EXHIBIT 10.47
EMPLOYEE CHANGE IN CONTROL AGREEMENT
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. XXXXXX (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
1.2 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.10 "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.
1.1.11 "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.
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1.1.12 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.13 "Deferral Account" means the Company's accounting of
the Director's accumulated Deferrals plus accrued interest.
1.1.14 "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 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.
1.1.15 "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.
1.1.16 "Earnings" means the Company's reported Net Income
after taxes.
1.1.17 "Earnings Growth" means the percentage change in the
Company's Earnings over a one-year period, measured on December 31 of
each year.
1.1.18 "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.
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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.
1.1.20 "Termination of Service" means the Director ceasing to
be a member of the Company's Board of Directors for any reason
whatsoever.
1.1.21 "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.
1.1.22 "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
2.3 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.
2.4 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.
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3.5 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.
3.6 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
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.
3.7 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.
4.1.3 Amount of Benefit. The benefit under this Section 4.1 is
the Deferral Account balance on the Director's Normal Retirement Date.
4.1.4 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.
4.2.4 Amount of Benefit. The benefit under this Section 4.2 is
the Deferral Account balance on the Director's Early Retirement Date.
4.2.5 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
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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.
4.2.6 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 first day of the month following his Normal Retirement Age.
4.4 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.
4.4.1 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.
4.4.2 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.
4.4.3 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.
4.4.3 Amount of Benefit. The benefit under this Section 4.4 is
the Deferral Account balance at Termination of Service.
4.4.4 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.
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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.
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.
5.1.3 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.
5.1.4 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.
5.4 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.
5.5 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.
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ARTICLE 6
Beneficiaries
6.3 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 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.
6.4 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:
7.3 Excess Parachute Payment. To the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
7.4 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
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have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
8.2 Review Procedure. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of this Agreement on which the decision is based. If, because of the need for a
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.
10.3 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 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.
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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 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.
10.11 Administration. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
10.10.5 Interpreting the provisions of this Agreement;
10.10.6 Establishing and revising the method of accounting for
this Agreement;
10.10.7 Maintaining a record of benefit payments; and
10.10.8 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
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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 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. XXXXXX By /s/ XXXXXX X. XXXXX
Xxxxxxx X. Xxxxxx 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]
___ 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]
___ 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]
___ 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. XXXXXX
Xxxxxxx X. Xxxxxx
Date January 2, 2009
Accepted by the Company this 5th 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. XXXXXX
I designate the following as beneficiary of any death benefits under the
Director Incentive Retirement Agreement:
Primary: Xxxxx X.Xxxxxx
Contingent: Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx
--------------------------------------------------------------------------------
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. XXXXXX
Xxxxxxx X. Xxxxxx
Date January 2, 2009
Accepted by the Company this 5th 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
-----------------------------------------------------
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
--------------------------------------------------------------------------------
Xxxxxxx 60 72 12 $13,627 $98,755
X. Xxxxxx
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