EMPLOYMENT AGREEMENT
AGREEMENT made as of the 26th day of
November, 1997, among ARROW FINANCIAL
CORPORATION, a New York corporation with its
principal place of business at 000 Xxxx Xxxxxx, Xxxxx Xxxxx,
Xxx Xxxx 00000 ("Arrow"), its wholly-owned subsidiary,
GLENS FALLS NATIONAL BANK AND TRUST
COMPANY, a national banking association with its
principal place of business at 000 Xxxx Xxxxxx, Xxxxx Xxxxx,
Xxx Xxxx 00000 (the "Bank"), and XXXX X. XXXXXX,
residing at 00 Xxxxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx
00000 (the "Executive").
Recitals
WHEREAS, Arrow and the Bank, through their
respective Boards of Directors, consider the maintenance of
a competent and experienced executive management team
to be essential to the long-term success of Arrow and the
Bank; and
WHEREAS, in this regard, Arrow and the Bank
have determined that it is in the best interests of each that
the Executive continue to serve as Executive Vice
President, Treasurer and Chief Financial Officer of Arrow
and the Bank, pursuant to a written employment agreement;
and
WHEREAS, Arrow and the Bank have determined
that the existing employment agreement between the
Executive and each of them should be renewed, with certain
modifications to reflect changed circumstances, and have
agreed with the Executive that the Employment Agreement
set forth hereinbelow shall replace said existing employment
agreement;
NOW, THEREFORE, in furtherance of the interests
described above and in consideration of the respective
covenants and agreements herein contained, the parties
hereto agree as follows:
1. Employment
Arrow and the Bank agree to employ the Executive
and the Executive agrees to continue to serve as Executive
Vice President, Treasurer and Chief Financial Officer of
Arrow and the Bank during the term of employment
provided for in this Agreement.
2. Term of Employment
Employment of the Executive pursuant to this
Agreement shall commence on the date hereof and, unless
the Executive becomes a Retired Early Employee under
Paragraph 6 of this Agreement or such employment is
earlier terminated as provided in Paragraph 7 of this
Agreement, employment under this Employment Agreement
shall terminate on the earlier of (i) December 31 of the
second year after the year in which the Board of Directors
of Arrow (the "Arrow Board") first fails to approve the
extension of this Agreement pursuant to the following
sentence, or (ii) the last day of the month in which the
Executive attains retirement age (which shall be age 65,
unless the Executive shall have elected early retirement at
age 62 under any retirement plan of Arrow). At any
meeting of the Arrow Board in the fourth quarter of each
calendar year during which this Agreement is in effect
(except the year in which the Executive attains retirement
age and the two preceding years), the Arrow Board shall
vote upon a one (1) year extension of this Agreement, and
in the event such extension shall receive the affirmative vote
of a majority of the entire Arrow Board, this Agreement
shall remain in effect through December 31 of the third year
after the Arrow Board meeting, subject to earlier
termination of this Agreement under Paragraph 6 or 7. In
the event that, in the fourth quarter of any such calendar
year, a majority of the entire Arrow Board fails to vote in
favor of such a one (1) year extension of this Agreement,
employment of the Executive hereunder shall continue for
the period and only for the period specified in the first
sentence of this Paragraph, and, notwithstanding the
foregoing sentence, during such period the Arrow Board
shall not again consider extension of this Agreement.
3. Position and Duties
The Executive shall continue to serve as Executive
Vice President, Treasurer and Chief Financial Officer of
Arrow and the Bank and shall have duties, responsibilities,
and authority as normally attend such positions or as may
reasonably be assigned to the Executive from time to time
by the Arrow Board or the Board of Directors of the Bank
(the "Bank Board") or the Chief Executive Officer of Arrow
or the Bank. The Executive shall devote substantially all his
working time and efforts to the business and affairs of
Arrow and the Bank, provided however, that the Executive
may, with the approval of the Arrow Board or the Chief
Executive Officer of Arrow, serve as a director or officer of
any non-competing business or engage in any other activity,
including but not limited to, charitable or community
activity, to the extent that they do not inhibit the
performance of his duties hereunder.
