EXHIBIT 10.6
CORTLAND BANCORP
AMENDED DIRECTOR RETIREMENT AGREEMENT
THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is made
effective as of October 1, 2003, by and between Cortland Bancorp, a bank holding
company located in Cortland, Ohio (the "Company") and Xxxxxxx X. Xxxxxx (the
"Director").
WHEREAS, the Company and the Director entered into a Director Retirement
Agreement dated as of March 1, 2001, which agreement provides for payment of
retirement benefits to the Director after termination of his service,
WHEREAS, the March 1, 2001 Director Retirement Agreement provides for
payment of $10,000 annually to the Director for 10 years if the Director retires
on or after reaching the defined "Normal Retirement Age" of 73, and it provides
for payment of reduced benefits if instead the Director retires before age 73,
WHEREAS, because the Company's Code of Regulations prohibits any person who
has attained the age of 70 from standing for election as a director, and because
the Director will be age 72 when his term expires at the Company's Annual
Meeting of Shareholders to be held in 2004, the Company's Code of Regulations
makes it impossible for the Director to attain the "Normal Retirement Age"
defined in the March 1, 2001 Director Retirement Agreement before termination of
his active director service with the Company,
WHEREAS, the Director has served the Company and subsidiaries as a member
of the board of directors with distinction for more than 30 years, since 1972,
WHEREAS, the effect of the Code of Regulations' age limitation on director
service was overlooked when the March 1, 2001 Director Retirement Agreement was
entered into, and the intent of that March 1, 2001 Director Retirement Agreement
was that the Director should be entitled to the full Normal Retirement Benefit
of $10,000 annually for 10 years for retirement after reaching the mandatory
retirement age limit under the Code of Regulations,
WHEREAS, the Company and the Director desire to correct that oversight by
amending and restating in its entirety the March 1, 2001 Director Retirement
Agreement by means of this Agreement, which shall supersede and replace the
March 1, 2001 Director Retirement Agreement in its entirety on the effective
date of this Agreement, and which shall, among other things, change the defined
"Normal Retirement Age" from age 73 to age 72,
WHEREAS, the Director has stated his desire to retire from active director
service effective on February 29, 2004,
WHEREAS, at the Company's request the Director has agreed to serve as
Director Emeritus after termination of his active director service so that the
board will continue to have the benefit of the Director's guidance and advice,
and
WHEREAS, this Agreement supersedes and replaces in its entirety the March
1, 2001 Director Retirement Agreement, but the February 23, 2001 Split Dollar
Agreement between the Company and the Director shall remain in full force and
effect and shall not be amended, modified, or affected in any way by this
Agreement.
NOW, THEREFORE, in consideration of these premises and the other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Director hereby agree as follows.
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:
1.1 "Accrual Balance" means the liability that should be accrued by the
Company under generally accepted accounting principles ("GAAP") for the
Company's obligation to the Director under this Agreement, by applying
Accounting Principles Board Opinion No. 12, as amended by Statement of Financial
Accounting Standards No. 106, and the calculation method and discount rate
specified hereinafter. The Accrual Balance shall be calculated assuming a level
principal amount and interest as the discount rate is accrued each period. The
principal accrual is determined such that when it is credited with interest each
month, the Accrual Balance at Normal Retirement Age equals the present value of
the normal retirement benefits. The discount rate means the rate used by the
Plan Administrator for determining the Accrual Balance. The rate is based on the
yield on a 20-year corporate bond rated Aa by Xxxxx'x, rounded to the nearest
1/4%. The initial discount rate is 6.75%. However, the Plan Administrator, in
its sole discretion, may adjust the discount rate to maintain the rate within
reasonable standards according to GAAP. The Plan Administrator shall consist of
the Company's board of directors or such committee or person(s) as the board
shall appoint.
1.2 "Effective Date" means the date first written above, October 1, 2003.
1.3 "Normal Retirement Age" means the Director's 72nd birthday.
1.4 "Normal Retirement Date" means the later of the Normal Retirement Age
or Termination of Service.
1.5 "Plan Year" means each twelve-month period beginning on March 1 of each
year and ending on the last day of February of each year.
1.6 "Termination of Service" means that the Director ceases to be a member
of the Company's board of directors for any reason whatsoever. For purposes of
this Agreement, if the Director serves as Director Emeritus he shall
nevertheless be considered to have ceased to be a member of the Company's board
of directors. For purposes of this Agreement, if there is a dispute over the
service status of the Director or the date of the Director's Termination of
Service, the Company shall have the sole and absolute right to decide the
dispute unless a Change in Control shall have occurred.
ARTICLE 2
LIFETIME BENEFITS
The Director having attained the Normal Retirement Age on August 25, 2003,
upon Termination of Service the Company shall pay to the Director an annual
benefit of $10,000. The annual benefit shall be payable to the Director in 12
equal monthly installments, payable on the first day of each month beginning
with the month after the Director's Normal Retirement Date. The annual benefit
shall be paid to the Director for 10 years. Commencing on the first anniversary
of the first benefit payment, and continuing on each subsequent anniversary, the
Company's board of directors may, in its sole discretion, increase the benefit.
ARTICLE 3
DEATH BENEFITS
If the Director dies before receiving all benefit payments under Article 2
of this Agreement, the Company shall pay the remaining benefits to the
Director's beneficiary(ies) at the same time and in the same amounts they would
have been paid to the Director had the Director survived.
