Exhibit 10.59
THE FIRST NATIONAL BANK OF LITCHFIELD
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made this twenty-first day of November, 2005, by and
between The First National Bank of Litchfield, a national bank, located in
Litchfield, Connecticut, (the "Company"), and Xxxxxx Xxxxxxxxx (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's inability to perform
substantially all normal duties of the Executive's position, as determined
by the Company's Board of Directors in its sole discretion. As a condition
to any benefits, the Company may require the Executive to submit to such
physical or mental evaluations and tests as the Board of Directors deems
appropriate.
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 "Effective Date" means the date first written above.
1.1.9 "Election Form" means the Form attached as Exhibit 1.
1.1.10 "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.
1.1.11 "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.
1.1.12 "Normal Retirement Age" means the Executive's 65th birthday.
1.1.13 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.14 "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.
1.1.15 "Growth of Stock Rate" means the percentage change in the
Company'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.
1.1.16 "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.
1.1.17 "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 and earnings
growth Return On Equity (the "XXX") 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 XXX 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.
3.4 Hardship. If an unforeseeable financial emergency arising from the
death of a family member, divorce, sickness, injury, catastrophe or similar
event outside the control of the Director occurs, the Director, by written
instructions to the Company, may reduce future deferrals under this Agreement.
Article 4
Lifetime Benefits
4.1 Normal Retirement Benefit. If the Executive terminates employment on or
after the 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 month 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 the Executive terminates employment 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 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 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 the Executive terminates employment
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% 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 within 60 days 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 Hardship Distribution. Upon the Company's determination (following
petition by the Executive) that the Executive has suffered an unforeseeable
financial emergency as described in Section 3.4, the Company shall distribute to
the Executive all of the Deferral Account balance as determined by the Company.
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 Termination of Employment.
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
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 the 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 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 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 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
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
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 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 the Agreement;
10.10.2 Establishing and revising the method of accounting for the
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 the 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.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
The First National Bank of Litchfield
/s/ Xxxxxx X. Xxxxxxxxx s/s Xxxxxx X. Xxxxx
Signed: By Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxxxxxx
Title CEO & President
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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
__RT__ 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 .
-----------------------------------------
_RT___ 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]
__RT__ 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]
_RT___ Lump sum
____ Equal monthly installments for 180 months.
Signature: /s/ Xxxxxx X. Xxxxxxxxx
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Date: November 21, 2005
-------------------------
Accepted by the Company this 21st day of November, 2005.
Signature: /s/ Xxxxxx X. Xxxxx
-------------------------------
By Xxxxxx X. Xxxxx .
---------------------------
Title President & CEO .
------------------------
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: Xxxxx X. Xxxxxxxxx - 50%, Xxxxxx X. Xxxxxxxxx - 50%
Contingent: Xxxxxxx Xxxxx - -50%, Xxxxx Xxxxxxxxx - 50%
--------------------------------------------------------------------------------
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: /s/ Xxxxxx X. Xxxxxxxxx
Date: November 21, 2005
Accepted by the Company this 21st day of November, 2005.
Signature: /s/ Xxxxxx X. Xxxxx
By Xxxxxx X. Xxxxx .
-----------------------------
Title President & CEO .
----------------------------------
Schedule A
Deferred Bonus as a % of Annual Fees
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14.0% 11.0 12.1 13.1 14.1 15.1 16.1
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13.0% 10.3 11.3 12.2 13.1 14.1 15.0
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12.0% 9.6 10.5 11.4 12.2 13.1 14.0
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Earnings 11.0% 8.9 9.7 10.5 11.3 12.1 13.0
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Growth 10.0% 8.2 8.8 9.7 10.4 11.2 11.9
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9.0% 7.5 8.1 8.8 9.5 10.2 10.9
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8.0% 6.8 7.5 8.0 8.6 9.2 9.8
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7.0% 6.1 6.5 7.2 7.7 8.3 8.8
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6.0% 5.3 5.9 6.3 6.8 7.3 7.8
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5.0% 4.6 5.0 5.5 5.9 6.3 6.7
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11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
Return on Equity
Schedule B
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Projected Account
Name Balance at Retirement
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Xxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxxxx
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Xxxx Xxxxxx
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Xxxxxx Xxxxxxxxx 202,068
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Xxxxxx Xxxxxxxxx
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Xxxxxxx X. Xxxxx
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