4. Place of Performance
In connection with the Executive's employment
hereunder, the Executive shall be based at the principal
executive offices of the Bank, except for required travel on
business. The Executive shall not be required to change his
residence from the area in which he now resides. The Bank
shall furnish the Executive with office space, stenographic
assistance, and such other facilities and services as shall be
suitable to the Executive's position and adequate for the
performance of his duties hereunder.
5. Compensation
(a) Salary. The Bank shall continue to
pay the Executive hereunder his current base annual
salary of $ 146,000.00, payable in equal bi-weekly
installments or at such other intervals as shall be
agreed upon by the parties, plus such annual bonus,
if any, as may be determined by the Arrow Board or
the committee of the Arrow Board charged with
reviewing executive compensation (the
"Committee"). The Executive's base annual salary
may be increased from time to time in accordance
with the normal business practices of Arrow and the
Bank as determined by the Arrow Board or the
Committee, and, if so increased, such base annual
salary shall not thereafter during the Executive's
employment under this Agreement be decreased and
the obligation of the Bank hereunder to pay the
Executive's base annual salary shall thereafter relate
to such increased base annual salary. Compensation
of the Executive by base annual salary payments
shall not prevent the Executive from participating in
any other compensation or benefit plan of Arrow or
the Bank in which he is entitled to participate and
participation in any such other compensation or
benefit plan shall not in any way limit or reduce the
obligation of the Bank to pay the Executive's base
annual salary hereunder.
(b) Other Benefits. In addition to the
compensation provided for in subparagraph (a)
above, the Executive shall be entitled during the
term of his employment under this Agreement (i) to
participate in any and all employee benefit programs
or stock purchase programs of Arrow or the Bank
now or hereafter in effect and open to participation
by qualifying employees of Arrow or the Bank
generally, including but not limited to the retirement
plan, supplemental retirement plan, employee stock
purchase plan and employee stock ownership plan of
Arrow or the Bank, and (ii) to enjoy certain personal
benefits provided by Arrow or the Bank, including
but not limited to:
(A) life insurance on the life of the
Executive, at no cost to the Executive, under
a group plan maintained by Arrow;
(B) disability insurance for the
Executive, at no cost to the Executive, under
a group plan maintained by Arrow;
(C) comprehensive medical and
dental insurance under a group plan provided
by Arrow, with the Executive to pay only
those amounts required to be paid
thereunder by covered employees generally
under the cost-sharing arrangements in effect
from time to time under such plan;
(D) reimbursement in full of all
business, travel and entertainment expenses
incurred by the Executive in performing his
duties hereunder; and
(E) fully paid vacation during
each calendar year in accordance with the
vacation policies of Arrow in effect from
time to time.
Arrow shall not make any material changes in any of
the personal benefits itemized above adversely
affecting the Executive unless such change occurs
pursuant to a program applicable to all executive
officers of Arrow and the adverse effect on the
Executive is not proportionately greater than the
adverse effect of the change on any other executive
officer of Arrow previously enjoying such benefit.
6. Change of Control or Change of
Authority
(a) Retired Early Employee. If a Change
of Control or Change of Authority (as such terms
are defined in subparagraph 6(f) below) occurs
during the term the Executive's employment under
this Employment Agreement, either the Executive,
on the one hand, or Arrow or the Bank, on the
other, may elect by written notice, given to the other
party or parties, at any time within twelve (12)
months after such Change of Control or Change of
Authority, to terminate the employment of the
Executive by Arrow and the Bank, whereupon the
Executive will become a "Retired Early Employee,"
and will be entitled to receive such payments as are
provided hereafter in this Section 6. Such election
and the termination of the Executive's employment
shall become effective on the first day of the second
calendar month commencing after delivery of the
notice or on such earlier date as the Executive in his
sole discretion may specify (the "Effective Date").
