EXHIBIT 10.46
THE FIRST NATIONAL BANK OF LITCHFIELD
FIRST AMENDED AND RESTATED
DIRECTOR INCENTIVE RETIREMENT AGREEMENT
THIS FIRST AMENDMENT AND RESTATEMENT to the DIRECTOR INCENTIVE RETIREMENT
AGREEMENT (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 XXXXXXX X. XXXX (the "Director").
INTRODUCTION
In an effort to reward past service, encourage continued service on the
Company's Board of Directors, and as a method to attract future Directors, the
Company is willing to provide to the Director a deferred incentive opportunity.
The Company will pay the benefits from its general assets.
AGREEMENT
The Director 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 "Annual Fees" means the Board of Director retainer fees, the
Board of Director meeting fees and the Board of Director committee fees
earned by the Director during the Plan Year.
1.1.2 "Change of Control" means a change in the ownership or
effective control of the Company, or in the ownership of a substantial
portion of the assets of the Company, as defined in Treasury Regulation
ss.409A-3(i)(5) under Section 409A of the Code.
1.1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.4 "Deferral Account" means the Company's accounting of the
Director's accumulated Deferrals plus accrued interest.
1.1.5 "Disability" means the Director is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be
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expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months. As a condition to any
benefits, the Company may require the Director to submit to such physical
or mental evaluations and tests as the Board of Directors deems
appropriate. The Director will be deemed disabled if determined to be
totally disabled by the Social Security Administration.
1.1.6 "Early Retirement Date" means the date that the Director has
terminated service before his 72nd birthday provided he has completed at
least 10 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 November 20, 2008.
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 mergers, acquisitions, stock splits and other
items of that nature.
1.1.12 "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.
1.1.13 "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.
1.1.14 "Normal Retirement Age" means the Director's 72nd birthday.
1.1.15 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Service.
1.1.16 "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.
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1.1.17 "Termination of Service" means the Director ceasing to be a
member of the Company's Board of Directors for any reason whatsoever.
1.1.18 "Unforeseeable Emergency" means a severe financial hardship
to the Director resulting from an illness or accident of the Director,
the Director's spouse or a dependent of the Director, loss of the
Director's property due to casualty, or similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Director, as limited by Section 409A(a)(1)(B)(ii)(II) of
the Code and Treasury Regulations 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 Director served on the Company's Board of
Directors on a full-time basis, inclusive of any approved leave of
absence.
ARTICLE 2
Incentive
2.1 Incentive Award. Return On Equity (the "XXX") and Earnings Growth
determined as of December 31 of each plan year shall determine the Director'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 Director's Annual Fees for the Plan Year in
which the XXX and Earnings Growth 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
Director 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 Director, 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 annually, equal to the Growth of Stock Rate for the same
period.
3.2 Statement of Accounts. The Company shall provide to the Director,
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 Director is a general unsecured creditor of the
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Company for the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Director's rights are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by the Director's creditors.
3.4 Hardship. If an Unforeseeable Emergency occurs, the Director, 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 the Director terminates service on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Director 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 Director's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to the
Director commencing on the first day of the month following the
Director's Normal Retirement Date in the form elected by the Director on
the Election Form. If the Director 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
Director's Termination of Service.
4.2 Early Retirement Benefit. If the Director terminates service on or
after the Early Retirement Date and before the Normal Retirement Age, and for
reasons other than Change of Control, death or Disability, the Company shall pay
to the Director 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 Director's Early Retirement Date.
4.2.2 Payment of Benefit. The Company shall pay the benefit to the
Director in the form and on the date elected by the Director on the
Election Form. If the Director 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 Director's Termination of Service.
4.2.3 Deferred Payment Option. Under this Section 4.2, the
Director may elect to defer payment of his Early Retirement Benefit until
the date elected by the Director on the Election Form, not to exceed the
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first day of the month following his Normal Retirement Age.
4.3 Early Termination Benefit. If the Director terminates service before
the Early Retirement Age or Normal Retirement Age for reasons other than Change
of Control, death or Disability, the Company shall pay to the Director 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 Director's
Termination of Service.
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
Director in a single lump sum within 60 days after Termination of
Service.
4.4 Disability Benefit. If the Director terminates service for Disability
prior to the Early Retirement Age or Normal Retirement Age, the Company shall
pay to the Director 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 Service.
4.4.2 Payment of Benefit. The Company shall pay the benefit to the
Director commencing on the first day of the month following the
Director's Normal Retirement Age in the form elected by the Director on
the Election Form. If the Director 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
Director's Termination of Service.
4.5 Subsequent Election. If the Director makes any election under
Sections 4.1.2, 4.2.2, or 4.4.2 or 5.1.2 subsequent to December 31, 2005 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 Change of Control Benefit. Upon a Change of Control while the
Director is in the active service of the Company, the Company shall pay to the
Director the benefit described in this Section 4.5 in lieu of any other benefit
under this Agreement.
