bank and committees thereof. The principal responsibilities of
the standing committees and the number of meetings held during 1996 appear
below.
ADMINISTRATIVE COMMITTEE. The Administrative Committee is responsible
for administering the Option Plan, including determining grants of Options under
the Option Plan, for administering certain parts of the ESOP and for
administering the Officers' RRP. The Administrative Committee met two times
during 1996. Messrs. Eisen, Galgano, Genovese, Kowatch, Loser, Orr and Voutsinas
currently comprise the Administrative Committee.
AUDIT COMMITTEE. The Audit Committee is charged with the responsibility
of annually examining the records and affairs of the Company to assess its
financial condition and presenting a report of examination to the Board of
Directors. The Audit Committee also makes other examinations directed by the
Board of Directors. The Audit Committee met four times during 1996. Messrs.
Eisen, Genovese, Loser, Mesloh, Orr and Voutsinas and Ms. Clancy currently
comprise the Audit Committee.
COMPENSATION COMMITTEE. The Compensation Committee annually reviews and
makes recommendations to the Board of Directors regarding the compensation of
the Company's senior officers, including the Chairman of the Board and Chief
Executive Officer. The Compensation Committee met two times during 1996. Messrs.
Eisen, Galgano, Genovese, Kowatch, Loser, Orr and Voutsinas currently comprise
the Compensation Committee.
NOMINATING COMMITTEE. The Board of Directors, acting as the Nominating
Committee, met in January 1997 to select the nominees for election as directors
at the Annual Meeting. In accordance with the Bylaws of the Company, no
nominations for election as directors, except those made by the Board of
Directors acting as the Nominating Committee, shall be voted upon at the Annual
Meeting unless properly made by a stockholder in accordance with the procedures
set forth below under "Additional Information -- Stockholder's Notice of
Business to be Conducted at the Annual Meeting." No nominations for directors
were received from stockholders for the elections to be held at the Annual
Meeting.
DIRECTORS' COMPENSATION
RETAINER AND FEES. In 1996, Directors of the Bank who were not
employees of the Bank or the Company received a retainer at an annualized rate
of $20,000 and a fee of $750 for each Board of Directors meeting of the Bank
attended and $350 for each committee meeting of the Bank attended. Directors of
the Company who were not employees of the Company or the Bank received a
retainer at an annualized rate of $5,000 and a fee of $500 for each Board of
Directors meeting of the Company attended.
DIRECTORS' OPTION PLAN. Directors are eligible to receive options to
purchase shares of Common Stock pursuant to the T R Financial Corp. 1993 Stock
Option Plan for Outside Directors (the "Directors' Option Plan"). The Directors'
Option Plan authorizes the grant of stock options to purchase Company Common
Stock (and limited rights) equal to 404,224 shares. Under the Directors' Option
Plan, at the time of the Bank's
10
<PAGE> 13
conversion to stock form and the Company's initial public offering in 1993, each
non-officer director who served on the Board of the Bank was granted a fixed
number of options. The exercise price of such options was $9.00 per share, and
the options became exercisable on June 29, 1994 (one year following the date of
the grant). All options granted under the Directors' Option Plan expire on the
tenth anniversary of the date of grant, or, if earlier, one year following
termination of service for any reason other than removal for cause.
In January 1997, the Directors' Option Plan was amended and restated to
provide for annual grants to each outside director of non-statutory stock
options ("Non-statutory Options") to purchase 1,200 shares of Common Stock, or
such lesser number of shares as remain under the Directors' Option Plan. The
exercise price of such options is the fair market value of the shares of Common
Stock on the date of the grant, and such options vest at a rate of 33 1/3% per
year after the date of the grant, with full vesting in the event of death,
disability, change in control or retirement, as defined in such plan.
TERMINATION OF THE ROOSEVELT SAVINGS BANK RECOGNITION AND RETENTION
PLAN FOR OUTSIDE DIRECTORS. At the time of the Bank's conversion to stock form
in 1993, each non-officer director who served on the Board of Directors of the
Bank was granted a fixed number of shares of Common Stock pursuant to the
Roosevelt Savings Bank Recognition and Retention Plan for Outside Directors (the
"Directors' RRP"). Since these awards, no further shares under the Directors'
RRP have been awarded and all prior awards have vested and been distributed. The
Board of Directors of the Bank terminated the Directors' RRP, effective in
January 1997, and directed the trustee of the Directors' RRP to return to the
Bank all of the remaining assets of the trust maintained for the Directors' RRP.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Company's Compensation Committee is
provided in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Pursuant to such rules and regulations, this
Report shall not be deemed "soliciting material" filed with the SEC subject to
Regulation 14A or 14C of the SEC or subject to Section 18 of the Exchange Act.
The Human Resources Committee of the Bank (the "Human Resources
Committee") is responsible for establishing the policies which govern employee
compensation and stock ownership programs. The Compensation Committee of the
Company (the "Compensation Committee") is comprised of the Human Resources
Committee members who are not officers of the Bank or the Company. The
Compensation Committee annually reviews and makes recommendations to the Board
of Directors regarding the compensation of the Company's executive officers,
including the compensation of Mr. Tsimbinos, the Chairman of the Board and Chief
Executive Officer ("CEO") of the Company. Messrs. Tsimbinos, Nutt, Kuhn, Henchy,
DeRusso and Kramer are the executive officers of both the Bank and the Company,
and they receive no additional compensation for their service with the Company.
The overall compensation structure of the Company is aimed at
establishing a total compensation package that both rewards strong individual
performance and Company performance and remains competitive with compensation
levels at comparable banking institutions. In connection with the conversion of
the Bank from mutual to stock form and the initial public offering of the
Company in 1993, the Bank, as part of its ongoing management of executive
compensation, utilized the services of its outside compensation consulting firm
to advise the Human Resources Committee with respect to the Company's
compensation programs for executive officers adopted at the time of the
conversion. As part of the Compensation Committee's review of the Company's
compensation programs in 1996, the Bank utilized the services of the same
compensation consulting firm as to whether changes in such programs would be
appropriate given the passage of time since the conversion. The compensation
consultant prepared a detailed report and met with the Compensation Committee to
review its recommendations. The report contained a comparison of the performance
of the Bank to that of a peer group of twelve other New York-based public
banking institutions each having total assets
11
<PAGE> 14
in excess of $1 billion. The relative performance was measured using key
financial performance factors for the years 1992 through 1995.
The compensation consultant's report also included an analysis of the
relative value of the annual salary, performance compensation and stock benefits
received by the Company's executive officers as compared to such types of
compensation at the same group of public banking institutions. The peer group
selected is different than the companies included in the Nasdaq Composite Index
and Nasdaq Bank Composite Index used in the Performance Graph on page 14 of this
Proxy Statement since these two indices reflect the stock performance of a
significantly broader group of companies and financial institutions.
Based upon its review of the facts and the advice of the Bank's
compensation consultant, the Compensation Committee concluded that, in order to
continue to give the Company's executive officers incentive to keep performing
at their current and higher levels, the Company's compensation program should
continue to be aligned with the level of performance achieved by the Bank
relative to the peer group, as well as taking into account the officer's
individual responsibility and performance. In accordance with the compensation
consultant's recommendations, the Compensation Committee also concluded that an
executive's total pay level should continue to be considered when making
individual changes to annual salary, annual incentive compensation or long-term
incentive compensation.
INCENTIVE COMPENSATION. The Compensation Committee believes that
incentive compensation should be an integral component of the Company's total
compensation package. In this regard, the Bank maintains a performance
compensation program (the "Performance Compensation Program") which provides for
cash payments based upon the annual performance of the Bank in comparison to a
pre-established target goal and, in the case of certain executive officers, the
individual performance of the executive officer. In order to assure that
incentive awards to Messrs. Tsimbinos, Nutt, Kuhn and Henchy are tax deductible
by the Company as "performance-based" compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Bank adopted,
effective January 23, 1997, the Performance Compensation Plan. The Performance
Compensation Plan is a written plan that is substantively equivalent to the
existing Performance Compensation Program, except for certain limitations,
requirements and provisions required under Section 162(m) of the Code in order
to assure that the Company may take tax deductions for the payments made under
the Performance Compensation Plan. One of the requirements of Section 162(m) of
the Code is that the Performance Compensation Plan, as described on pages 27
through 29 of this Proxy Statement, must be approved by the stockholders of the
Company.
STOCK OWNERSHIP PROGRAMS. The Compensation Committee believes that
providing executive officers with significant stock ownership and stock options
aligns the interests of executive officers with the interests of stockholders.
In this regard, the Company adopted the ESOP at the time of the Company's
initial public offering in 1993. Additionally, the stockholders of the Company
approved the Option Plan and the Roosevelt Savings Bank Recognition and
Retention Plan for Officers (the "Officers' RRP"), each adopted by the Company
and the Bank, respectively, at the time of the Company's initial public offering
in 1993.
In connection with the Company's initial public offering, the Company
granted stock options under the Option Plan at an exercise price equal to the
actual purchase price of the shares issued in the initial public offering. These
grants were awarded to provide an incentive for future performance by giving
full and part-time employees, including the executive officers, equity interests
in the Company. The size of the grants to executive officers were based in part
on the practices of other similar institutions and in part on the performance
and position of the executive officer in the organization. Since these grants,
no further stock options under the Option Plan have been granted to the
Company's executive officers, except as described below. The Officers' RRP is
designed to encourage executive officers to remain with the Company. At the time
of the initial public offering in 1993, the Company made awards under the
Officers' RRP to Messrs. Tsimbinos, Nutt, Kuhn, Henchy and Kramer. Since these
awards, no further shares under the Officers' RRP have been awarded to the
Company's executive officers.
12
<PAGE> 15
The Company has amended the Option Plan, subject to stockholder
approval as described on pages 23 through 27 of this Proxy Statement, to
increase the number of shares of Common Stock available for option awards and to
assure that Non-statutory Options awarded pursuant to the Option Plan are tax
deductible by the Company as "performance-based" compensation under Section
162(m) of the Code. At the recommendation of the Bank's compensation consultant,
the Administrative Committee which administers the Option Plan granted stock
options to certain officers of the Bank in January 1997 and, pursuant to the
Option Plan, will consider annual grants of stock options in the future. In each
case, the exercise price of the stock option is equal to the fair market value
of the stock on the day the stock option is granted.
CHIEF EXECUTIVE OFFICER. The Compensation Committee reviewed the
performance of Mr. Tsimbinos as CEO of the Bank and the Company over the past
year. The Compensation Committee concluded that his performance was outstanding,
in terms of the achievement of the Bank's and the Company's goals and objectives
as set forth in the Bank's strategic operating plan, the record level of profits
attained for 1996, the building of a solid and talented management team and the
management of the Bank's growth since the successful conversion of the Bank and
the initial public offering of the Company. Mr. Tsimbinos also actively
participated in a variety of outside organizations and causes which served to
benefit the Company and the banking industry.
Based upon the analysis in the report of the Bank's compensation
consultant and the outstanding financial performance of the Company and the Bank
during 1996, the Compensation Committee recommended, and the Board of Directors
approved, that an additional 5% be added to the targeted award of the
Performance Compensation Program for Mr. Tsimbinos for 1996. In addition, the
Compensation Committee recommended, and the Board of Directors approved, an
increase in the targeted award under the Performance Compensation Plan for Mr.
Tsimbinos from 45% to 50% of his annual salary for 1997. As previously noted,
the Performance Compensation Plan does not differ substantively from the
previously applicable Performance Compensation Program, except for certain
limitations, requirements and provisions required under Section 162(m) of the
Code. The Compensation Committee also recommended, and the Board of Directors
approved, an increase in Mr. Tsimbinos's annual salary from $570,000 to $600,000
for 1997. There was no increase in Mr. Tsimbinos's annual salary in 1996 over
the 1995 rate. These actions were consistent with the findings and
recommendations made by the Bank's compensation consultant regarding the mix of
incentive compensation to annual salary and result in a compensation level
appropriate to industry standards.
Ernest L. Loser, Chairperson Leonard Genovese
Edward J. Kowatch, Vice Chairperson James E. Orr, Jr.
Robert F. Eisen, Sr. Spiros J. Voutsinas
Michael P. Galgano
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
One of the responsibilities of the Compensation Committee of the Board
of Directors of the Company is to determine the level of compensation for
executive officers of the Bank. The members of the Human Resources Committee who
are not officers of the Bank or the Company acted as the Compensation Committee
for 1996 and consisted of Messrs. Eisen, Galgano, Genovese, Kowatch, Loser, Orr
and Voutsinas. There are no interlocks, as defined under the rules and
regulations of the SEC, between members of the Compensation Committee or
executive officers of the Company and corporations with respect to which such
persons are affiliated, or otherwise.
