| Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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On December 21, 2022, ECB Bancorp, Inc. (the “Company”), the holding company for Everett Co-operative Bank (the “Bank”) and the Bank, entered
into an employment agreement with Richard J. O’Neil, Jr., the President and Chief Executive Officer of the Company the Bank. On December 21, 2022, the Bank also entered into change in control agreements with John Citrano, Executive Vice President,
Chief Operating Officer and Chief Financial Officer of the Company and the Bank, and John A. Migliozzi, Executive Vice President and Chief Lending Officer of the Bank. The Company is also a party to the change in control agreements solely for
purposes of guaranteeing the performance of the Bank thereunder.
On January 3, 2022, the Bank entered into a confidentiality and non-solicitation agreement with Mr. Migliozzi in connection with his offer of
employment with the Bank.
The Company, the Bank and Mr. O’Neil entered into an employment agreement on December 21, 2022. The employment agreement has an initial term of three years. Commencing on December 21, 2023 and continuing each December 21st thereafter, the term of the employment agreement extends for an additional year, so that the term again becomes three years. Prior to the renewal of the term of the employment agreement, the disinterested members of the Boards
of Directors of the Company and the Bank (collectively the “Board”) must conduct a comprehensive performance evaluation of Mr. O’Neil and affirmatively approve any extension of the agreement for an additional year or determine not to extend the
term of the agreement. If the Board determines not to extend the term, it must notify Mr. O’Neil at least 30 days, but not more than 60 days, prior to the applicable renewal date. If a change in control occurs during the term of the employment
agreement, the term of the employment agreement will automatically renew for two years from the effective date of the change in control.
The employment agreement provides Mr. O’Neil with an annual base salary of $425,000. The Board will review Mr. O’Neil’s base salary at least
annually and the base salary may be increased, but not decreased during the term of the employment agreement. In addition to receiving a base salary, Mr. O’Neil is eligible to participate in any bonus programs and benefit plans that are made
available to other Bank and Company senior executives. The employment agreement also provides that Mr. O’Neil will receive a monthly automobile allowance of $1,000 and is eligible for the reimbursement of all reasonable business expenses incurred in
performing his duties as President and Chief Executive Officer of the Bank and the Company.
Under the terms of the employment agreement, in the event Mr. O’Neil voluntarily terminates employment with the Company and the Bank without
“good reason,” Mr. O’Neil will be entitled to receive the sum of: (i) his earned and unpaid salary as of his termination date and (ii) his earned and unpaid annual bonus and long-term incentive compensation as of his termination date (his “Accrued
Obligations”).
In the event Mr. O’Neil’s employment involuntary terminates for reasons other than cause, disability, or death, or in the event of his
resignation for “good reason,” in either event other than in connection with a change in control, Mr. O’Neil is entitled to his Accrued Obligations and his base salary for
the remaining term of the employment agreement. In addition, Mr. O’Neil is entitled to continued coverage under the Bank’s health insurance plans (to the extent
permitted by the plans and law) until the earlier of 18 months following his termination date or his procurement of health insurance coverage under another plan.
In the event Mr. O’Neil’s employment involuntary terminates for reasons other than cause, disability, or death, or in the event of Mr.
O’Neil’s resignation for “good reason,” in either case within 24 months following a change in control, Mr. O’Neil will receive his Accrued Obligations, along with a single lump sum payment equal to three (3) times the sum of his base salary and
average cash bonus earned during the three years preceding the change in control. In addition, Mr. O’Neil will be provided with continued coverage under the Bank’s health insurance plans (to the extent permitted by the plans and law) until the earlier of 18 months following his termination date or the procurement of
health insurance coverage under another plan. In the event continued coverage is not permitted under plans or by law, Mr. O’Neil will receive a lump sum cash payment equal to the total cost of Consolidated Omnibus Budget Reconciliation Act (COBRA)
coverage for 18 months following his termination date.
The employment agreement includes a “best net benefits” provision if the change in control severance benefits under the employment agreement
or otherwise result in “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). The best net benefits approach would reduce Mr. O’Neil’s payments and benefits, if necessary, to avoid triggering an
excise tax if the reduction would result in a greater after-tax amount paid to him than compared to the payments and benefits he would receive net of the excise tax if no reduction were made to the payment and benefits.