(b) Cash Payments. If the Executive
should become a Retired Early Employee hereunder,
the Bank shall, during the period commencing on the
Effective Date and ending two years thereafter (the
"Pay-Out Period"), make equal monthly payments to
the Executive (which shall not be deemed base
annual salary payments) in an amount such that the
present value of all such payments, determined as of
the Effective Date, equals two hundred ninety-nine
percent (299%) of the Base Amount, as such term is
defined in subparagraph 6(f) below. If at any time
during the Pay-Out Period the Arrow Board in its
sole discretion shall determine, upon application of
the Retired Early Employee supported by substantial
evidence, that the Retired Early Employee is then
under a severe financial hardship resulting from (i) a
sudden and unexpected illness or accident of the
Retired Early Employee or any of his dependents (as
defined in section 152(a) of the Internal Revenue
Code), (ii) loss of the Retired Early Employee's
property due to casualty, or (iii) other similar
extraordinary and unforeseeable circumstance
arising as a result of events beyond the control of the
Retired Early Employee, the Bank shall make
available to the Retired Early Employee, in one (1)
lump sum, an amount up to but not greater than the
present value of all monthly payments remaining to
be paid to him in the Pay-Out Period, calculated as
of the date of such determination by the Arrow
Board, for the purpose of relieving such severe
financial hardship to the extent the same has not
been or may not be relieved by (xi) reimbursement
or compensation by insurance or otherwise, (xii)
liquidation of the Retired Early Employee's assets
(to the extent such liquidation would not itself cause
severe financial hardship), or (xiii) distributions from
other benefit plans. If (a) the lump sum amount thus
made available is less than (b) the present value of
all such remaining monthly payments, the Bank shall
continue to pay to the Retired Early Employee
monthly payments for the duration of the Pay-Out
Period, but from such date forward such monthly
payments will be in a reduced amount such that the
present value of all such reduced payments will
equal the difference between (b) and (a), above.
The Retired Early Employee may elect to waive any
or all payments due him under this subparagraph.
(c) Death of Retired Early Employee. If
the Retired Early Employee dies before receiving all
monthly payments payable to him under
subparagraph 6(b), above, the Bank shall pay to the
Retired Early Employee's spouse, or if the Retired
Early Employee leaves no spouse, to the estate of
the Retired Early Employee, one (1) lump sum
payment in an amount equal to the present value of
all such remaining unpaid monthly payments,
determined as of the date of death of the Retired
Early Employee.
(d) Indemnification of Executive. In the
event a Change of Control or Change of Authority
occurs, Arrow and the Bank shall indemnify the
Executive for all legal fees and expenses
subsequently incurred by the Executive in seeking to
obtain or enforce any right or benefit provided under
this Employment Agreement, not limited to the
rights and benefits provided under this Section 6 and
whether or not the Executive has become a Retired
Early Employee hereunder, provided, however, that
such right to indemnification will not apply if and to
the extent that a court of competent jurisdiction shall
determine that any such fees and expenses have been
incurred as a result of the Executive's bad faith.
Indemnification payments payable hereunder by
Arrow or the Bank shall be made not later than
thirty (30) days after a request for payment has been
received from the Executive with such evidence of
indemnifiable fees and expenses as Arrow or the
Bank may reasonably request.
(e) No Duty to Seek Other Employment.
Amounts payable to any Retired Early Employee
under this Paragraph 6 shall not be reduced by the
amount of any compensation received by such
Retired Early Employee from any other employer or
source during the Pay-Out Period, and no Retired
Early Employee shall be under any obligation to
seek other employment or gainful pursuit during
such Pay-Out Period as a result of this Agreement.
(f) Definitions.
(i) The "Base Amount" for purpose
of this Paragraph 6 shall equal the average
annual compensation payable by the Bank to
the Executive and includable by the
Executive in gross income for the most
recent five (5) taxable years ending before
the date on which the Change of Control or
Change of Authority occurred.