13
<PAGE> 16
PERFORMANCE GRAPH
Pursuant to the rules and regulations of the SEC, the graph below
compares the performance of T R Financial Corp. Common Stock with that of the
Nasdaq Composite Index (U.S. Companies) and the Nasdaq Bank Composite Index
(banks and bank holding companies, over 99% of which are based in the United
States) from June 29, 1993, the date of the Company's initial public offering,
through December 31, 1996. The graph is based on an investment of $100 on June
29, 1993 at the initial public offering price of $9.00 and assumes the
reinvestment of all dividends paid in additional shares of the same class of
equity securities as those below.
T R Financial Corp.
[TOTAL RETURN PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------
INDEX 6/29/93 12/31/93 12/31/94 12/31/95 12/31/96
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
T R FINANCIAL CORP. $100.00 $143.06 $146.41 $289.91 $413.69
NASDAQ - TOTAL US 100.00 111.00 108.50 153.44 188.74
NASDAQ - BANKS 100.00 107.25 106.86 159.15 210.38
</TABLE>
- ------------------------
Note: There can be no assurance that the performance of T R Financial Corp.
Common Stock will continue into the future with the same or similar
trends depicted in the graph above.
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following Summary Compensation Table includes individual
compensation information on the Chief Executive Officer and the next five most
highly paid executive officers whose base salary and bonus exceeded $100,000 in
1996 (the "Named Executive Officers") for services rendered in all capacities to
the Company and the Bank during the years ended December 31, 1996, 1995 and
1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION AWARDS(2)
--------------- ----------------------
RESTRICTED ALL OTHER
STOCK COMPEN-
SALARY(3) BONUS(4) AWARDS(5) OPTIONS(6) SATION(7)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
John M. Tsimbinos 1996 570,000 319,200 -- -- 354,529
Chairman of the Board and 1995 570,000 323,190 -- -- 278,526
Chief Executive Officer 1994 530,000 258,640 -- -- 166,684
A. Gordon Nutt 1996 230,000 103,040 -- -- 134,112
President and Chief 1995 215,000 94,815 -- -- 102,916
Administrative Officer 1994 200,000 73,200 -- -- 60,493
William R. Kuhn 1996 200,000 67,200 -- -- 109,111
Executive Vice President and 1995 195,000 61,425 -- -- 90,459
Chief Real Estate Lending Officer 1994 185,000 56,425 -- -- 55,524
Dennis E. Henchy 1996 192,500 64,680 -- -- 104,829
Executive Vice President 1995 185,000 58,275 -- -- 85,926
and Chief Financial Officer 1994 175,000 53,375 -- -- 52,204
John J. DeRusso (8) 1996 145,000 32,480 -- -- 76,132
Senior Vice President 1995 140,000 35,280 -- -- --
1994 9,154 100 -- -- --
Ira H. Kramer 1996 140,000 31,360 -- -- 72,771
Senior Vice President 1995 125,000 31,500 -- -- 55,796
and Corporate Secretary 1994 110,000 26,840 -- -- 28,994
</TABLE>
- ------------------------
(1) For 1994, 1995 and 1996, there were no (a) perquisites over the lesser
of $50,000 or 10% of the individual's total salary and bonus for the
year; (b) payments of above-market or preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term
incentive plans prior to settlement; (d) tax payment reimbursements; or
(e) preferential discounts on stock.
(2) For 1994, 1995 and 1996, there were no payouts or awards under any
long-term incentive plan because the Bank and the Company did not
maintain any long-term incentive plans.
(3) Salary includes the amount of each individual's contributions to the
401(k) Plan.
(footnotes continued on next page)
15
<PAGE> 18
(4) Bonus consists of payments under the Bank's Performance Compensation
Program and reflects amounts earned for each year, although such bonus
is paid in the subsequent year. For a description of this plan, see "--
Performance Compensation Program." Subject to stockholder approval at
the Annual Meeting, future bonuses to the four most highly compensated
executive officers will be awarded under the Bank's Performance
Compensation Plan. For a complete description of this plan, see
Proposal 4 on pages 27 through 29 of this Proxy Statement. Bonuses to
the other executive officers will continue to be awarded under the
Performance Compensation Program.
(5) Upon the Company's initial public offering in 1993, Messrs. Tsimbinos,
Nutt, Kuhn, Henchy and Kramer were awarded 109,250, 28,405, 28,405,
28,405 and 17,738 shares of Common Stock, respectively, under the
Officers' RRP. The awards to Messrs. Tsimbinos, Nutt, Kuhn and Henchy
vested at a rate of 33 1/3% per year commencing on June 29, 1994. The
award to Mr. Kramer vests at a rate of 20% per year commencing on June
29, 1994. As of December 31, 1996, the awards to Messrs. Tsimbinos,
Nutt, Kuhn and Henchy had fully vested, and the number of shares held
under the Officers' RRP for Mr. Kramer was 7,097. The value of these
shares at December 31, 1996 was $251,944. This dollar amount is based
upon $35.50 per share for 1996, the closing price of the Common Stock
as reported on the Nasdaq Stock Market on December 31, 1996. Dividends
are paid on shares awarded pursuant to the Officers' RRP to the same
extent as paid on the Company's outstanding shares of Common Stock.
(6) No options were earned or granted pursuant to the Option Plan in 1994,
1995 or 1996. For a discussion of the terms of the grants and vesting
of Options, see "-- 1993 Incentive Stock Option Plan" and the
corresponding table.
(7) Includes the value of allocations under the Company's ESOP, which for
1996 totalled $60,102 for each of Messrs. Tsimbinos, Nutt, Kuhn,
Henchy, DeRusso and Kramer. Also includes the Bank's matching
contributions to the 401(k) Plan, a cash or deferred plan designed to
be qualified under Sections 401(a) and 401(k) of the Code, which for
1996, totalled $4,380 for Mr. Tsimbinos, $4,500 for each of Messrs.
Nutt, Kuhn and Henchy, $4,350 for Mr. DeRusso and $4,362 for Mr.
Kramer. Also includes the Bank's contributions to the trust established
for the SERP (excluding amounts contributed with respect to
supplemental retirement benefits thereunder) with respect to
supplemental 401(k) plan benefits and supplemental ESOP benefits, which
for 1996 totalled $290,047 for Mr. Tsimbinos, $69,510 for Mr. Nutt,
$44,509 for Mr. Kuhn, $40,227 for Mr. Henchy, $11,680 for Mr. DeRusso
and $8,307 for Mr. Kramer. The 1996 dollar amounts are based on $35.50
per share, the closing price of the Common Stock as reported on the
Nasdaq Stock Market on December 31, 1996. See "-- 401(k) Plan," "--
Employee Stock Ownership Plan" and "Retirement Plan and Supplemental
Executive Retirement Plan -- Supplemental Executive Retirement Plan."
(8) Mr. DeRusso commenced employment with the Bank in November 1994. At
such time, he was not eligible to participate in the formula based
portion of the Bank's Performance Compensation Program for 1994, but he
did receive a fixed payment for 1994 based on his employment
commencement date. Mr. DeRusso did not receive any awards, grants or
allocations pursuant to the Officers' RRP, the Option Plan, the ESOP
and the 401(k) Plan for 1994 and 1995.
EMPLOYMENT AGREEMENTS. The Bank and the Company have entered into
employment agreements with Messrs. Tsimbinos, Nutt, Kuhn, Henchy, DeRusso and
Kramer. The employment agreements are intended to ensure that the Bank and the
Company will be able to continue to maintain a stable and competent management
base. The continued success of the Bank and the Company depends to a significant
degree on the skills and competence of these executive officers.
The Bank's employment agreements, as amended, and the Company's
employment agreements, as amended (collectively, the "Employment Agreements"),
are substantially similar. The Employment Agreements provide for initial
three-year terms with respect to Messrs. Tsimbinos and Nutt, two-year terms with
respect to Messrs. Kuhn, Henchy and Kramer and a one-year term with respect to
Mr. DeRusso (each an "Executive"). Each contract provides for daily extensions
such that the term of the contract will always be three years for Messrs.
Tsimbinos and Nutt, two years for Messrs. Kuhn, Henchy and Kramer and one year
for Mr. DeRusso unless written notice of termination of such extensions is
provided by either party, but in no event may the term of the agreement extend
beyond the last day of the month in which the Executive attains the age of 65,
or, for Messrs. Tsimbinos and Nutt, the age of 68. The Employment Agreements
provide for a base salary which is reviewed annually. The Employment Agreements
do not preclude termination of the Executive's employment by the Bank or the
Company for "cause" at any time. In the event the Bank or the Company chooses to
terminate the Executive's employment for reasons other than for cause, or in the
event of the Executive's resignation from the Bank or the Company upon (i)
failure to re-elect the
16
<PAGE> 19
Executive to his current office or offices (or a more senior office) or, if
currently a member of the Board of Directors, to renominate the Executive for
election to the Board of Directors, (ii) a material adverse change in the
Executive's functions, duties or responsibilities, or relocation of his
principal place of employment, or (iii) liquidation or dissolution of the Bank
or the Company, the Executive, or in the event of death, his beneficiaries,
would be entitled to receive payments and benefits under the Employment
Agreement. Such payments and benefits would generally include a lump sum payment
equal to (a) his earned but unpaid salary as of the date of termination, (b) the
present value of the amount the Executive would have earned in salary had he
continued working through the unexpired term of the Employment Agreement and (c)
the present value of the additional benefits to which he would have been
entitled under all of the Bank's or the Company's employee benefit plans had he
continued working through the unexpired term of the Employment Agreement at the
rate of salary in effect on his date of termination, including, in the case of
Messrs. Tsimbinos and Nutt, an additional two years of service credit under the
supplemental retirement benefit portion of the Supplemental Executive Retirement
Plan of Roosevelt Savings Bank (the "SERP"). Each Executive would also be
entitled to continued insurance coverage through the unexpired term of the
Employment Agreement at the same level as of his date of termination, except
that for Messrs. Tsimbinos and Nutt, the insurance coverage would continue for
their lifetimes. Each Executive would also be entitled to the payments that
would have been paid under any incentive plan as if he had continued working
through the unexpired term of the Employment Agreement and had earned an
incentive award in each calendar year that ends during the unexpired term of the
Employment Agreement in an amount equal to the product of the average rate for
the four highest compensated officers of the Company and the salary that would
have been paid during such calendar year.
If termination of employment, whether voluntary or involuntary, follows
a change in control of the Bank or the Company, the Executive or, in the event
of death, his beneficiaries, would be entitled to the severance pay as described
above, except that the unexpired term of the Employment Agreement would be five
years from the date of the change in control for Messrs. Tsimbinos and Nutt,
three years from the date of the change in control for Messrs. Kuhn, Henchy and
Kramer, and one year from the date of the change in control for Mr. DeRusso, and
that the payments under any incentive plan would be based on the maximum
attainable rate under such plan. The payments made to an Executive upon or
following a change in control of the Bank or the Company may result in an
"excess parachute payment" as defined under Section 280G of the Code, which may
result in the imposition of a 20% federal excise tax on the Executive and a
denial of the deduction for such excess amounts to the Bank and the Company.
Under the Employment Agreements, the Company would indemnify the Executive for
any such excise tax and for any additional income, excise and employment taxes
imposed as a result of such indemnification. A "change in control" is generally
defined to mean, during the term of the Employment Agreement, an event that
would be reported in response to Item 1(a) of the Current Report on Form 8-K, or
the acquisition of Company or Bank stock that would require Federal Reserve
Board approval under the Bank Holding Company Act of 1956, as amended, or
approval under the Change in Bank Control Act, as amended, or the acquisition by
a person or group of persons of 20% or more of the Bank's or the Company's
Common Stock or a tender offer, exchange offer, merger or other form of business
combination, sale of assets, or contested election of directors which results in
a change of a majority of the Board of Directors. Payments to the Executives
under the Bank's Employment Agreements are guaranteed by the Company in the
event that payments or benefits are not paid by the Bank.
1993 INCENTIVE STOCK OPTION PLAN. The Board of Directors of the Company
has amended the Option Plan, effective in January 1997, to increase the number
of shares of Common Stock available for option awards, to assure that
Non-statutory Options awarded pursuant to the Option Plan are tax deductible by
the Company as "performance-based" compensation under Section 162(m) of the Code
and to include certain other changes. The amended Option Plan is subject to
stockholder approval at the Annual Meeting because, among other reasons, Section
162(m) of the Code requires such approval. For a full description of the amended
Option Plan, see Proposal 3 on pages 23 through 27 of this Proxy Statement.
