Exhibit 10.1
FORM OF
THE FIRST NATIONAL BANK OF LITCHFIELD
FIRST AMENDED AND RESTATED
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
THIS FIRST AMENDMENT AND RESTATEMENT to the EXECUTIVE INCENTIVE
RETIREMENT AGREEMENT dated the __th day of __________, 200_ (this "Agreement")
is made this 20th day of November, 2008 by and between The First National Bank
of Litchfield, a national bank, located in Litchfield, Connecticut, (the
"Company"), and _________________ (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide to the Executive a deferred incentive opportunity.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Base Salary" means the total annual base salary payable
to the Executive at the rate in effect on the date specified. Base
Salary shall not be reduced for any salary reduction contributions: (i)
to cash or deferred arrangements under Section 401(k) of the Code; (ii)
to a cafeteria plan under Section 125 of the Code; or (iii) to a
deferred compensation plan that is not qualified under Section 401(a)
of the Code.
1.1.2 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.3 "Deferral Account" means the Company's accounting of the
Executive's accumulated Deferrals plus accrued interest.
1.1.4 "Disability" means the Executive is (i) unable to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of
not less than twelve (12) months or (ii) receiving income replacement
benefits for a period of not less than three (3) months under an
accident and health plan covering the employees of the Bank by reason
of any medically determinable physical or mental impairment which can
be expected to result in death or last for a continuous period of at
least twelve (12) months. As a condition to any benefits, the
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Company may require the Executive to submit to such physical or mental
evaluations and tests as the Board of Directors deems appropriate. The
Executive will be deemed disabled if determined to be totally disabled
by the Social Security Administration.
1.1.5 "Early Retirement Age" means the Executive's 55th
birthday, provided he has completed at least 20 Years of Service.
1.1.6 "Early Retirement Date" means the date that the
Executive has terminated employment after attaining his 55th birthday
but before his 65th birthday provided he has completed at least 20
Years of Service.
1.1.7 "Earnings" means the Company's reported Net Income after
taxes.
1.1.8 "Earnings Growth" means the percentage change in the
Company's Earnings over a one-year period, measured on December 31 of
each year.
1.1.9 "Effective Date" means ___________, 200_.
1.1.10 "Election Form" means the Form attached as Exhibit 1.
The Election Form must be completed at the time of signing of this
Agreement and may not be amended with respect to any deferrals for any
Plan Year unless such amended Election Form is received by June 30 of
the Plan Year; if not received by such date, the amended Election Form
will be effective with respect to deferrals for the Plan Year
commencing after the date the instructions are received by the Company.
1.1.11 "Extraordinary Items" means those items recognized by
Generally Accepted Accounting Principles as extraordinary that
substantially affect shareholder equity and/or the Company's assets.
Examples of such items are stock redemptions, mergers, acquisitions,
stock splits and other items of that nature.
1.1.12 "Return On Equity" means the Company's Earnings,
adjusted for Extraordinary Items, divided by the Company's common stock
equity at the end of the same fiscal year.
1.1.13 "Normal Retirement Age" means the Executive's 65th
birthday.
1.1.14 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.15 "Plan Year" means the calendar year. The initial Plan
Year shall be a short Plan Year commencing on the Effective Date and
ending on December 31 of the same year.
1.1.16 "Growth of Stock Rate" means the percentage change in
the First Litchfield Financial Corporation's fair market value common
stock price ("Stock Price") over a one year period, measured on
December 31 of each year, with a guaranteed minimum of 4% and a maximum
of 15%, cumulatively.
1.1.17 "Termination of Employment" means the Executive ceasing
to be employed by the Company for any reason whatsoever, voluntary or
involuntary, other than by reason of an approved leave of absence.
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1.1.18 "Unforeseeable Emergency" means a severe financial
hardship to the participant resulting from an illness or accident of
the Executive, the Executive's spouse or a dependent of the Executive,
loss of the Executive's property due to casualty, or similar
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Executive, as limited by Section
409A(a)(1)(B)(ii)(II) of the Code and Treasury Regulation ss.409A-3
under Section 409A of the Code.
1.1.19 "Years of Service" means the total number of
twelve-month periods during which the Executive is employed on a
full-time basis by the Company, inclusive of any approved leave of
absence.