For purposes of the employment agreement, “good reason” includes (i) a change in the nature, scope or status of Mr. O’Neil’s positions,
authority or duties, (ii) a material reduction in his compensation or benefits (other than one that is part of an overall adjustment in benefits for all employees), (iii) a relocation of his principal place of employment by more than 25 miles from
the Bank’s main office location; (iv) the failure of an acquiror to assume the employment agreement at the time of a change in control or (v) a material breach of the employment agreement by the Company or the Bank.
Should Mr. O’Neil become disabled during the term of the employment agreement, he will be entitled to his Accrued Obligations plus disability
benefits, if any, provided under a long-term disability plan sponsored by the Bank. In the event Mr. O’Neil dies while employed by the Bank, his beneficiaries will receive his Accrued Obligations plus any benefit payable under the group-term life
insurance program sponsored by the Bank.
Upon any separation from service that would entitle Mr. O’Neil to a severance payment under the terms of the employment agreement, Mr. O’Neil
will be required to adhere to one-year non-competition and non-solicitation covenants.
The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by reference to the
employment agreement attached hereto as Exhibit 10.1.
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B.
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Change in Control Agreements
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The Bank entered into a change in control agreement with Mr. Citrano and Mr. Migliozzi on December 21, 2022. The Company is also a party to
the change in control agreements solely for purposes of guaranteeing the performance of the Bank. The change in control agreement with Mr. Citrano has an initial term of three years and the change in control agreement with Mr. Migliozzi has an
initial term of two years. Commencing on December 21, 2023 and continuing each December 21st thereafter, the term of the change in control agreements with Messrs. Citrano
and Migliozzi will extend for an additional year, so that the term again becomes three years for Mr. Citrano and two years for Mr. Migliozzi. Prior to the renewal of the term of the change in control agreements, the Chief Executive Officer of the
Bank must conduct a comprehensive performance evaluation of the executives and the Board of Directors must approve any extension of the term of the change in control agreements or determine not to extend the term of the agreements.
In the event either executive’s employment involuntary terminates for reasons other than cause, or in the event of the executive’s
resignation for “good reason,” (which is defined in the same manner as the term is defined in Mr. O’Neil’s employment agreement), in either event within 24 months following a change in control, the executive will receive his Accrued Obligations and a
single lump sum cash payment, equal to two and one-half times the sum of his base salary and average bonus earned during the three years preceding the change in control for Mr. Citrano, and two times the sum of his base salary and average bonus
earned during the three years preceding the change in control for Mr. Migliozzi. In addition, the executives will be provided with continued coverage under the Bank’s health
insurance plans (to the extent permitted by the plans and law) in which they were participating as of their termination date, until the earlier of 18 months following the termination date or the procurement of health insurance coverage under
another plan. In the event continued coverage is not permitted under plans or by law, the executives will receive a lump sum cash payment equal to the total cost of COBRA coverage for 18 months following the termination date.
The change in control agreements include a “best net benefits” provision if the change in control severance benefits under the change in
control agreement or otherwise result in “excess parachute payments” under Section 280G of the Code. The best net benefits approach would reduce the executive’s payments and benefits, if necessary, to avoid triggering an excise tax if the reduction
would result in a greater after-tax amount paid compared to the payments and benefits an executive would receive net of the excise tax if no reduction were made to the payment and benefits.
The foregoing description of the change in control agreements does not purport to be complete and is qualified in its entirety by reference
to the change in control agreements attached hereto as Exhibits 10.2 and 10.3.
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C.
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Confidentiality and Non-Solicitation Agreement
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The Bank entered into a confidentiality and non-solicitation agreement with Mr. Migliozzi on January 3, 2022. Pursuant to the confidentiality
and non-solicitation agreement, Mr. Migliozzi is prohibited, with limited exceptions, from disclosing to third-parties information deemed confidential under the agreement which is provided to him by the Bank or derived by him from his employment at
the Bank. Under the agreement, generally, during his employment with the Bank and for a period of twelve months following his termination of employment with the Bank, regardless of the reason for such termination, Mr. Migliozzi is prohibited from
directly or indirectly soliciting or inducing the hiring by a third-party of an employee, consultant or independent contractor of the Bank. The agreement also prohibits, with limited exceptions, for a period of twelve months from the date of his
termination from employment with the Bank, Mr. Migliozzi from soliciting, interfering with, or trying to entice away from the Bank, any relationship between the Bank and a current or prospective customer of the Bank.
The foregoing description of the confidentiality and non-solicitation agreement does not purport to be complete and is qualified in its
entirety by reference to the confidentiality and non-solicitation agreement attached hereto as Exhibits 10.4.