17
<PAGE> 20
The following table provides information on the number of shares of
Common Stock acquired during 1996 through the exercise of options or SARs, or
represented by unexercised options or SARs held by the CEO and the other Named
Executive Officers as of December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES DURING 1996
AND 1996 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES VALUE SECURITIES UNDERLYING IN-THE-MONEY
ACQUIRED REALIZED UNEXERCISED OPTIONS/SARS OPTIONS/SARS
ON ON AT YEAR-END 1996 AT YEAR-END 1996
EXERCISE EXERCISE (#) ($)(2)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John M. Tsimbinos -- -- 262,014 / 0 6,943,371 / 0
A. Gordon Nutt -- -- 65,550 / 0 1,737,075 / 0
William R. Kuhn -- -- 65,550 / 0 1,737,075 / 0
Dennis E. Henchy -- -- 65,550 / 0 1,737,075 / 0
John J. DeRusso -- -- -- /-- -- / --
Ira H. Kramer -- -- 29,565 / 0 783,473 / 0
</TABLE>
- ------------------------
(1) Based upon the difference between the average market price of the
Common Stock as reported on the Nasdaq Stock Market on the date of
exercise and the $9.00 exercise price of the options.
(2) Based upon the difference between $35.50, the closing price of the
Common Stock as reported on the Nasdaq Stock Market on December 31,
1996, and the $9.00 exercise price of the options.
PERFORMANCE COMPENSATION PROGRAM. The Bank maintains the Performance
Compensation Program, which is a discretionary program covering all employees of
the Bank, except for certain executive officers covered by the Performance
Compensation Plan discussed below. The Performance Compensation Program provides
generally for cash awards to individual employees based upon the annual
performance of the Bank in comparison to its pre-established goal and the
individual performance of such employees. Prior to the Board's adoption of the
Performance Compensation Plan in January 1997, Messrs. Tsimbinos, Nutt, Kuhn and
Henchy were also covered under the Performance Compensation Program. Any awards
such officers received under the Performance Compensation Program were based
entirely on the Bank's achievement of its annual performance goal.
PERFORMANCE COMPENSATION PLAN. The Board of Directors of the Bank has
adopted the Performance Compensation Plan, effective in January 1997, in order
to assure that the incentive payment awards to Messrs. Tsimbinos, Nutt, Kuhn and
Henchy are tax deductible by the Company as "performance-based" compensation
under Section 162(m) of the Code. The Performance Compensation Plan is a written
plan that is substantively equivalent to the existing Performance Compensation
Program, except for certain limitations and provisions required under Section
162(m) of the Code. The Performance Compensation Plan is subject to stockholder
approval at the Annual Meeting because Section 162(m) of the Code requires such
approval. For a full description of the Performance Compensation Plan, see
Proposal 4 on pages 27 through 29 of this Proxy Statement.
BANK RECOGNITION AND RETENTION PLAN FOR OFFICERS. Executive officers of
the Bank are eligible to receive awards of shares of Common Stock pursuant to
the Officers' RRP. The awards are granted at the discretion of the
Administrative Committee. Awards to officers become vested over a period of
years as determined under the Officers' RRP. Awards become 100% vested upon
termination of employment due to
18
<PAGE> 21
death, disability or retirement of the officer, or following a change in control
of the Bank or the Company. In the event that, before reaching retirement, an
officer terminates employment with the Bank or the Company, the unvested portion
of the officer's award will be forfeited. When awards become vested and shares
of Common Stock are distributed in accordance with the Officers' RRP, the
participants also receive amounts equal to any accrued dividends with respect
thereto. Prior to vesting, recipients of awards may direct the voting of the
shares allocated to them. Unallocated shares will be voted by the trustee of the
Officers' RRP in the same proportion as the shares that have been awarded.
Vested shares are distributed to recipients as soon as practicable following the
day on which they vested.
At the time of the Company's initial public offering in 1993, awards
under the Officers' RRP were granted to Messrs. Tsimbinos, Nutt, Kuhn, Henchy
and Kramer. Since these awards, no further awards have been granted to the
Company's executive officers under the Officers' RRP.
401(k) PLAN. The Bank maintains the Roosevelt Savings Bank Salary
Reduction Plan in RSI Retirement Trust (the "401(k) Plan"), which is a
tax-qualified, defined contribution plan designed to be qualified under Section
401(a) and Section 401(k) of the Code. Full-time salaried employees of the Bank
become eligible to join the 401(k) Plan following the completion of one year of
service with the Bank. Under the 401(k) Plan, subject to the limitations imposed
under Section 401(a)(17), Section 401(k) and Section 415 of the Code, a
participant may elect to defer not less than 2% and not more than 6% of his or
her compensation by directing the Bank to contribute such amount to the 401(k)
Plan on his or her behalf. No after-tax voluntary contributions may currently be
made to the 401(k) Plan. The Bank makes matching contributions to the 401(k)
Plan equal to 50% of a participant's elective deferrals, up to a maximum of 3%
of the participant's compensation for the plan year. A participant's
"compensation" for purposes of the 401(k) Plan is generally defined as a
participant's base compensation from the Bank, including salary reduction
contributions to the 401(k) Plan and wage continuation payments to an employee
who is absent due to an illness or disability of a short-term nature, but
excluding overtime pay, bonuses, commissions and contributions made by the Bank
to any other pension, insurance, welfare or any other employee benefit or
deferred compensation plan. Participants are always 100% vested in their
contributions, in matching contributions and in the earnings thereon. The 401(k)
Plan provides for in-service hardship distributions, and for in-service
non-hardship distributions of certain after-tax contributions made prior to
January 1, 1989. Distributions from the 401(k) Plan are made upon or after
termination of service in a lump sum or over a period not to exceed 20 years.
The 401(k) Plan includes a fund that invests primarily in shares of the
Company's Common Stock (the "Employer Stock Fund"). Participants investing in
the Employer Stock Fund direct the trustee how to vote the shares of the Common
Stock held by such fund, based on their proportionate interests in the fund.
Upon distribution of the participant's account, the participant will have the
choice of having his or her account paid to him or her in Common Stock (to the
extent invested in the Employer Stock Fund) or in cash. As of December 31, 1996,
the 401(k) Plan had $16,665,436 in total assets, of which $10,327,767 was
invested in the Employer Stock Fund.
EMPLOYEE STOCK OWNERSHIP PLAN. The Company has established the ESOP for
eligible employees of the Company and its affiliates, including the Bank.
Full-time salaried employees become eligible for participation in the ESOP on
the entry date following the completion of a year of service. As part of the
Company's initial public offering, the ESOP borrowed funds from the Company to
purchase 1,081,575 shares of the Common Stock issued in the Company's initial
public offering in 1993. Collateral for the loan was the Common Stock purchased
by the ESOP. The loan is being repaid principally from employer cash
contributions to the ESOP over a period of approximately ten years. The interest
rate for the loan is equal to the average prime interest rate as published by
The Wall Street Journal during the applicable quarter plus 150 basis points.
Shares of Common Stock purchased by the ESOP and pledged as collateral for the
loan are held in a suspense account and released for allocation among
participants annually in amounts proportionate to the repayment of the loan.
19
<PAGE> 22
Contributions to the ESOP and shares released from the suspense account
are allocated among ESOP participants on the basis of compensation for the year
of allocation, subject to the limitations imposed under Section 401(a)(17) and
Section 415 of the Code. A participant's "compensation" for purposes of the ESOP
is generally defined as a participant's base compensation from the Bank,
including salary reduction contributions to the 401(k) Plan and wage
continuation payments to an employee who is absent due to an illness or
disability of a short-term nature, plus bonuses and overtime pay, but excluding
commissions and contributions made by the Bank to any other pension, insurance,
welfare or any other employee benefit or deferred compensation plan. Benefits
generally become vested over a seven-year period with 10% becoming vested after
the first year of credited service and an additional 10% becoming vested for the
second, third and fourth years of credited service. An additional 20% of the
benefit will become vested each year thereafter until participants are 100%
vested after seven years. However, in the event of a change in control, as
defined by the ESOP, any unvested portion of benefits shall vest immediately and
all unallocated shares and cash held in the suspense account will be allocated
among participants. The ESOP generally provides that, upon certain changes in
control as described in the ESOP, unallocated shares in the ESOP will be sold to
repay any outstanding loan and all remaining unallocated shares or proceeds
thereof will be allocated among participants who were employed immediately
preceding the change in control in proportion to compensation for that part of
the year prior to the change in control. In the event of a change in control,
the ESOP provides that no amount credited to a participant's account as a result
of the repayment of any outstanding loan will be treated as an annual addition
for purposes of the limitations under Section 415 of the Code and, if any amount
cannot be allocated in the year of the change in control because of these
limitations, it will be allocated in subsequent years to those persons who were
participants immediately preceding the change in control and who continue to be
participants.
Prior to the completion of a year of credited service, a participant
who terminates employment for reasons other than death, retirement, or
disability will not receive any benefit under the ESOP. Forfeitures are
reallocated annually among remaining participating employees in the same
proportion as the annual allocation that is made on the basis of compensation.
Benefits are generally payable in the form of stock upon death, retirement,
disability or termination of service.
RETIREMENT PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
RETIREMENT PLAN. The Bank maintains the Retirement Plan of Roosevelt
Savings Bank in RSI Retirement Trust (the "Retirement Plan"), which is a
tax-qualified, defined benefit plan designed to be qualified under Section
401(a) of the Code. The Retirement Plan generally covers full-time salaried
employees who have attained the age of 21 and have completed one year of
service. Employees compensated on an hourly or on a contract basis, leased
employees and employees who work outside the Bank's offices in connection with
the operation and maintenance of buildings or other properties acquired through
foreclosure or deed, are not eligible to participate in the Retirement Plan. The
Bank makes quarterly contributions to the Retirement Plan in amounts necessary
to satisfy the minimum funding requirements under the Employee Retirement Income
Security Act of 1974, as amended.
A participant is fully vested in his or her benefit under the
Retirement Plan upon retirement at the age of 65, or if later, the fifth
anniversary of the participant's initial participation in the Retirement Plan.
The annual benefit provided to a participant under the Retirement Plan, subject
to the limitations imposed under Section 401(a)(17) and Section 415 of the Code,
is equal to 2% of the participant's average annual earnings, multiplied by the
number of years, and any fraction thereof, of service credited to the
participant for benefit purposes not in excess of 30 years, plus l% of average
annual earnings multiplied by the number of years, and any fraction thereof, of
credited service in excess of 30 years. A participant's "average annual
earnings" for purposes of the Retirement Plan is the average of his or her
annual compensation for the 36 consecutive calendar months with the highest
average during his or her final 120 months of credited service (or the total
number of months of credited service if the total is less than 120 months). A
participant's "compensation"
20
<PAGE> 23
for purposes of the Retirement Plan is generally defined as a participant's base
compensation, including salary reduction contributions to the 401(k) Plan and
wage continuation payments to an employee who is absent due to an illness or
disability of a short-term nature, but excluding overtime pay, bonuses,
commissions and contributions made by the Bank to any other pension, insurance,
welfare or any other employee benefit or deferred compensation plan. A
participant's annual benefit under the Retirement Plan is limited to 60% of his
or her average annual earnings. Retirement Plan benefits are also payable upon
termination due to disability and death.
At December 31, 1996 the market value of the Retirement Plan trust fund
was $19,337,583. The Bank's contribution to the Retirement Plan for 1996 was
$726,582.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank maintains the SERP for
designated salaried executive officers of the Bank to compensate such
individuals who participate in the Bank's Retirement Plan, ESOP and the 401(k)
Plan, but whose benefits otherwise receivable under such benefit plans are
limited by Sections 402(g), 401(a)(17) and 415 of the Code. Payment of benefits
under the SERP is triggered by the same events triggering payment under the
Bank's Retirement Plan, ESOP and 401(k) Plan. The SERP also provides that, if
allocations under the ESOP in the case of a change in control are limited by
Section 415 of the Code, the SERP benefit with respect to the ESOP for all
eligible employees will be determined by taking into account the allocation of
the unallocated shares and cash in accordance with the amendment to the ESOP.
This additional SERP benefit will not be reduced by any subsequent allocation of
unallocated shares or cash in the years following the change in control.
The SERP is an unfunded plan. All obligations arising under the SERP
are payable from the general assets of the Bank. However, the Bank has
established a trust (the "SERP Trust"), the assets of which will be used to pay
the benefits under the SERP, except in the event of the insolvency of the Bank,
in which case the assets of the SERP Trust would be used to satisfy the claims
of the Bank's general creditors.
PENSION PLAN TABLE. The following table sets forth the estimated annual
benefits payable under the Retirement Plan and the retirement benefit portion of
the SERP upon retirement at age 65 in calendar year 1997, expressed in the form
of a single life annuity, for the average annual earnings and years of credited
service specified.