(ii) A "Change of Control" shall be
deemed to have occurred if (A) any
individual corporation (other than Arrow),
partnership, trust, association, pool,
syndicate, or any other entity or any group of
persons acting in concert becomes the
beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities
and Exchange Commission under the
Securities Exchange Act of 1934, as the
result of any one or more securities
transactions (including gifts and stock
repurchases but excluding transactions
described in subdivision (B), following), of
securities of Arrow possessing twenty-five
percent (25%) or more of the voting power
for the election of directors of such entity,
(B) there shall be consummated any
consolidation, merger or stock-for-stock
exchange involving Arrow or the securities
of Arrow in which the holders of voting
securities of Arrow immediately prior to
such consummation own, as a group,
immediately after such consummation, voting
securities of Arrow (or, if Arrow does not
survive such transaction voting securities of
the corporation surviving such transaction)
having less than fifty percent (50%) of the
total voting power in an election of directors
of Arrow (or such other surviving
corporation), excluding securities received
by any members of such group which
represent disproportionate percentage
increases in their shareholdings vis-a-vis the
other members of such group, (C) "approved
directors" shall constitute less than a majority
of the entire Arrow Board, with "approved
directors" defined to mean the members of
the Arrow Board as of the date of this
Agreement and any subsequently elected
members who shall be nominated or
approved by a majority of the approved
directors on the Arrow Board prior to such
election, or (D) there shall be consummated
any sale, lease, exchange or other transfer (in
one transaction or a series of related
transactions, excluding any transaction
described in subdivision (B), above), of all,
or substantially all, of the assets of Arrow to
a party which is not controlled by or under
common control with Arrow.
(iii) A "Change of Authority" shall
be deemed to have occurred if the Executive
is assigned duties by Arrow which, in the
reasonable opinion of the Executive have
materially less authority than those duties
currently being performed by him and
otherwise described herein.
7. Early Termination of Employment
The employment of the Executive hereunder by
Arrow and the Bank may be terminated or may terminate,
other than as provided in Paragraph 2 of this Agreement or
as permitted under Paragraph 6 of this Agreement, under
the circumstances set forth below.
(a) Termination for Cause. Arrow may
terminate the Executive's employment under this
Agreement prior to the normal expiration of its term
for cause. "Cause" shall mean:
(i) any willful misconduct by the
Executive which is materially injurious to
Arrow or the Bank, monetarily or otherwise;
(ii) any willful failure by the
Executive to follow the reasonable directions
of the Arrow Board or the Bank Board or
the Chief Executive Officer of Arrow or the
Bank; or
(iii) any failure by the Executive
substantially to perform any reasonable
directions of the Arrow Board or the Bank
Board or the Chief Executive Officer of
Arrow or the Bank (other than failure
resulting from disability), within thirty (30)
days after delivery to the Executive by the
respective Board or Chief Executive Officer
of a written demand for substantial
performance, which written demand shall
specifically identify the manner in which the
respective Board or Chief Executive Officer
believes that the Executive has not
substantially performed.
Notwithstanding the foregoing, the employment of
the Executive hereunder shall not be deemed to have
been terminated for cause unless and until:
(A) reasonable notice is given to
the Executive setting forth the reasons
Arrow intends to terminate the Executive for
cause;
(B) an opportunity is provided for
the Executive to be heard before the Arrow
Board and the Chief Executive Officer of
Arrow, with counsel; and
(C) after such hearing or
opportunity to be heard, written notice of
final termination for cause is delivered to the
Executive, setting forth the specific reasons
therefor.
Termination for cause by Arrow shall require the
affirmative vote of at least two-thirds (2/3) of the
Arrow Board. The Executive will not be entitled to
any further compensation for any period subsequent
to the effective date of such termination, except for
severance pay, if any, in accordance with the then
existing severance policies of Arrow; provided,
however, that any such termination for cause
occurring after the Executive shall have elected to
become a Retired Early Employee under Paragraph
6 of this Agreement will not affect the right of the
Executive to receive all of the payments provided
for therein.