ARTICLE 4
BENEFICIARIES
4.1 Beneficiary Designations. The Director shall designate a beneficiary by
filing a written designation with the Company. The Director may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective if signed by the Director and received by the Company
during the Director's lifetime. The Director's beneficiary designation shall be
deemed automatically revoked if the
beneficiary predeceases the Director or if the Director names a spouse as
beneficiary and the marriage is subsequently dissolved. If the Director dies
without a valid beneficiary designation, the Director's estate shall be the
beneficiary.
4.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, 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,
incapacitated person, or incapable person. The Company may require proof of
incapacity, 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 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim for benefits under this Agreement (the "Claimant") in writing,
within 90 days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the 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 the 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 the 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 90 days.
5.2 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 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 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 verbally 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 60-day period, stating specifically the
basis of its decision, written in a manner to be understood by the Claimant and
the specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another 60 days at the election of the
Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 6
MISCELLANEOUS
6.1 Amendment and Termination. This Agreement may be amended or terminated
solely by a written agreement signed by the Company and the Director.
6.2 Binding Effect. This Agreement shall bind the Director and the Company,
and their beneficiaries, survivors, executors, successors, administrators and
transferees.
6.3 No Guarantee of Service. This Agreement is not a contract for services.
It does not give the Director the right to remain a Director of the Company, nor
does the Agreement interfere with the rights of the Company's shareholders not
to re-elect the Director or the right of shareholders or the Board to remove an
individual as a director of the Company. The Agreement also does not require the
Director to remain a director nor interfere with the Director's right to
terminate services at any time.
6.4 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner.
6.5 Successors; Binding Agreement. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business and/or assets of the Company, by an
assumption agreement in form and substance satisfactory to the Director, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform this Agreement if
no such succession had taken place.
6.6 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
6.7 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Ohio, except to the extent preempted by the
laws of the United States of America.
6.8 Unfunded Arrangement. The Director 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 Director's life is a general
asset of the Company to which the Director and beneficiary have no preferred or
secured claim.
6.9 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Director concerning the subject matter hereof. No
rights are granted to the Director under this Agreement other than those
specifically set forth herein. Effective as of the Effective Date of this
Agreement, this Agreement supersedes and replaces in its entirety the Director
Retirement Agreement between the Company and the Director dated as of March 1,
2001. However, the February 23, 2001 Split Dollar Agreement between the Company
and the Director shall remain in full force and effect and shall not be amended,
modified, or affected in any way by this Agreement.
6.10 Severability. If for any reason any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall, to the full
extent consistent with the law, continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the rest of such provision, not held so invalid, and the rest
of such provision, together with all other provisions of this Agreement shall,
to the full extent consistent with the law, continue in full force and effect.
6.11 Headings. The headings and captions in this Agreement are included
solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.
6.12 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
requested, with postage prepaid, to the following addresses or to such other
address as either party may designate by like notice.
(a) If to the Company, to: Board of Directors
Cortland Bancorp
000 X. Xxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxx, Xxxx 00000-0000
(b) If to the Director, to: Xxxxxxx X. Xxxxxx
Cortland Bancorp
000 X. Xxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxx, Xxxx 00000-0000
and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.
ARTICLE 7
ADMINISTRATION OF AGREEMENT
7.1 Plan Administrator Duties. This Agreement shall be administered by a
Plan Administrator consisting of the Company's board of directors or such
committee or person(s) as the board shall appoint. The Director may be a member
of the Plan Administrator. The Plan Administrator shall also have the discretion
and authority to (a) make, amend, interpret, and enforce all appropriate rules
and regulations for the administration of this Agreement and (b) decide or
resolve any and all questions, including interpretations of this Agreement, as
may arise in connection with the Agreement.
7.2 Agents. In the administration of this Agreement, the Plan Administrator
may employ agents and delegate to them such administrative duties as it sees fit
(including acting through a duly appointed representative), and may from time to
time consult with counsel who may be counsel to the Company.
7.3 Binding Effect of Decisions. The decision or action of the Plan
Administrator with respect to any question arising out of or in connection with
the administration, interpretation, and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Agreement. Neither the
Director nor any beneficiary shall be deemed to have any right, vested or
nonvested, regarding the continued use of any previously adopted assumptions,
including but not limited to the discount rate and calculation method employed
in the determination of the Accrual Balance.
7.4 Indemnity of Plan Administrator. The Company shall indemnify and hold
harmless the members of the Plan Administrator against any and all claims,
losses, damages, expenses, or liabilities arising from any action or failure to
act with respect to this Agreement, except in the case of willful misconduct by
the Plan Administrator or any of its members.
7.5 Company Information. To enable the Plan Administrator to perform its
functions, the Company shall supply full and timely information to the Plan
Administrator on all matters relating to the date and circumstances of the
retirement, death, or Termination of Service of the Director, and such other
pertinent information as the Plan Administrator may reasonably require.
IN WITNESS WHEREOF, the Director and a duly authorized Company officer have
executed this Amended Director Retirement Agreement as of the date first written
above.
DIRECTOR: COMPANY:
Cortland Bancorp
By:
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Xxxxxxx X. Xxxxxx Title:
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BENEFICIARY DESIGNATION
CORTLAND BANCORP
AMENDED DIRECTOR RETIREMENT AGREEMENT
XXXXXXX X. XXXXXX
I designate the following as beneficiary of any death benefits under this
Director 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:
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Xxxxxxx X. Xxxxxx
Date: ______________, 2004
Received by the Company this _______ day of ______________, 2004.
By:
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Title:
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