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
AVERAGE YEARS OF CREDITED SERVICE
ANNUAL -------------------------
EARNINGS 15 20 25 30 35(2)
-------- -- -- -- -- -----
<S> <C> <C> <C> <C> <C>
$100,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 60,000
200,000(4) 60,000 80,000 100,000 120,000(3) 120,000(3)
300,000(4) 90,000 120,000(3) 150,000(3) 180,000(3) 180,000(3)
400,000(4) 120,000(3) 160,000(3) 200,000(3) 240,000(3) 240,000(3)
500,000(4) 150,000(3) 200,000(3) 250,000(3) 300,000(3) 300,000(3)
700,000(4) 210,000(3) 280,000(3) 350,000(3) 420,000(3) 420,000(3)
900,000(4) 270,000(3) 360,000(3) 450,000(3) 540,000(3) 540,000(3)
</TABLE>
- ------------------------
(1) The annual benefits shown in the table above assume the participant
would receive his retirement benefits under the Retirement Plan and the
SERP in the form of a straight life annuity at normal retirement age.
(2) Normal retirement benefits are limited to 60% of average annual
earnings.
(footnotes continued on next page)
21
<PAGE> 24
(3) These are hypothetical benefits based upon the Retirement Plan's normal
retirement benefit formula. The maximum annual benefit permitted under
Section 415 of the Code in 1996 is $120,000 and in 1997 is $125,000, or
if higher, a member's current accrued benefit as of December 31, 1982
(but not more than $136,425). The $125,000 ceiling will be adjusted to
reflect cost of living increases after 1997 in accordance with Section
415 of the Code. The SERP will provide the difference between the
amounts appearing in this table and the maximum amount allowed by the
Code.
(4) The benefits shown corresponding to these compensation ranges are
hypothetical benefits based upon the Retirement Plan's normal retirement
benefit formula. Under Section 401(a)(17) of the Code, a participant's
compensation in excess of $200,000 (as adjusted to reflect
cost-of-living increases) is disregarded for purposes of determining
average annual earnings in plan years beginning in or after 1989 but
before 1994. Benefits accrued as of the last day of the plan year
beginning in 1988 on the basis of compensation in excess of $200,000 are
preserved. The $200,000 limit was increased to $209,200 in 1990,
$222,220 in 1991, $228,860 in 1992, and $235,840 in 1993. The limitation
was reduced to $150,000 for plan years beginning in 1994 through 1996
and is $160,000 for plan years beginning in 1997. The limitation will be
adjusted to reflect cost of living increases after 1997 in accordance
with Section 401(a)(17) of the Code. The table reflects amounts payable
in conjunction with the SERP.
The following table sets forth the years of credited service (i.e., benefit
service) as of December 31, 1996 for each of the individuals named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
CREDITED SERVICE
----------------
YEARS MONTHS
----- ------
<S> <C> <C>
John M. Tsimbinos 14 10
A. Gordon Nutt 13 6
William R. Kuhn 22 6
Dennis E. Henchy 21 8
John J. DeRusso 2 1
Ira H. Kramer 13 7
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time the Bank makes mortgage loans and consumer loans to
its executive officers and to members of the immediate families of its executive
officers and directors, to the extent consistent with applicable laws and
regulations. Such loans are made in the ordinary course of business and on the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and do not and will not
involve more than the normal risk of collectibility or present other unfavorable
features. The outstanding principal balance of such loans to executive officers
and family members of executive officers and directors totaled $209,614 as of
December 31, 1996.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's
directors, its executive officers, and any person holding more than ten percent
of the Company's Common Stock are required to file initial reports of ownership
of the Company's Common Stock and reports of changes in that ownership to the
SEC. Specific due dates for these reports have been established and the Company
is required to disclose in this Proxy Statement any failure to file by these
dates during 1996. All of such filing requirements of the Company's directors
and executive officers were satisfied during 1996, based upon their written
representations and copies of the reports that they have filed with the SEC.
22
<PAGE> 25
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP
to continue as independent auditors for the Company for the year ending December
31, 1997, subject to ratification of such appointment by the Company's
stockholders. Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting. The representatives will have an opportunity to
make a statement if they desire to do so and will be available to respond to
questions.
VOTE REQUIRED
Ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock represented in person or by
proxy at the Annual Meeting and entitled to vote thereon. ACCORDINGLY, SHARES AS
TO WHICH THE "ABSTAIN" BOX HAS BEEN SELECTED ON THE PROXY CARD WITH RESPECT TO
PROPOSAL 2 WILL BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND WILL HAVE THE
EFFECT OF A VOTE AGAINST PROPOSAL 2. IN CONTRAST, SHARES UNDERLYING BROKER
NON-VOTES OR HELD IN EXCESS OF THE LIMIT WILL NOT BE COUNTED AS PRESENT AND
ENTITLED TO VOTE AND WILL HAVE NO EFFECT ON THE VOTE FOR PROPOSAL 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY.
PROPOSAL THREE
APPROVAL OF THE AMENDED AND RESTATED
T R FINANCIAL CORP. 1993 INCENTIVE STOCK OPTION PLAN
GENERAL PLAN INFORMATION
The Board of Directors of the Company has, subject to approval by the
stockholders of the Company, amended and restated the T R Financial Corp. 1993
Incentive Stock Option Plan, effective as of January 23, 1997, which is
hereinafter referred to as the "Option Plan." The Option Plan was initially
adopted on June 29, 1993 and was approved by the stockholders of the Company on
December 13, 1993. The Option Plan provides for the grant of options to purchase
Common Stock of the Company ("Options") to certain officers and employees of the
Company and its affiliates. The full text of the Option Plan, as amended and
restated, to which reference is made, is set forth as Appendix A to this Proxy
Statement. The amendments to the Option Plan and the principal provisions of the
Option Plan are described in the summary below, which summary is qualified in
its entirety by such reference. The failure to obtain stockholder approval of
the Option Plan, as amended and restated, will not affect the validity of the
Option Plan prior to its amendment and restatement, or any Options granted
thereunder. In such event, the Option Plan as in effect prior to such amendment
and restatement, and any Options granted thereunder, will continue in full force
and effect.
23
<PAGE> 26
PURPOSE OF THE AMENDMENTS
The Company has amended the Option Plan, subject to stockholder
approval, (i) to increase the number of shares of Common Stock available for
awards, (ii) to assure that Non-statutory Options awarded pursuant to the Option
Plan are considered to be "performance-based" compensation under Section 162(m)
of the Code and (iii) to make certain other changes. The amendments increase the
number of shares of Common Stock reserved for purchase pursuant to the exercise
of Options granted under the Option Plan so that awards will be available to
provide those employees of the Company and its affiliates, upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its affiliates largely depends, with an additional incentive to perform in a
superior manner. In addition, Options will be available to attract people of
experience and ability to the service of the Company.
Section 162(m) of the Code generally limits an employer's tax
deductions for certain executives' compensation as described below. See "--
Federal Income Tax Consequences." However, the regulations under Section 162(m)
of the Code provide that certain compensation will not be subject to the
limitations of Section 162 of the Code if such compensation qualifies as
"performance-based" compensation. Compensation attributable to stock options is
considered to satisfy the requirements for "performance-based" compensation if
(i) such options are granted by a committee consisting of at least two "outside
directors," (ii) the plan under which such options are granted states the
maximum number of shares with respect to which options may be granted during a
specified period to any employee and (iii) under the terms of the option, the
amount of compensation any employee could receive is based solely on an increase
in the value of the stock after the date of the grant.
DESCRIPTION OF THE AMENDMENTS TO THE OPTION PLAN
The Option Plan has been amended to increase the number of shares of
Common Stock reserved for purchase pursuant to the exercise of Options granted
under the Option Plan from 688,275 shares of Common Stock to 1,288,275 shares of
Common Stock.
The amendments also provide that the maximum number of shares of Common
Stock for which Options under the Option Plan may be granted to any participant
during any plan year may not exceed 100,000 shares of Common Stock. The
amendments further provide that the Option Plan will be administered by a
committee of two or more members of the Board of Directors, each of whom shall
be both a "non-employee director," as such term is defined under Rule 16b-3
under the Exchange Act and an "outside director," as such term is defined under
Section 162(m) of the Code.
DESCRIPTION OF THE AMENDED AND RESTATED OPTION PLAN
STOCK SUBJECT TO THE OPTION PLAN. The Company has reserved 1,288,275
shares of Common Stock for issuance upon the exercise of Options, which shares
may be authorized and unissued shares or shares previously issued and reacquired
by the Company. Any shares of Common Stock subject to Options granted under the
Option Plan which expire or are terminated, forfeited or cancelled without
having been exercised or vested in full, shall again be available for purposes
of the Option Plan. As of March 5, 1997, the closing price of the Common Stock
was $36.25 (as reported on the Nasdaq Stock Market on such date).
ADMINISTRATION. The Option Plan is administered by the Administrative
Committee (the "Committee"), which consists of two or more non-employee members
of the Board of Directors. The Committee will determine, within the limitations
of the Option Plan, the officers and employees to whom Options will be granted,
the number of shares subject to each Option, the terms of such Options
(including
24
<PAGE> 27
provisions regarding exercisability and acceleration of exercisability) and the
procedures by which the Options may be exercised.
ELIGIBILITY. An employee of the Company, the Bank or any affiliate who is
selected by the Committee is eligible to participate in the Option Plan as a
Participant.
TERMS AND CONDITIONS OF OPTIONS. The Committee will award discretionary
grants of Options to Participants. The Committee determines the exercise price
for each Option granted to a Participant at the time of grant, which will be at
least the fair market value of the underlying Common Stock on the date of grant.
Under the Option Plan, the term fair market value is generally defined, with
respect to a share of Common Stock on a specified date, as the closing price of
the Common Stock as reported on the Nasdaq Stock Market on such date. The
Committee may also establish a vesting schedule or other terms and conditions
applicable to a particular Option, in its discretion; provided, however, that
all options will be fully exercisable in the event the optionee terminates
employment due to death, Disability, Retirement or a Change in Control (each as
defined in the Option Plan). The option period during which an individual may
exercise such Option (the "Option Period") will generally commence on the date
of grant and will expire no later than ten years from such date. The Option
Period will expire earlier, if so specified by the Committee, or (i) upon the
last day of the three-month period commencing on the date of the Participant's
termination of employment with the Company or its affiliates, other than on
account of death, Disability, Retirement or a Termination for Cause (as defined
in the Option Plan); (ii) the last day of the one-year period commencing on the
date of the Participant's termination of employment due to death, Disability or
Retirement or (iii) the date the Participant ceases to be an employee due to a
Termination for Cause.
The Option Plan provides for the grant of options which are treated for
federal income tax purposes as "incentive stock options" ("ISOs"), Non-statutory
Options and certain limited stock appreciation rights ("Limited Rights"). ISOs
are subject to certain restrictions under the Code. Unless otherwise designated
by the Committee, Options granted under the Option Plan will be Non-statutory
Options, will generally be exercisable at a price per share equal to the fair
market value of a share of Common Stock on the date of the Option grant and will
be exercisable for a period of ten years after the date of grant. In no event
may an Option be granted with an exercise price per share that is less than the
fair market value of a share of Common Stock on the date when the Option is
granted.
Upon the exercise of an Option, the exercise price must be paid in full.
Payment may be made (i) in cash, (ii) pursuant to a "cashless exercise" of an
Option in accordance with applicable securities laws or (iii) with Common Stock
already owned by the Option holder. No Options may be transferred other than by
will or the laws of descent and distribution, and may only be exercised during
the Option holder's lifetime by such Option holder or by a guardian or legal
representative of the Option holder.
ADJUSTMENTS. In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
shares of Common Stock held by each person who is then a holder of shares on the
record date for such event, the number of shares covered by each outstanding
Option and the number of shares available under the Option Plan may be adjusted
according to the provisions of the Option Plan to prevent dilution or
enlargement of the rights of Participants.
TERMS AND CONDITIONS OF LIMITED RIGHTS. Each Option granted under the
Option Plan may be accompanied by a Limited Right that is exercisable only upon
a Change in Control (as defined in the Option Plan). Upon exercise of a Limited
Right, the optionee will be entitled to receive a lump sum cash payment equal to
the difference between the exercise price of the related Option and the fair
market value of the shares of Common Stock subject to the Option on the date of
exercise in lieu of purchasing the Common Stock underlying the Option. Upon the
exercise of a Limited Right, the related Option will cease to be exercisable,
and upon the exercise or termination of an Option, the related Limited Right
will terminate.