(b) Termination Without Cause. Arrow
may terminate the Executive's employment under
this Agreement prior to the normal expiration of its
term without cause upon thirty (30) days' written
notice. Termination without cause by Arrow shall
require the affirmative vote of at least two-thirds
(2/3) of the entire Arrow Board. In the event of
termination without cause, the Bank shall pay to the
Executive on the effective date of such termination
one (1) lump sum payment in an amount equal to the
total amount of base annual salary payments which
would have been payable to the Executive during the
remaining portion of the calendar year in which such
termination occurs and during the two (2) ensuing
calendar years had the Executive continued his
employment under this Agreement for the duration
of the period. For purposes of computing the
amount of the lump sum payment, it shall be
assumed that the Executive's current base salary on
the effective date of termination would not have
changed and no bonus would have been paid to him
during the period specified in the foregoing
sentence. Any such termination without cause
occurring after the Executive shall have elected to
become a Retired Early Employee under Paragraph
6 of this Agreement will not affect the right of the
Executive to receive all of the payments provided
for therein.
(c) Termination for Disability. If, as a
result of the Executive's incapacity due to physical
or mental illness, the Executive shall not have
performed his duties hereunder on a full time basis
for six (6) consecutive months, the Executive's
employment under this Agreement may be
terminated by Arrow upon thirty (30) days' written
notice. Such termination for disability shall require
the affirmative vote of a majority of the entire Arrow
Board. The Executive's compensation during any
period of disability prior to the effective date of such
termination shall be the amounts normally payable to
him in accordance with his then current base annual
salary, reduced by the sum of the amounts, if any,
paid to the Executive under disability benefit plans
maintained by Arrow. The Executive shall not be
entitled to any further compensation from the Bank
for any period subsequent to the effective date of
such termination, except for severance pay in
accordance with then existing severance policies of
Arrow; provided, however, that any such
termination for disability occurring after the
Executive shall have elected to become a Retired
Early Employee under Paragraph 6 of this
Agreement will not affect the right of the Executive
to receive all of the payments provided for therein.
(d) Termination for Breach by
Employer. In the event that Arrow or the Bank shall
have materially breached any provision of this
Agreement and such breach shall not have been
cured within ten (10) days after delivery of written
notice thereof to the breaching party by the
Executive, identifying the breach with reasonable
particularity, the Executive may cease to perform
and may terminate this Agreement and his
employment with Arrow and the Bank hereunder,
without thereby forfeiting any cause of action he
may have against the breaching party or parties as a
result of such breach or otherwise.
(e) Consensual Termination. All parties
hereto may agree at any time to terminate this
Agreement and the Executive's employment
hereunder upon such terms and conditions as the
parties may agree.
8. Competition Restriction
In the event the Executive is terminated for cause
under Paragraph 7 or improperly terminates his own
employment hereunder, then during the period beginning on
the date of termination of the Executive's employment and
continuing for two (2) years after such date, the Executive
shall not, without the prior approval of the Arrow Board,
certified to him by the Secretary or Acting Secretary of
Arrow, become an officer, employee, agent, partner or
director of any other business in substantial competition
with the Bank, Arrow, or any other company or bank
affiliated with Arrow, including any branch or office of any
of the foregoing. Such restriction shall apply to any such
other business doing business in any county in the State of
New York in which Arrow, the Bank or any such other
affiliated company or bank is then conducting any material
business or into which, to the knowledge of the Executive at
the time of such termination, any such entity has immediate
plans to expand its activities in material respects. The
provisions of this Paragraph 8 shall not apply in the event
that the Executive becomes a Retired Early Employee under
Paragraph 6 or the Executive's employment terminates in
accordance with the first sentence of Paragraph 2.