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4.6.1 Amount of Benefit. The benefit under Section 4.5 is the
Deferral Account balance on the date of the Director's Termination of
Service.
4.6.2 Payment of Benefit. The Company shall pay the benefit to the
Director in a lump-sum payment no later than 60 days after the Director's
Termination of Service.
4.7 Hardship Distribution. Upon the Company's determination (following
petition by the Director) that the Director has suffered an Unforeseeable
Emergency, the Company shall distribute to the Director 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.
ARTICLE 5
Death Benefits
5.1 Death During Active Service. If the Director dies while in the active
service of the Company, the Company shall pay to the Director'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 in the form elected by the Director on the Election Form. If
the Director 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 Director's death.
5.2 Death During Benefit Period. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived.
5.3 Death After Termination of Service But Before Benefit Payments
Commence. If the Director 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 Director's beneficiary that the Director 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 Director's death.
ARTICLE 6
Beneficiaries
6.1 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 accepted by
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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, all payments shall be made to the Director'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 Suicide. If the Director commits suicide within two years
after the date of this Agreement, or if the Director 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
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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 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 Director and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
10.2 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 it interfere with the shareholders' rights to replace the
Director. It also does not require the Director to remain a Director nor
interfere with the Director's right to terminate services 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.
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10.7 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.
10.8 Recovery of Estate Taxes. If the Director'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 Director's
estate, then the Director'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 Director's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Director'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 Director as to the subject matter hereof. No rights
are granted to the Director 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 service 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
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and rulings issued thereunder, so as not to subject the benefits accruing
hereunder to taxation pursuant to Section 409A(a)(1).
IN WITNESS WHEREOF, the Director and a duly authorized Company officer
have signed this Agreement.
DIRECTOR: COMPANY:
The First National Bank of Litchfield
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXXX X. XXXXX
Xxxxxxx X. Xxxx Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
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EXHIBIT 1 TO
DIRECTOR 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]
_x__ Lump sum
____ Equal monthly installments for 120 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]
_x__ Lump sum, payable on the first day of the month following my Early
Retirement Date.
____ Deferred Lump sum, payable on ________________________________ .
____ Equal monthly installments for 120 months commencing on the first day of
the month following my Early Retirement Date.
____ Deferred Equal monthly installments for 120 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]
_x__ Lump sum
____ Equal monthly installments for 120 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]
_x__ Lump sum
____ Equal monthly installments for 120 months.
Signature /s/ XXXXXXX X. XXXX
Xxxxxxx X. Xxxx
Date December 30, 2008
Accepted by the Company this 12th day of January, 2009.
By: /s/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
Title President and Chief Executive Officer
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BENEFICIARY DESIGNATION
The First National Bank of Litchfield
DIRECTOR INCENTIVE RETIREMENT AGREEMENT
XXXXXXX X. XXXX
I designate the following as beneficiary of any death benefits under the
Director Incentive Retirement Agreement:
Primary: Xxxxxx X. Xxxx
Contingent:
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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/ XXXXXXX X. XXXX
Xxxxxxx X. Xxxx
Date: December 30, 2008
Accepted by the Company this 12th day of January, 2009.
By: /s/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
Title President and Chief Executive Officer
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Schedule A
Deferred Bonus as a % of Annual Fees
-----------------------------------------------------
14.0% 34.5 37.8 40.8 43.9 47.1 50.2
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13.0% 32.3 34.9 38.2 41.1 44.0 47.0
-----------------------------------------------------
12.0% 30.1 32.6 35.5 38.3 41.0 43.7
-----------------------------------------------------
Earnings 11.0% 27.8 30.3 32.9 35.4 38.0 40.5
Growth -----------------------------------------------------
10.0% 25.6 28.0 30.3 32.6 34.9 37.2
-----------------------------------------------------
9.0% 23.4 25.8 27.6 29.8 31.9 34.0
-----------------------------------------------------
8.0% 21.2 22.5 25.0 26.9 28.8 30.8
-----------------------------------------------------
7.0% 18.9 19.6 22.4 24.1 25.8 27.5
-----------------------------------------------------
6.0% 16.7 17.6 19.7 21.3 22.8 24.3
-----------------------------------------------------
5.0% 14.5 15.8 17.1 18.4 19.7 21.1
-----------------------------------------------------
11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
Return on Equity
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Schedule B
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Director Incentive Retirement Plan
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Projected Projected
Director Age Retirement Years Annual Lump
Age Awarded Benefit or Sum
Payment
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Xxxxxxx 64 72 8 $7,622 $55,238
X. Xxxx
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