25
<PAGE> 28
SURRENDER OF OPTIONS. In the event of a Participant's termination of
employment due to death, Disability or Retirement, if requested by the
Participant or his representative, the Committee may elect, in its discretion,
to pay the Participant, in exchange for the surrender of such Participant's
Options, an amount equal to the difference between the fair market value of the
Common Stock on the date of the Participant's termination of employment and the
exercise price of the Option, multiplied by the number of Options surrendered.
TERMINATION OR AMENDMENT OF THE OPTION PLAN
Unless sooner terminated, the Option Plan will terminate automatically on
the day preceding the tenth anniversary of the Option Plan's initial effective
date. The Board of Directors may amend or terminate the Option Plan in whole or
in part at any time prior to the tenth anniversary of the Option Plan's initial
effective date. However, in order to comply with the requirements of Section
162(m) of the Code, any amendment that amends a material term of the Option Plan
will be subject to the approval of the stockholders of the Company. In the event
of any suspension or termination of the Option Plan, all Options granted under
the Option Plan that are outstanding on the date of such suspension or
termination will remain outstanding under the terms of the agreements granting
such Options.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary and does not
purport to be a comprehensive description of the federal tax laws, regulations
and policies affecting the Company and recipients of ISOs, Non-statutory Options
and Limited Rights that may be granted under the Option Plan. Any change in
applicable law or regulation or in the policies of various taxing authorities
may have a material effect on the discussion contained herein.
There are no federal income tax consequences for the Company or the Option
holder at the time an ISO is granted or upon the exercise of an ISO. If there is
no sale or other disposition of the shares acquired upon the exercise of an ISO
within two years after the date the ISO was granted, or within one year after
the exercise of the ISO, then at no time will any amount be deductible by the
Company with respect to the ISO. If the Option holder exercises an ISO and sells
or otherwise disposes of the shares so acquired after satisfying the foregoing
holding period requirements, then the Option holder will realize a capital gain
or loss on the sale or disposition. If the Option holder exercises the ISO and
sells or disposes of the shares prior to satisfying the foregoing holding period
requirements, then an amount equal to the difference between the amount realized
upon the sale or other disposition of the shares and the price paid for such
shares upon the exercise of the ISO will be includible in the ordinary income of
such person, and such amount will ordinarily be deductible by the Company at the
time it is includible in such person's income.
With respect to the grant of Non-statutory Options and Limited Rights,
there are no federal income tax consequences for the Company or the Option
holder at the date of the grant. Upon the exercise of a Non-statutory Option, an
amount equal to the difference between the fair market value of the shares to be
purchased on the date of exercise and the exercise price of such shares is
generally includible in the ordinary income of the person exercising such
Non-statutory Option, although such inclusion may be at a later date in the case
of an Option holder whose disposition of such shares could result in liability
under Section 16(b) of the Exchange Act. The Company will ordinarily be entitled
to a deduction for federal income tax purposes at the time the Option holder is
taxed on the exercise of the Non-statutory Option equal to the amount which the
Option holder is required to include as ordinary income. Section 162(m) of the
Code may limit the Company's deductions of compensation in excess of $1 million
per year for the five most highly paid executives named in the Company's Proxy
Statement, but provides for certain exceptions to such limitations for
"performance-based" compensation. The Company intends the Option Plan to comply
with the
26
<PAGE> 29
requirements for an exception to Section 162(m) of the Code applicable to stock
option plans so that the Company's deduction for compensation related to the
exercise of Options would not be subject to the deduction limitation set forth
in Section 162(m) of the Code.
Upon exercise of a Limited Right, the amount of cash or the fair market
value of the shares received, determined on the date of exercise, is generally
includible in the ordinary income of the person exercising the Limited Right,
although such inclusion may be at a later date in the case of an Option holder
who receives stock on the exercise of a Limited Right and whose disposition of
such shares could result in liability under Section 16(b) of the Exchange Act.
The Company will ordinarily be entitled to a deduction for federal income tax
purposes at the time the Option holder is taxed on the exercise of the Limited
Right, equal to the amount which the Option holder is required to include as
ordinary income.
The foregoing statements are intended to summarize the general principles
of current federal income tax law applicable to Options and Limited Rights that
may be granted under the Option Plan. State and local tax consequences may also
be significant.
VOTE REQUIRED
Pursuant to the regulations under Section 162(m) of the Code, the Option
Plan must be approved by the holders of a majority of the outstanding shares of
Common Stock represented in person or by proxy at the Annual Meeting and
entitled to vote thereon. ACCORDINGLY, SHARES AS TO WHICH THE "ABSTAIN" BOX HAS
BEEN SELECTED ON THE PROXY CARD WITH RESPECT TO PROPOSAL 3 WILL BE COUNTED AS
PRESENT AND ENTITLED TO VOTE AND WILL HAVE THE EFFECT OF A VOTE AGAINST PROPOSAL
3. IN CONTRAST, SHARES UNDERLYING BROKER NON-VOTES OR HELD IN EXCESS OF THE
LIMIT WILL NOT BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND WILL HAVE NO
EFFECT ON THE VOTE WITH RESPECT TO PROPOSAL 3.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE APPROVAL OF THE AMENDED AND RESTATED
T R FINANCIAL CORP. 1993 INCENTIVE STOCK OPTION PLAN.
PROPOSAL FOUR
APPROVAL OF THE ROOSEVELT SAVINGS BANK
PERFORMANCE COMPENSATION PLAN
GENERAL PLAN INFORMATION
The Board of Directors of the Bank has adopted the Performance
Compensation Plan, subject to approval by the stockholders of the Company. The
Performance Compensation Plan provides for cash awards ("Performance Awards") to
certain officers of the Company, the Bank or any of their affiliates. The full
text of the Performance Compensation Plan, to which reference is made, is set
forth as Appendix B to this Proxy Statement. The principal provisions of the
Performance Compensation Plan are described in the summary below, which summary
is qualified in its entirety by such reference.
27
<PAGE> 30
PURPOSE OF PERFORMANCE COMPENSATION PLAN
The purpose of the Performance Compensation Plan is to promote the growth
and profitability of the Bank, to provide certain key officers of the Bank and
its affiliates with an incentive to achieve business objectives, to attract and
retain individuals of outstanding competence and to provide a means of
compensating such individuals for their contributions to the Bank in a manner
which permits such compensation to be deductible by the Bank for federal income
tax purposes.
It is the intention of the Bank that the Performance Awards granted under
the Performance Compensation Plan qualify as "performance-based" compensation
under Section 162(m) of the Code. Section 162(m) of the Code generally limits an
employer's tax deduction for certain of its executives' compensation, unless
such compensation qualifies as "performance-based" compensation.
DESCRIPTION OF THE PERFORMANCE COMPENSATION PLAN
ADMINISTRATION. The Performance Compensation Plan is administered by the
Compensation Committee (the "Committee"), which consists of two or more
Disinterested Board Members (as defined in the Performance Compensation Plan) of
the Bank, each of whom shall be an "outside director," as such term is defined
under Section 162(m) of the Code. The Committee will determine, within the
limitations of the Performance Compensation Plan, the officers to whom
Performance Awards will be granted and the performance goal such officers must
meet ("Performance Goal") to obtain such Performance Awards.
ELIGIBILITY. An officer of the Bank, the Company or any affiliate who is
selected by the Committee is eligible to participate in the Performance
Compensation Plan as an "Eligible Employee." As of March 5, 1997, there were
four Eligible Employees, Messrs. Tsimbinos, Nutt, Kuhn and Henchy.
PERFORMANCE GOAL. During the first 90 days of each year, the Committee
will establish a Performance Goal, which for the 1997 plan year will be based
upon the Company's 1997 consolidated pre-tax income with certain adjustments
that the Committee determines to be appropriate; provided, however, that any
such adjustments comply with the requirements of Section 162(m) of the Code. For
plan years after 1997, the Performance Goal may also take into account the
Company's return on equity or average equity as compared to such returns of a
peer group of other financial institutions, determined over a specified period.
Once established, such Performance Goal for the year may not be changed or
adjusted, unless the Committee determines that an adjustment which decreases or
eliminates the amount of an Eligible Employee's Performance Award is necessary
due to external changes or other unanticipated business conditions.
PERFORMANCE AWARDS. If the Bank satisfies the preestablished Performance
Goal for a particular year, each Eligible Employee is eligible to receive a
Performance Award for such year. A Performance Award awarded to any Eligible
Employee may not exceed the lesser of (a) 175% of such Eligible Employee's base
salary for such year or (b) $1,750,000. At the end of each year, provided that
the Performance Goal established has been met, the Committee will certify in
writing the amount of the Performance Award to be granted to such Eligible
Employee. Such Performance Award will be paid to the Eligible Employee, in the
form and manner determined by the Committee, as soon as practicable following
the date the Committee determines the amount of such Performance Award.
If an Eligible Employee terminates employment with the Bank during any
year or following the end of such year, but prior to the payment of a
Performance Award earned for such year, the Eligible Employee will be deemed to
have forfeited any right to receive such Performance Award. However, if an
Eligible Employee's termination of employment occurs after the end of a year for
which such Eligible Employee would have received a Performance Award, and such
termination is due to death, Disability, Retirement or a Change in Control (each
as defined in the Performance Compensation Plan), such Performance Award will
not be
28
<PAGE> 31
forfeited. In such a case, the Performance Award will be paid in the form and
manner determined by the Committee as soon as practicable after the Committee
determines the amount of such Performance Award. In the event of a termination
of employment following the end of the year due to a Change in Control, the
Performance Award will be paid on the date of such Change in Control.
TERMINATION OR AMENDMENT OF THE PERFORMANCE COMPENSATION PLAN
The Board of Directors of the Bank may amend or terminate the Performance
Compensation Plan in whole or in part at any time. However, in order to comply
with the requirements of Section 162(m) of the Code, any amendment that amends a
material term of the Performance Compensation Plan will be subject to the
approval of the stockholders of the Company.
VOTE REQUIRED
Pursuant to the regulations under Section 162(m) of the Code, the
Performance Compensation Plan must be approved by the holders of a majority of
the outstanding shares of Common Stock represented in person or by proxy at the
Annual Meeting and entitled to vote thereon. ACCORDINGLY, SHARES AS TO WHICH THE
"ABSTAIN" BOX HAS BEEN SELECTED ON THE PROXY CARD WITH RESPECT TO PROPOSAL 4
WILL BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND WILL HAVE THE EFFECT OF A
VOTE AGAINST PROPOSAL 4. IN CONTRAST, SHARES UNDERLYING BROKER NON-VOTES OR HELD
IN EXCESS OF THE LIMIT WILL NOT BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND
WILL HAVE NO EFFECT ON THE VOTE WITH RESPECT TO PROPOSAL 4.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE APPROVAL OF THE ROOSEVELT SAVINGS BANK
PERFORMANCE COMPENSATION PLAN.
29
<PAGE> 32
NEW PLAN BENEFITS
The following table provides information on the benefits that will be
received by the executive officers of the Company pursuant to the Option Plan
and the Performance Compensation Plan, subject to the requirements of such
plans, if such plans are approved by the stockholders at the Annual Meeting.
T R FINANCIAL CORP. 1993 STOCK OPTION PLAN (AS AMENDED AND RESTATED)
AND ROOSEVELT SAVINGS BANK PERFORMANCE COMPENSATION PLAN
<TABLE>
<CAPTION>
Performance
Compensation
1993 STOCK OPTION PLAN(1)(2) Plan(2)
---------------------------- -------
Name/Position # $ Value $ Value
------------- ------ ------- -------
<S> <C> <C> <C>
John M. Tsimbinos, Chairman of the Board and Chief 35,000 -- 319,200
Executive Officer
A. Gordon Nutt, President and Chief Administrative Officer 15,500 -- 103,040
William R. Kuhn, Executive Vice President and Chief Real 7,000 -- 67,200
Estate Lending Officer
Dennis E. Henchy, Executive Vice President and Chief 7,000 -- 64,680
Financial Officer
John J. DeRusso, Senior Vice President 10,000 -- N/A
Ira H. Kramer, Senior Vice President and Corporate 5,000 -- N/A
Secretary
All Executive Officers as a Group (6 Persons) 79,500 -- 554,120
All Outside Directors as a Group (9 Persons) N/A N/A N/A
All Nominees for Outside Directors (3 Persons) N/A N/A N/A
All Employees as a Group for Option Plan 120,100 -- N/A
(22 Persons)
All Employees as a Group for Performance Compensation N/A N/A 554,120
Plan (4 Persons)
</TABLE>
- ------------------------
(1) The Option Plan was amended and restated by the Board of Directors, and
the Options set forth in the above table were granted by the
Administrative Committee, on January 23, 1997, subject to stockholder
approval of the Option Plan. The exercise price of such Options is equal
to the closing price of the Common Stock on the date of grant. The
closing price of the Common Stock on January 23, 1997 was $33.75. Such
Options will generally expire on the tenth anniversary of the date of the
grant.