It is the intention of the parties to restrict the
activities of the Executive under this Paragraph 9 only to
the extent necessary for the protection of the legitimate
business interests of Arrow, and the parties specifically
covenant and agree that should any of the clauses or
provisions of the competition restriction set forth herein,
under any set of circumstances, be held by a court of
competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws effective during the term of this
Agreement, then and in that event, the court so holding may
reduce the business or territory to which such restriction
pertains and/or the period of time during which it operates,
or effect any other change to the extent necessary to render
such restriction enforceable by said court.
9. Confidential Information
The Executive specifically acknowledges that all
information pertaining to the Bank and Arrow received by
him during the course of his employment hereunder which
has been designated confidential or otherwise has not been
made publicly available, including, without limitation, plans,
strategies, projections, analyses, and information pertaining
to customers or potential customers, is the exclusive
property of Arrow and the Executive covenants and agrees
not to disclose any of such information, without the express
prior consent of the Arrow Board or the Chief Executive
Officer of Arrow, during his employment hereunder or after
termination of such employment, to anyone not employed or
engaged by Arrow or a subsidiary thereof to render services
to it. The Executive further covenants and agrees that he
will not at any time use any such information, without such
express prior consent, for his own benefit or the benefit of
any party other than Arrow. This Paragraph 9 shall survive
termination of the Agreement.
10. Successors and Assigns; Assumption by
Successors
This Agreement is a personal services contract
which may not be assigned by the Bank or Arrow to, or
assumed from the Bank or Arrow by, any other party
without the prior consent of the Executive. All rights
hereunder shall inure to the benefit of the parties hereto,
their personal or legal representatives, heirs, successors and
assigns. Arrow will require any successor (whether direct
or indirect, by purchase, assignment, merger, consolidation
or otherwise) to all or substantially all of the business and/or
assets of Arrow in any consensual transaction expressly to
assume this Agreement and to agree to perform hereunder
in the same manner and to the same extent that Arrow
would be required to perform if no such succession had
taken place. References herein to "Arrow" or the "Bank"
will be understood to refer to the successor or successors of
Arrow or the Bank, respectively.
11. Notices
Any notice required or desired to be given hereunder
shall be in writing and shall be deemed given when delivered
personally or sent by certified or registered mail, postage
prepaid, to the addresses of the other parties set forth in the
first Paragraph of this Agreement, provided that all notices
to Arrow or the Bank shall be directed in each case to the
Chief Executive Officer thereof.
12. Waiver of Breach
Waiver by any party of a breach of any provision
shall not operate as or be construed a waiver by such party
of any subsequent breach hereof.
13. Invalidity
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability
of any other provisions, which shall remain in full force and
effect.
14. Entire Agreement; Written Modification;
Termination
This agreement contains the entire agreement among
the parties concerning the employment of the Executive by
Arrow and the Bank. No modification, amendment or
waiver of any provision hereof shall be effective unless in
writing specifically referring hereto and signed by the party
against whom such provision as modified or amended or
such waiver is sought to be enforced. This Agreement shall
terminate as of the time the Bank makes the final payment
which it may be obligated to pay hereunder or provides the
final benefit which it may be obligated to provide hereunder,
or, if later, as of the time the restriction on competition set
forth in Paragraph 8 expires.
15. Counterparts
This Agreement may be made and executed in
counterparts, in which case all counterparts shall be deemed
to constitute one original document for all purposes.
16. Governing Law
This Agreement is governed by and is to be
construed and enforced in accordance with the laws of the
State of New York.
17. Authorization
The Bank and Arrow represent and warrant that the
execution of this Employment Agreement has been duly
authorized by resolution of their respective Boards. This
Paragraph 17 shall survive termination of the Agreement.
IN WITNESS WHEREOF, the parties have
executed or caused to be executed this Employment
Agreement as of the day and year first above written.
ARROW FINANCIAL CORPORATION
By: s/Xxxxxx X. Xxx
Xxxxxx X. Xxx, President and Chief
Executive Officer
GLENS FALLS NATIONAL BANK AND TRUST COMPANY
By: s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, President and Chief
Executive Officer
"EXECUTIVE"
s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