Article 2
Incentive
2.1 Incentive Award. The three (3) year rolling average of Earnings
Growth and Return On Equity (the "▇▇▇") determined as of December 31 of each
plan year shall determine the Executive's Incentive Award Percentage, in
accordance with the attached Schedule A. The chart on Schedule A is specifically
subject to change annually at the sole discretion of the Company's Board of
Directors. The Incentive Award is calculated annually by taking the Executive's
Base Salary for the Plan Year in which the ▇▇▇ was calculated times the
Incentive Award Percentage.
2.2 Incentive Deferral. On March 1 following each Plan Year, the
Company shall declare and pay the Incentive Award in the form of compensation
and the Executive shall defer such amount to the Deferral Account.
Article 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a Deferral
Account on its books for the Executive, and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Incentive Deferral as determined under
Article 2.
3.1.2 Interest. On March 1 following each Plan Year and
immediately prior to the payment of any benefits, interest on the
account balance since the preceding credit under this Section 3.1.2, at
an annual rate, compounded monthly, equal to the Growth of Stock Rate
for the same period.
3.2 Statement of Accounts. The Company shall provide to the Executive,
within one hundred twenty (120) days after each Plan Year, a statement setting
forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Executive is a general unsecured creditor of the
Company for the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Executive's rights are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by the Executive's creditors.
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3.4 Hardship. If an Unforeseeable Emergency occurs, the Executive, by
written instructions to the Company, may elect to reduce future deferrals under
this Agreement with respect to Incentive Awards for the current Plan Year if
such instructions are received by June 30 of the Plan Year, or if not received
by such date, the Plan Year commencing after the date the instructions are
received by the Company.
Article 4
Lifetime Benefits
4.1 Normal Retirement Benefit. If there is a Termination of Employment
of the Executive on or after the Executive's Normal Retirement Age for reasons
other than death, the Company shall pay to the Executive the benefit described
in this Section 4.1 in lieu of any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is
the Deferral Account balance on the Executive's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to
the Executive commencing on the first day of the seventh month
following the Executive's Termination of Employment following the
Executive's Normal Retirement Date in the form elected by the Executive
on the Election Form. If the Executive elects to receive payments in
equal monthly installments, the Company shall continue to credit
interest on the remaining account balance during any applicable
installment period fixed at the rate in effect under Section 3.1.2 on
the date of the Executive's Termination of Employment.
4.2 Early Retirement Benefit. If there is a Termination of Employment
of the Executive on or after the Early Retirement Age and before the Normal
Retirement Age, and for reasons other than death or Disability, the Company
shall pay to the Executive the benefit described in this Section 4.2 in lieu of
any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is
the Deferral Account balance on the Executive's Early Retirement Date.
4.2.2 Payment of Benefit. The Company shall pay the benefit to
the Executive in the form and on the date no earlier than the date
which is six (6) months after Termination of Employment elected by the
Executive on the Election Form. If the Executive elects the Deferred
Payment Option or to receive payments in equal monthly installments,
the Company shall continue to credit interest on the remaining account
balance during any applicable installment period fixed at the rate in
effect under Section 3.1.2 on the date of the Executive's Termination
of Employment.
4.3 Early Termination Benefit. If there is a Termination of Employment
of the Executive before the Early Retirement Age or Normal Retirement Age for
reasons other than death or Disability, the Company shall pay to the Executive
the benefit described in this Section 4.3 in lieu of any other benefits under
this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is
the vested portion of the Deferral Account balance on the Executive's
Termination of Employment.
4.3.2 Vesting of Awards. For purposes of this Section 4.3,
Incentive Awards will vest 20%
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per year from the date the award was declared. The interest credited to
each Incentive Award will also vest 20% per year from the date the
award was declared.
4.3.3 Payment of Benefit. The Company shall pay the benefit to
the Executive in a single lump sum no earlier than the date which is
six (6) months after Termination of Employment.
4.4 Disability Benefit. If the Executive terminates employment for
Disability prior to the Early Retirement Age or Normal Retirement Age, the
Company shall pay to the Executive the benefit described in this Section 4.4 in
lieu of any other benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 is
the Deferral Account balance at Termination of Employment.