(2) The amounts to be awarded under the Bank's Performance Compensation Plan
for 1997 are not yet determinable. The amounts provided for each of the
four executive officers eligible to receive an award under the
Performance Compensation Plan for 1997 reflect awards to each such
executive officer under the Bank's Performance Compensation Program for
1996. For 1996, 477 employees of the Bank were paid awards under the
Performance Compensation Program aggregating $1,623,482. As noted
previously, the Performance Compensation Plan is substantively equivalent
to the existing Performance Compensation Program, except for certain
limitations, requirements and provisions required under Section 162(m) of
the Code in order to assure that the Company may take tax deductions for
the payments made under the Performance Compensation Plan.
30
<PAGE> 33
ADDITIONAL INFORMATION
STOCKHOLDER'S NOTICE OF BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an annual meeting or to nominate
any person for election to the Board of Directors. To properly bring business
before an annual meeting or to nominate any person for election to the Board of
Directors, a stockholder must be a stockholder of record entitled to vote with
respect thereto, and the stockholder must give timely notice thereof in writing
to the Corporate Secretary of the Company.
To be timely, a stockholder's notice must be delivered to and received by
the Corporate Secretary not less than 90 days prior to the date of the annual
meeting. However, if less than 100 days notice or prior disclosure of the date
of the meeting is given to stockholders, notice must be received not later than
the close of business on the tenth day following the day on which such notice of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Corporate Secretary shall set forth such information
as required by the Bylaws of the Company. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
relating to an annual meeting any stockholder proposal or nomination which does
not meet all of the requirements for inclusion established by the SEC in effect
at the time such proposal or nomination is received.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any stockholder wishing to have a proposal considered for inclusion in
the Company's proxy statement and proxy card relating to the 1998 annual meeting
of stockholders must, in addition to other applicable requirements, set forth
such proposal in writing and file it with the Corporate Secretary of the Company
on or before November 18, 1997, pursuant to the proxy soliciting regulations of
the SEC. Any such proposal will be subject to 17 C.F.R. Section 240.14a-8 of the
rules and regulations promulgated by the SEC under the Exchange Act.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matters to be brought before the stockholders at the Annual
Meeting. If, however, any other matters not now known are properly brought
before the meeting, the persons named in the accompanying Proxy Card will vote
the shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Board of Directors.
FINANCIAL STATEMENTS
A copy of the 1996 Annual Report to Stockholders for the year ended
December 31, 1996, containing consolidated statements of financial condition as
of December 31, 1996 and December 31, 1995 and related consolidated statements
of income, changes in stockholders' equity and cash flows for each of the years
ended December 31, 1996, 1995 and 1994, prepared in conformity with generally
accepted accounting principles, accompanies this Proxy Statement. The
consolidated financial statements have been audited by KPMG Peat Marwick LLP
whose report thereon appears in the Annual Report. The Annual Report serves as
the Bank's Annual Disclosure Statement for purposes of the regulations of the
Federal Deposit Insurance Corporation. Upon request, stockholders will be
furnished, free of charge, an additional copy of the Annual Report.
31
<PAGE> 34
The Company is required to file an annual report on Form 10-K for the
year ended December 31, 1996 with the SEC. Stockholders may obtain, free of
charge, a copy of such annual report (excluding exhibits) by writing to Theodore
S. Ayvas, Assistant Vice President, Roosevelt Savings Bank, 1122 Franklin
Avenue, Garden City, New York 11530.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THE ACCOMPANYING PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
32
<PAGE> 35
APPENDIX A
T R FINANCIAL CORP.
1993 INCENTIVE STOCK
OPTION PLAN
-------------------------
ADOPTED JUNE 29, 1993
AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 23, 1997
<PAGE> 36
T R FINANCIAL CORP.
1993 INCENTIVE STOCK OPTION PLAN
AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 23, 1997
1. PURPOSE.
The purpose of the T R Financial Corp. 1993 Incentive Stock Option Plan,
as amended and restated as of January 23, 1997 (the "Plan"), is to advance the
interests of T R Financial Corp. (the "Company") and its stockholders by
providing those employees of the Company and its Affiliates, as hereinafter
defined, including Roosevelt Savings Bank (the "Bank"), upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its Affiliates largely depends, with additional incentive to perform in a
superior manner. A purpose of the Plan is also to attract people of experience
and ability to the service of the Company and its Affiliates.
2. DEFINITIONS.
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
(a) "Affiliate" means (i) a member of a controlled group of corporations
of which the Company is a member or (ii) an unincorporated trade or business
which is under common control with the Company as determined in accordance with
Section 414(c) of the Code and the regulations issued thereunder. For purposes
hereof, a "controlled group of corporations" shall mean a controlled group of
corporations as defined in Section 1563(a) of the Code determined without regard
to Sections 1563(a)(4) and (e)(3)(C).
(b) "Award" means a grant of Non-Statutory Stock Options, Incentive Stock
Options, and/or Limited Rights under the provisions of this Plan.
(c) "Beneficiary" means the person or persons designated by a Participant,
or otherwise determined to be entitled to a benefit under the Plan, under
Section 14.
(d) "Board of Directors" or "Board" means the board of directors of the
Company.
(e) "Change in Control" means an event of a nature that: (i) would be
required to be reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) results
in a Change in Control of the Bank or the Company within the meaning of the
Change in Bank Control Act and the Rules and Regulations promulgated by the
Federal Deposit Insurance Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a)
with respect to the Bank and the Board of Governors of the Federal Reserve
System ("FRB") at 12 C.F.R. Section 225.41(b) with respect to the Company, as in
effect on the date hereof, but excluding any such Change in Control resulting
from the purchase of securities by the Company's or the Bank's tax-qualified
employee benefit plans and trusts; (iii) results in a transaction requiring
prior FRB approval under the Bank Holding Company Act of 1956, as amended, and
the regulations promulgated thereunder by the FRB at 12 C.F.R. Section 225.11,
as in effect on the date hereof, except for the Company's acquisition of the
Bank and any transaction resulting from the purchase of securities by the
Company's or the Bank's tax-qualified employee benefit plans and trusts; or (iv)
without limitation, such a Change in Control shall be deemed to have occurred at
such time as (a) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Company representing 20% or more of the Bank's or the Company's
outstanding securities except for any securities of the Bank purchased by the
Company in connection with the initial conversion
A-1
<PAGE> 37
of the Bank from mutual to stock form (the "Conversion") and any securities
purchased by the Company's or the Bank's tax-qualified employee benefit plans
and trusts; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
as though he were a member of the Incumbent Board, but excluding, for this
purpose, any such person whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction occurs in which the
Bank or Company is not the resulting entity; or (d) a proxy statement shall be
distributed soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or Bank or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Company; or (e) a tender offer is made for 20% or
more of the voting securities of the Bank or Company then outstanding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means a committee consisting of two or more members of the
Board, each of whom (i) is not a current employee of the Company or a subsidiary
thereof, (ii) is not a former employee of the Company who receives compensation
for prior services for the Company (other than benefits under a tax-qualified
retirement plan) during the taxable year, (iii) is not currently and has not
been an officer of the Company or a subsidiary thereof, (iv) does not receive
remuneration or consideration from the Company or a subsidiary thereof, either
directly or indirectly, for services rendered in any capacity other than as a
director and (v) does not possess an interest in any other transaction, and is
not engaged in a business relationship, for which disclosure would be required
pursuant to Item 404(a) or (b) of the proxy solicitation rules of the Securities
and Exchange Commission. Each member of the Committee shall be a "non-employee
director" as such term is defined under Rule 16b-3 under the Exchange Act and an
"outside director" as such term is defined under Section 162(m) of the Code and
any regulations thereunder.
(h) "Date of Grant" means the date an Award granted by the Committee is
effective pursuant to the terms hereof.
(i) "Common Stock" means the Common Stock of the Company, par value $.01
per share.
(j) "Disability" means disability as defined in the Bank's Retirement
Plan, or if not so defined, it shall mean a condition of total incapacity,
mental or physical, preventing further performance of duties with the Company or
the Bank, which the Board shall have determined, on the basis of competent
medical evidence, is likely to be permanent.
(k) "Fair Market Value" means, with respect to a share of Common Stock on
a specified date:
(i) the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on
which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange on
which the shares of Common Stock are listed or admitted to trading; or
A-2
<PAGE> 38
(ii) if the shares of Common Stock are not listed or admitted to
trading on any such exchange, the closing bid quotation with respect to a
share of Common Stock on such date on the Nasdaq Stock Market, or, if no
such quotation is provided, on another similar system, selected by the
Committee, then in use; or
(iii) if Sections 2(k)(i) and (ii) are not applicable, the fair
market value of a share of Common Stock as the Committee may determine.
For purposes of the grant of Options in the Conversion, Fair Market Value shall
mean the initial public offering price of the Common Stock.
(l) "Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designed as an Incentive Stock Option pursuant to
Section 8.
(m) "Limited Right" means the right to receive an amount of cash based
upon the terms set forth in Section 9.
(n) "Non-statutory Stock Option" means an Option granted by the Committee
to a Participant, which is not designated by the Committee as an Incentive Stock
Option.
(o) "Option" means an Award granted under Section 7 or Section 8.
(p) "Participant" means an employee of the Company or its Affiliates
chosen by the Committee to participate in the Plan.
(q) "Plan" means the T R Financial Corp. 1993 Incentive Stock Option Plan,
as amended from time to time, and may be referred to as the "T R Financial Corp.
1993 Incentive Stock Option Plan."
(r) "Plan Year(s)" means a calendar year or years commencing on or after
January 1, 1993.
(s) "Retirement" means retirement at the normal or early retirement date
as set forth in the Retirement Plan of Roosevelt Savings Bank in RSI Retirement
Trust, or, if such plan has been terminated, in any other tax-qualified
retirement or pension plan of the Bank.
(t) "Termination for Cause" means the termination upon an intentional
failure to perform stated duties, breach of a fiduciary duty involving personal
dishonesty, which results in material loss to the Company or one of its
Affiliates or willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order which
results in material loss to the Company or one of its Affiliates.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it sees necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it sees as necessary or advisable. All determinations and interpretations made
by the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
4. TYPES OF AWARDS.
Awards under the Plan may be granted in any one or a combination of:
A-3
<PAGE> 39
(a) Non-statutory Stock Options;
(b) Incentive Stock Options; and
(c) Limited Rights
as defined below in paragraphs 7 through 9 of the Plan.
5. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 15, the maximum number of
shares of Common Stock reserved for purchase pursuant to the exercise of Options
granted under the Plan is 1,288,275 shares of Common Stock. These shares of
Common Stock may be either authorized but unissued shares or shares previously
issued and reacquired by the Company. To the extent that Options or Limited
Rights are granted under the Plan, the shares underlying such Options will be
unavailable for future grants under the Plan except that, to the extent that
Options together with any related Limited Rights granted under the Plan
terminate, expire or are cancelled without having been exercised (in the case of
Limited Rights, exercised for cash), new Awards may be made with respect to
these shares.
6. ELIGIBILITY.
Officers and other employees of the Company or its Affiliates shall be
eligible to receive Incentive Stock Options, Non-statutory Stock Options and/or
Limited Rights under the Plan. Directors who are not employees or officers of
the Company or its Affiliates shall not be eligible to receive Awards under the
Plan.
7. NON-STATUTORY STOCK OPTIONS.
7.1 GRANT OF NON-STATUTORY STOCK OPTIONS.
The Committee may, from time to time, grant Non-statutory Stock Options to
eligible employees and, upon such terms and conditions as the Committee may
determine, grant Non-statutory Stock Options in exchange for and upon surrender
of previously granted Awards under this Plan. Non-statutory Stock Options
granted under this Plan are subject to the following terms and conditions:
(a) Price. The exercise price per share of Common Stock which shall
be deliverable upon the exercise of each Non-statutory Stock Option shall
be determined by the Committee on the date the Option is granted. Such
exercise price shall not be less than 100% of the Fair Market Value of the
Company's Common Stock on the Date of Grant. Shares may be purchased only
upon full payment of the exercise price. Non-statutory Stock Options may
be exercised pursuant to a "cashless exercise" of an Option in accordance
with applicable securities laws. Payment of the exercise price may be
made, in whole or in part, through the surrender of shares of the Common
Stock of the Company at the Fair Market Value of such shares on the date
of surrender.
(b) Terms of Options. The term during which each Non-statutory Stock
Option may be exercised shall be determined by the Committee, but in no
event shall a Non-statutory Stock Option be exercisable in whole or in
part more than 10 years from the Date of Grant. The Committee shall
determine the date on which each Non-statutory Stock Option shall become
exercisable and may provide that a Non-statutory Stock Option shall become
exercisable in installments. The shares comprising each installment may be
purchased in whole or in part at any time after such installment becomes
exercisable. The Committee may, in its sole discretion, accelerate the
time at which any Non-statutory Stock Option may be exercised in whole or
in
A-4
<PAGE> 40
part. Notwithstanding the above, in the event of a Change in Control of
the Company, all Non-statutory Stock Options shall become immediately
exercisable.
(c) Termination of Employment. Upon the termination of a
Participant's employment with the Bank or the Company for any reason other
than Disability, Retirement, death, Change in Control or Termination for
Cause, the Participant's Non-statutory Stock Options shall be exercisable
only as to those shares which were immediately purchasable by the
Participant at the date of termination and only for a period of three
months following such termination. In the event of Termination for Cause,
all rights under the Participant's Non-statutory Stock Options shall
expire upon the date of such termination. In the event of the death,
Disability, Change in Control or Retirement of any Participant, all
Non-statutory Stock Options held by the Participant, whether or not
exercisable at such time, shall be exercisable by the Participant or such
Participant's legal representatives or Beneficiaries for one year or such
longer period as determined by the Committee following the date of the
Change in Control or the Participant's death, Retirement or cessation of
employment due to Disability, provided that in no event shall the period
extend beyond the expiration of the Non-statutory Stock Option term.
8. INCENTIVE STOCK OPTIONS.
8.1 GRANT OF INCENTIVE STOCK OPTIONS.
The Committee may, from time to time, grant Incentive Stock Options to
eligible employees. Incentive Stock Options granted pursuant to the Plan shall
be subject to the following terms and conditions:
(a) Price. The exercise price per share of Common Stock deliverable
upon the exercise of each Incentive Stock Option shall be not less than
100% of the Fair Market Value of the Company's Common Stock on the Date of
Grant. However, if at the Date of Grant a Participant owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary corporation (or,
under Section 424(d) of the Code, is deemed to own stock representing more
than 10% of the total combined voting power of all such classes of stock,
by reason of the ownership of such classes of stock, directly or
indirectly, by or for his brothers and sisters (whether by the whole or
half blood), spouse, ancestors and lineal descendants of such employee, or
by or for any corporation, partnership, estate or trust of which such
employee is a shareholder, partner or beneficiary), the exercise price per
share of Common Stock deliverable upon the exercise of each Incentive
Stock Option shall not be less than 110% of the Fair Market Value of the
Company's Common Stock on the Date of Grant. Shares may be purchased only
upon payment of the full exercise price. Incentive Stock Options may be
exercised pursuant to a "cashless exercise" of an Option in accordance
with applicable securities laws. Payment of the exercise price may be
made, in whole or in part, through the surrender of shares of Common Stock
of the Company at the Fair Market Value of such shares on the date of
surrender.
(b) Amounts of Options. Incentive Stock Options may be granted to
any eligible employee in such amounts as determined by the Committee. In
the case of an Option intended to qualify as an Incentive Stock Option,
the aggregate Fair Market Value (determined as of the time the Option is
granted) of the Common Stock with respect to which Incentive Stock Options
granted are exercisable for the first time by the Participant during any
calendar year (under all plans of the Participant's employer corporation
and its parent and subsidiary corporations) shall not exceed $100,000. The
provisions of this Section 8.1(b) shall be construed and applied in
accordance with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder. To the extent an Award under this Section 8.1
exceeds this $100,000 limit, the portion of the Award in excess of such
limit shall be deemed a Non-statutory Stock Option.
A-5
<PAGE> 41
(c) Terms of Options. The term during which each Incentive Stock
Option may be exercised shall be determined by the Committee, but in no
event shall an Incentive Stock Option be exercisable in whole or in part
more than 10 years from the Date of Grant. If at the time an Incentive
Stock Option is granted to an employee, the employee owns stock
representing more than 10% of the total combined voting power of the
Company or of its parent or subsidiary corporation (or, under Section
424(d) of the Code, is deemed to own stock representing more than 10% of
the total combined voting power of all such classes of stock, by reason of
the ownership of such classes of stock, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors and lineal descendants of such employee, or by or for any
corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), the Incentive Stock Option granted
to such employee shall not be exercisable after the expiration of five
years from the Date of Grant. No Incentive Stock Option granted under this
Plan is transferable except by will or the laws of descent and
distribution and is exercisable in his lifetime only by the employee to
whom it is granted.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock
Option shall become exercisable in installments. The shares comprising
each installment may be purchased in whole or in part at any time after
such installment becomes purchasable, provided that the amount able to be
first exercised in a given year is consistent with the terms of Section
422 of the Code. The Committee may, in its sole discretion, accelerate the
time at which any Incentive Stock Option may be exercised in whole or in
part, provided that it is consistent with the terms of Section 422 of the
Code. Notwithstanding the above, in the event of a Change in Control of
the Company, all Incentive Stock Options shall become immediately
exercisable.
(d) Termination of Employment. Upon the termination of a
Participant's employment with the Company or the Bank for any reason other
than Disability, Retirement, Change in Control, death or Termination for
Cause, the Participant's Incentive Stock Options shall be exercisable only
as to those shares which were immediately purchasable by the Participant
at the date of such termination and only for a period of three months
following such termination. In the event of Termination for Cause, all
rights under the Participant's Incentive Stock Options shall expire upon
such termination. In the event of death or Disability of any employee, all
Incentive Stock Options held by such Participant, whether or not
exercisable at such time, shall be exercisable by the Participant or the
Participant's legal representatives or Beneficiaries for one year
following the date of the Participant's death or cessation of employment
due to Disability. Upon termination of the Participant's service with the
Company due to Retirement or a Change in Control, all Incentive Stock
Options held by such Participant, whether or not exercisable at such time,
shall be exercisable for a period of one year following the date of
Participant's cessation of employment; provided, however, that such Option
shall not be eligible for treatment as an Incentive Stock Option in the
event such Option is exercised more than three months following the date
of the Participant's Retirement. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term.
(e) Compliance with Code. The Options granted under this Section 8
of the Plan are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, but the Company makes no warranty as
to the qualification of any Option as an incentive stock option within the
meaning of Section 422 of the Code.
A-6
<PAGE> 42
9. LIMITED RIGHTS.
9.1 GRANT OF LIMITED RIGHTS.
Simultaneously with the grant of any Option, the Committee may grant a
Limited Right with respect to all or some of the shares covered by such Option.
Limited Rights granted under this Plan are subject to the following terms and
conditions:
(a) Terms of Rights. In no event shall a Limited Right be
exercisable in whole or in part before the expiration of six months from
the Date of Grant of the Limited Right. A Limited Right may be exercised
only in the event of a Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option
is eligible to be exercised, and only when the Fair Market Value of the
underlying shares on the day of exercise is greater than the exercise
price of the related Option.
Upon exercise of a Limited Right, the related Option shall cease to
be exercisable. Upon exercise or termination of an Option, any related
Limited Rights shall terminate. The Limited Rights may be for no more than
100% of the difference between the exercise price and the Fair Market
Value of the Common Stock subject to the underlying Option. The Limited
Right is transferable only when the underlying Option is transferable and
under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall
promptly receive from the Company an amount of cash equal to the
difference between the Fair Market Value on the Date of Grant of the
related Option and the Fair Market Value of the underlying shares on the
date the Limited Right is exercised, multiplied by the number of shares
with respect to which such Limited Right is being exercised.
(c) Termination of Employment. Upon the termination of a
Participant's service for any reason other than Termination for Cause, any
Limited Rights held by the Participant shall then be exercisable for a
period of one year following termination. In the event of Termination for
Cause, all Limited Rights held by the Participant shall expire
immediately. Upon termination of the Participant's employment for reason
of death, Retirement or Disability, all Limited Rights held by such
Participant shall be exercisable by the Participant or the Participant's
legal representative or Beneficiaries for a period of one year from the
date of such termination. In no event shall the period extend beyond the
expiration of the term of the related Option.
10. SURRENDER OF OPTIONS.
In the event of a Participant's termination of employment as a result of
death, Disability or Retirement, the Participant (or the Participant's
Beneficiaries, personal representative(s), heir(s), or devisee(s)) may, in a
form acceptable to the Committee make application to surrender all or part of
the Options held by such Participant in exchange for a cash payment from the
Company of an amount equal to the difference between the Fair Market Value of
the Common Stock on the date of termination of employment and the exercise price
per share of the Option on the Date of Grant; provided, however, that in the
event of Retirement, the application must be submitted by the Participant within
a "window period" beginning on the third business day following the date of
release of the Company's quarterly and annual earnings statements and ending on
the twelfth business day following such date. Whether the Committee accepts such
application or determines to make payment, in whole or part, is within its
absolute and sole discretion, it being expressly understood that the Committee
is under no obligation to any Participant whatsoever to make such payments. In
the event that the Committee accepts such application and the Company determines
to make payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
A-7
<PAGE> 43
11. MAXIMUM LIMITATION ON OPTIONS
Notwithstanding anything contained herein to the contrary, the maximum
number of shares of Common Stock for which Options may be granted to any
Participant during any Plan Year shall not exceed 100,000 shares of Common
Stock.
12. RIGHTS OF A STOCKHOLDER: NONTRANSFERABILITY.
No Participant shall have any rights as a stockholder with respect to any
shares covered by a Non-statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employment
of the Company or its Affiliates or to continue to perform services for the
Company or its Affiliates or interferes in any way with the right of the Company
or its Affiliates to terminate a Participant's services as an officer or other
employee at any time.
No Award under the Plan shall be transferable by the optionee other than
by will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative.
13. AGREEMENT WITH GRANTEES.
Each Award of Options, and/or Limited Rights will be evidenced by a
written agreement, executed by the Participant and the Company or its Affiliates
which describes the conditions for receiving the Awards including the date of
Award, the exercise price, if any, applicable periods, and any other terms and
conditions as may be required by the Board of Directors or applicable securities
law.
14. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee, designate a person
or persons to receive, in the event of death, any Option or Limited Rights Award
to which the Participant would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Company and may be revoked in
writing. If a Participant fails effectively to designate a Beneficiary, then the
Participant's estate will be deemed to be the Beneficiary.
15. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, the Committee will
make such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common
Stock which may be Awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common
Stock covered by Awards already made under the Plan; or
(c) adjustments in the exercise price of outstanding Incentive
and/or Non-statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of
benefits available to a Participant under a previously granted Award.
A-8
<PAGE> 44
16. WITHHOLDING.
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the amount of tax required by any governmental authority to be
withheld.
17. AMENDMENT OF THE PLAN.
The Board of Directors may amend, revise or terminate the Plan in whole or
in part at any time; provided, however, that, to the extent required to comply
with Section 162(m) of the Code, no such amendment or revision shall be
effective if it amends a material term of the Plan unless approved by the
holders of a majority of the voting shares of the Company. No such termination,
modification or amendment may affect the rights of a Participant under an
outstanding Award.
18. EFFECTIVE DATE OF PLAN.
The Plan became effective upon the consummation of the Conversion of the
Bank on June 29, 1993 (the "Effective Date") and was approved by the
stockholders of the Company on December 13, 1993. The Plan was amended and
restated as of January 23, 1997 as provided herein, and as so amended and
restated, is effective as of January 23, 1997. Following such date, the Plan, as
amended and restated, will be presented to the stockholders of the Company at
its next annual meeting of stockholders for approval for purposes of: (i)
satisfying one of the requirements of Section 422 of the Code governing the tax
treatment for Incentive Stock Options; (ii) satisfying one of the requirements
of Section 162(m) of the Code governing the tax deductibility of certain amounts
upon the exercise of certain Non-statutory Stock Options and Limited Rights; and
(iii) maintaining listing on the Nasdaq Stock Market. The failure to obtain
stockholder approval of the Plan, as amended and restated, will not affect the
validity of the Plan prior to its amendment and restatement, or any Options
granted thereunder, and in such event, the Plan as in effect prior to such
amendment and restatement, and any Options granted thereunder, shall continue in
full force and effect.
19. TERMINATION OF THE PLAN.
The right to grant Awards under the Plan will terminate upon the earlier
of 10 years after the Effective Date of the Plan or the issuance of Common Stock
or the exercise of Options or related Limited Rights equivalent to the maximum
number of shares reserved under the Plan as set forth in Section 5. The Board of
Directors has the right to suspend or terminate the Plan at any time, provided
that no such action will, without the consent of a Participant, adversely affect
such Participant's rights under a previously granted Award.
20. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the State of
Delaware.