4.4.2 Payment of Benefit. The Company shall pay the benefit to
the Executive commencing on the first day of the month following the
Executive's Termination of Employment in the form elected by the
Executive on the Election Form. If the Executive elects to receive
payments in equal monthly installments, the Company shall continue to
credit interest on the remaining account balance during any applicable
installment period fixed at the rate in effect under Section 3.1.2 on
the date of the Executive's Termination of Employment.
4.5 Subsequent Election. If the Executive makes any election under
Sections 4.1.2, 4.2.2, 4.4.2 or 5.1.2 subsequent to December 31, 2004 to delay a
payment or to change the form of payment, (i) the subsequent election must be
made at least twelve (12) months prior to the date that the first payment would
otherwise have been made, (ii) payments to be made with respect to such
subsequent election shall be deferred for a period of not less five (5) five
years from the date such payments would otherwise have been made, and (iii) such
subsequent election shall not take effect until at least twelve (12) months
after the date on which such subsequent election is made.
4.6 Hardship Distribution. Upon the Company's determination (following
petition by the Executive) that the Executive has suffered an Unforeseeable
Emergency, the Company shall distribute to the Executive the amount necessary to
satisfy such emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of the distribution, as determined in accordance with
Treasury Regulation ss.409A-3.
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Article 5
Death Benefits
5.1 Death During Active Service. If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive's
beneficiary the benefit described in this Section 5.1.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is the
greater of the Deferral Account balance or the projected retirement
benefit as per the attached Schedule B.
5.1.2 Payment of Benefit. The Company shall pay the benefit to
the beneficiary commencing on the first day of the month following the
Executive's death in the form elected by the Executive on the Election
Form. If the Executive elects payments in equal monthly installments,
the Company shall continue to credit interest on the remaining account
balance during any applicable installment period fixed at the rate in
effect under Section 3.1.2 on the date of the Executive's Death.
5.2 Death During Benefit Period. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
5.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Company shall
pay the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.
Article 6
Beneficiaries
6.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new written
designation. However, designations will only be effective if signed by the
Executive and accepted by the Company during the Executive's lifetime. The
Executive's beneficiary designation shall be deemed automatically revoked if the
beneficiary predeceases the Executive, or if the Executive names a spouse as
beneficiary and the marriage is subsequently dissolved. If the Executive dies
without a valid beneficiary designation, all payments shall be made to the
Executive's estate in a lump sum.
6.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. The Company may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
Article 7
General Limitations
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Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
7.1 Excess Parachute Payment. To the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
7.2 Termination for Cause. If the Company terminates the Executive's
employment for:
7.2.1 Gross negligence or gross neglect of duties;
7.2.2 Commission of a felony or of a gross misdemeanor
involving moral turpitude; or
7.2.3 Fraud, disloyalty, dishonesty or willful violation of
any law or significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
7.3 Suicide. If the Executive commits suicide within two years after
the date of this Agreement, or if the Executive has made any material
misstatement of fact on any application for life insurance purchased by the
Company.
Article 8
Claims and Review Procedures
8.1 Claims Procedure. The Company shall notify any person or entity
that makes a claim against this Agreement (the "Claimant") in writing, within
ninety (90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under this Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of this Agreement on which the denial is based, (3)
a description of any additional information or material necessary for the
Claimant to perfect his or her claim, and a description of why it is needed, and
(4) an explanation of this Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
8.2 Review Procedure. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of this Agreement on which the decision is based. If, because of the need for a
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hearing, the sixty-day period is not sufficient, the decision may be deferred
for up to another sixty-day period at the election of the Company, but notice of
this deferral shall be given to the Claimant.
Article 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company.
Article 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Reorganization. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term "Company" as
used in this Agreement shall be deemed to refer to the successor or survivor
company.
10.5 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
10.6 Applicable Law. The Plan and all rights hereunder shall be
governed by and construed according to the laws of Connecticut, except to the
extent preempted by the laws of the United States of America.
10.7 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
10.8 Recovery of Estate Taxes. If the Executive's gross estate for
federal estate tax purposes includes any amount determined by reference to and
on account of this Agreement, and if the beneficiary is other than the
Executive's estate, then the Executive's estate shall be entitled to recover
from the
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beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by the Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.
10.9 Entire Agreement. This Agreement supersedes the prior agreement
between Company and the Executive on the subject matter hereof dated December
19, 2002 and constitutes the entire agreement between the Company and the
Executive as to the subject matter hereof. No rights are granted to the
Executive by virtue of this Agreement other than those specifically set forth
herein.
10.10 Administration. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
10.10.1 Interpreting the provisions of this Agreement;
10.10.2 Establishing and revising the method of accounting
for this Agreement;
10.10.3 Maintaining a record of benefit payments; and 10.10.4
Establishing rules and prescribing any forms
necessary or desirable to administer this Agreement.
10.11 Designated Fiduciary. For purposes of the Employee Retirement
Income Security Act of 1974, if applicable, the Company shall be the named
fiduciary and plan administrator under the Agreement. The named fiduciary may
delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
10.12 Section 409A. All provisions of this Agreement shall be
interpreted to be compliant with the provisions of Section 409A of the Code, and
regulations and rulings issued thereunder, so as not to subject the benefits
accruing hereunder to taxation pursuant to Section 409A(a)(1).
(Signatures on next page.)
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IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
The First National Bank of Litchfield
_______________________________ By ____________________________
Title ___________________________
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EXHIBIT 1 TO
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
Normal Retirement Benefits
--------------------------
I elect to receive my Normal Retirement Benefits under Section 4.1.2 of the
Agreement in the following form:
[Initial One]
____ Lump sum
____ Equal monthly installments for 180 months.
Early Retirement Benefits
-------------------------
I elect to receive my Early Retirement Benefits under Section 4.2.2 of the
Agreement in the following form:
[Initial One]
____ Lump sum, payable on the first day of the month following my Early
Retirement Date.
____ Deferred Lump sum, payable on ________________________________________.
____ Equal monthly installments for 180 months commencing on the first day of
the month following my Early Retirement Date.
____ Deferred Equal monthly installments for 180 months commencing on _________.
Disability Benefits
-------------------
I elect to receive my Disability Benefits under Section 4.4.2 of the Agreement
in the following form:
[Initial One]
____ Lump sum
____ Equal monthly installments for 180 months.
Death Benefits
--------------
I elect to have my Death Benefit paid under Section 5.1.2 of the Agreement in
the following form:
[Initial One]
____ Lump sum
____ Equal monthly installments for 180 months.
Signature ___________________________________
Date ____________________________
Accepted by the Company this _______ day of ________________, 200_.
By ______________________________
Title ___________________________
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BENEFICIARY DESIGNATION
The First National Bank of Litchfield
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
I designate the following as beneficiary of any death benefits under the
Executive Incentive Retirement Agreement:
Primary: ______________________________________________________________________
________________________________________________________________________________
Contingent: ___________________________________________________________________
________________________________________________________________________________
Note: To name a trust as beneficiary, please provide the name of the
trustee(s) and the exact name and date of the trust agreement.
-----
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature _____________________________
Date __________________________________
Accepted by the Company this ______ day of _________________, 200_.
By _______________________________
Title ____________________________
Earnings 11.0% 8.9 9.7 10.5
Schedule A
Deferred Bonus as a % of Annual Fees
-----------------------------------------------
14.0% 11.0 12.1 13.1 14.1 15.1 16.1
-----------------------------------------------
13.0% 10.3 11.3 12.2 13.1 14.1 15.0
-----------------------------------------------
12.0% 9.6 10.5 11.4 12.2 13.1 14.0
-----------------------------------------------
Earnings 11.0% 8.9 9.7 10.5 11.3 12.1 13.0
Growth -----------------------------------------------
10.0% 8.2 8.8 9.7 10.4 11.2 11.9
-----------------------------------------------
9.0% 7.5 8.1 8.8 9.5 10.2 10.9
-----------------------------------------------
8.0% 6.8 7.5 8.0 8.6 9.2 9.8
-----------------------------------------------
7.0% 6.1 6.5 7.2 7.7 8.3 8.8
-----------------------------------------------
6.0% 5.3 5.9 6.3 6.8 7.3 7.8
-----------------------------------------------
5.0% 4.6 5.0 5.5 5.9 6.3 6.7
-----------------------------------------------
11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
Return on Equity
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