21. HEADINGS.
The headings of sections are included solely for convenience of reference.
If there is any conflict between such headings and the text of the Plan, the
text shall control.
A-9
<PAGE> 45
APPENDIX B
ROOSEVELT SAVINGS BANK
PERFORMANCE COMPENSATION PLAN
-------------------------
ADOPTED JANUARY 23, 1997
<PAGE> 46
ROOSEVELT SAVINGS BANK
PERFORMANCE COMPENSATION PLAN
1. PURPOSE. The purpose of the Roosevelt Savings Bank Performance
Compensation Plan (the "Plan") is to promote the growth and profitability of the
Bank, to provide certain key officers of the Bank and its Affiliates with an
incentive to achieve business objectives, to attract and retain individuals of
outstanding competence and to provide a means of compensating such individuals
for their contributions to the Bank in a manner which permits such compensation
to be deductible by the Bank for federal income tax purposes.
2. DEFINITIONS.
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
(a) "Affiliate" means (i) a member of a controlled group of corporations
of which the Bank is a member or (ii) an unincorporated trade or business which
is under common control with the Bank as determined in accordance with Section
414(c) of the Code and the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled group of corporations
as defined in Section 1563(a) of the Code determined without regard to Sections
1563(a)(4) and (e)(3)(C).
(b) "Bank" means Roosevelt Savings Bank and any successor thereto.
(c) "Board" means the board of directors of the Company.
(d) "Change in Control" means an event of a nature that: (i) would be
required to be reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) results
in a Change in Control of the Bank or the Company within the meaning of the
Change in Bank Control Act and the Rules and Regulations promulgated by the
Federal Deposit Insurance Corporation (the "FDIC") at 12 C.F.R. Section 303.4(a)
with respect to the Bank and the Board of Governors of the Federal Reserve
System ("FRB") at 12 C.F.R. Section 225.41(b) with respect to the Company, as in
effect on the date hereof, but excluding any such Change in Control resulting
from the purchase of securities by the Company's or the Bank's tax-qualified
employee benefit plans and trusts; (iii) results in a transaction requiring
prior FRB approval under the Bank Holding Company Act of 1956, as amended, and
the regulations promulgated thereunder by the FRB at 12 C.F.R. Section 225.11,
as in effect on the date hereof, except for the Company's acquisition of the
Bank and any transaction resulting from the purchase of securities by the
Company's or the Bank's tax-qualified employee benefit plans and trusts; or (iv)
without limitation, such a Change in Control shall be deemed to have occurred at
such time as (a) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Company representing 20% or more of the Bank's or the Company's
outstanding securities except for any securities of the Bank purchased by the
Company in connection with the initial conversion of the Bank from mutual to
stock form (the "Conversion") and any securities purchased by the Company's or
the Bank's tax-qualified employee benefit plans and trusts; or (b) individuals
who constitute the Board on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board, but excluding, for this purpose, any such person whose
initial assumption of office occurs as a result of an actual or threatened
election
B-1
<PAGE> 47
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board; or (c) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Company or similar
transaction occurs in which the Bank or Company is not the resulting entity; or
(d) a proxy statement shall be distributed soliciting proxies from stockholders
of the Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or Bank or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Bank or the
Company; or (e) a tender offer is made for 20% or more of the voting securities
of the Bank or Company then outstanding.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Committee described in Section 4.
(g) "Company" means T R Financial Corp. and any successor thereto.
(h) "Disability" means a condition of total incapacity, mental or
physical, preventing further performance of duty with the Company or the Bank
which the Committee shall have determined, on the basis of competent medical
evidence, is likely to be permanent.
(i) "Disinterested Board Member" means a member of the Board who (i) is
not a current employee of the Company or a subsidiary thereof, (ii) is not a
former employee of the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the taxable
year, (iii) is not currently and has not been an officer of the Company or a
subsidiary thereof, (iv) does not receive consideration or remuneration from the
Company or any subsidiary thereof, either directly or indirectly, in any
capacity other than as a director and (v) does not possess an interest in any
other transaction, and is not engaged in a business relationship, for which
disclosure would be required pursuant to Item 404(a) or (b) of the proxy
solicitation rules of the Securities and Exchange Commission. A Disinterested
Board Member shall be an "outside director" as such term is defined under
Section 162(m) of the Code.
(j) "Effective Date" means January 1, 1997, subject to the approval of
this Plan by the stockholders of the Company.
(k) "Eligible Employee" means an employee of the Bank or the Company whom
the Committee selects to be eligible to receive a Performance Award pursuant to
the Plan.
(l) "Employer" means the Company, the Bank, any Affiliates, and, with the
prior approval of the Board and subject to such terms and conditions as may be
imposed by the Board, any other corporation or other business organization or
institution.
(m) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(n) "Performance Award" means the amount awarded under Section 6.
(o) "Performance Goal" means the preestablished, objective performance
goal or goals described in Section 5(a).
(p) "Plan" means the Roosevelt Savings Bank Performance Compensation Plan,
as amended from time to time, and may be referred to as the "Roosevelt Savings
Bank Performance Compensation Plan."
B-2
<PAGE> 48
(q) "Plan Year" means the calendar year.
(r) "Share" means a share of common stock, par value $.01 per share, of T
R Financial Corp.
3. ELIGIBILITY.
An individual who is a key employee of the Employer or any of its
subsidiaries shall be eligible to be considered for a Performance Award under
this Plan. No later than 90 days (or such other period prescribed under Section
162(m) of the Code and the regulations thereunder) after the beginning of each
Plan Year, the Committee shall determine which individuals shall be Eligible
Employees for such Plan Year. An individual who is an Eligible Employee in one
Plan Year may be excluded from participation in a subsequent year at the
discretion of the Committee.
4. ADMINISTRATION.
(a) COMMITTEE. The Plan shall be administered by the members of the
Compensation Committee of the Bank, which shall consist of two or more
Disinterested Board Members. If the Committee consists of fewer than two
Disinterested Board Members, the Board shall appoint to the Committee such
additional Disinterested Board Members as shall be necessary to provide for a
Committee consisting of at least two Disinterested Board Members.
(b) COMMITTEE ACTION. The Committee shall hold such meetings, and may make
such administrative rules and regulations, as it may deem proper. A majority of
the members of the Committee shall constitute a quorum, and the action of a
majority of the members of the Committee present at a meeting at which a quorum
is present, as well as actions taken pursuant to the unanimous written consent
of all of the members of the Committee without holding a meeting, shall be
deemed to be actions of the Committee. All actions of the Committee shall be
final and conclusive and shall be binding upon the Employer and all other
interested parties. Any person dealing with the Committee shall be fully
protected in relying upon any written notice, instruction, direction or other
communication signed by two members of the Committee or by a representative of
the Committee authorized to sign the same in its behalf.
(c) COMMITTEE RESPONSIBILITIES. Subject to the terms and conditions of the
Plan and such limitations as may be imposed from time to time by the Board, the
Committee shall be responsible for the overall management and administration of
the Plan and shall have such authority as shall be necessary or appropriate in
order to carry out its responsibilities, including, without limitation, the
authority:
(i) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for
participation in the Plan;
(ii) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(iii) to take any other action not inconsistent with the provisions
of the Plan that it may deem necessary or appropriate.
5. PERFORMANCE GOALS.
(a) PERFORMANCE GOALS. The Committee shall establish, during the first 90
days of each Plan Year (or such other period specified in Section 162(m) of the
Code and any regulations thereunder), a Performance Goal or Performance Goals
for each Eligible Employee. The Performance Goals established by the Committee
for the 1997 Plan Year shall be based on the consolidated pre-tax income of the
Company for 1997, including any adjustments to such consolidated pre-tax income
as the
B-3
<PAGE> 49
Committee deems necessary or appropriate; provided, however, that any such
adjustments thereto shall comply with the requirements of Section 162(m) of the
Code and any regulations thereunder. In Plan Years after 1997, the Performance
Goals established by the Committee may be based upon one or more of (i) the
consolidated pre-tax income of the Company for such Plan Year, (ii) the return
on equity or average equity of the Company for a specified period determined by
the Committee and (iii) any adjustments to such factors as the Committee deems
necessary or appropriate; provided, however, that such factors and any
adjustments thereto shall comply with the requirements of Section 162(m) of the
Code and any regulations thereunder.
(b) ADJUSTMENT OF PERFORMANCE GOALS. Once established, the Performance
Goals for a particular Plan Year shall not be changed or adjusted during such
Plan Year, unless the Committee determines that such Performance Goal shall be
adjusted to decrease or eliminate the amount of an Eligible Employee's
Performance Award due to external changes or other unanticipated business
conditions; provided, however, that any such change or adjustment shall comply
with the requirements of Section 162(m) of the Code and any regulations
thereunder.
6. PERFORMANCE AWARDS.
An Eligible Employee shall be entitled to receive a Performance Award
pursuant to this Plan to the extent that the preestablished Performance Goal
determined by the Committee, or the applicable percentage thereof, is satisfied.
No Performance Award to an Eligible Employee may exceed the lesser of (a) 175%
of such Eligible Employee's base salary for such Plan Year or (b) $1,750,000.
7. PAYMENT OF PERFORMANCE AWARDS.
(a) PAYMENT OF AWARDS. As soon as practicable following the last day of
each Plan Year, provided that the Performance Goal established for an Eligible
Employee has been met, the Committee shall certify in writing that such
Performance Goal has been met and the amount of the Performance Award to be
granted to such Eligible Employee under the Plan. Such Performance Award shall
be paid in the form and manner determined by the Committee, as soon as
practicable after the Committee determines the amount of such Performance Award.
(b) TERMINATION OF SERVICE. An Eligible Employee who terminates employment
with the Employer during any Plan Year or following the end of any Plan Year,
but prior to the payment of a Performance Award earned for such Plan Year, shall
forfeit any right to receive such Performance Award; provided, however, that if
such termination occurs after the end of the Plan Year to which the Performance
Award relates and such termination is due to death, Disability, Retirement or a
Change in Control, then, in such case and only in such case, such Performance
Award shall not be forfeited and shall be paid as if no termination of service
had occurred. Each such Performance Award shall be paid in the form and manner
determined by the Committee, as soon as practicable after the Committee
determines the amount of such Performance Award. In the event of a termination
of employment with the Employer due to a Change in Control, such Performance
Award shall be paid on the date of the Change in Control.
8. AMENDMENT AND TERMINATION.
(a) TERMINATION. The Board may suspend or terminate the Plan in whole or
in part at any time by giving written notice of such suspension or termination
to the Committee.
(b) AMENDMENT. The Board may amend or revise the Plan in whole or in part
at any time; provided, however, that, to the extent required to comply with
Section 162(m) of the Code and any regulations thereunder, no such amendment or
revision shall be effective if it amends a material term of the Plan unless
approved by the affirmative vote of a majority of the votes cast by the
stockholders of the Company at a meeting duly called and held for such purpose.
B-4
<PAGE> 50
9. MISCELLANEOUS.
(a) STATUS AS AN EMPLOYEE BENEFIT PLAN. This Plan is not intended to
satisfy the requirements for qualification under section 401(a) of the Code or
to satisfy the definitional requirements for an "employee benefit plan" under
section 3(3) of ERISA. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of ERISA.
The Plan shall be construed and administered so as to effectuate this intent.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the establishment of the
Plan nor any provisions of the Plan nor any action of the Board or the Committee
with respect to the Plan shall be held or construed to confer upon any Eligible
Employee any right to a continuation of his or her position as an employee of
the Employer. The Employer reserves the right to dismiss any Eligible Employee
or otherwise deal with any Eligible Employee to the same extent as though the
Plan had not been adopted.
(c) CONSTRUCTION OF LANGUAGE. Whenever appropriate in the Plan, words used
in the singular may be read in the plural, words used in the plural may be read
in the singular, and words importing the masculine gender may be read as
referring equally to the feminine or the neuter. Any reference to a section
number shall refer to a section of this Plan unless otherwise indicated.
(d) GOVERNING LAW. The Plan shall be construed, administered and enforced
according to the laws of the State of New York without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law.
(e) HEADINGS. The headings of sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.
(f) NON-ALIENATION OF BENEFITS. The right to receive a benefit under the
Plan shall not be subject in any manner to anticipation, alienation or
assignment, nor shall such right be liable for or subject to debts, contracts,
liabilities, engagements or torts.
(g) TAXES. The Employer shall have the right to deduct from all amounts
paid by the Employer as a Performance Award under the Plan any taxes required by
law to be withheld with respect to such award.
(h) REQUIRED APPROVALS. The Plan shall not be effective or implemented
unless approved by the affirmative vote of a majority of the votes cast by the
stockholders of the Company at a meeting duly called and held for such purpose.
B-5
