EXHIBIT 10.3
THE OHIO VALLEY BANK COMPANY
SECOND AMENDED AND RESTATED
DIRECTOR RETIREMENT AGREEMENT
This SECOND AMENDED AND RESTATED DIRECTOR RETIREMENT AGREEMENT (this
"Agreement") is adopted this 28th day of December, 2007 by and between THE OHIO
VALLEY BANK COMPANY, a state-chartered commercial bank located in Gallipolis,
Ohio (the "Company"), and JEFFREY E. SMITH (the "Director"). This Agreement
amends and restates the prior Amended and Restated Director Retirement Agreement
between the Company and the Director dated January 12, 2004 (the "Prior
Agreement").
The parties intend this amended and restated Agreement to be a material
modification of the Prior Agreement such that all amounts earned and vested
prior to December 31, 2004 shall be subject to the provisions of Section 409A of
the Code and the regulations promulgated thereunder. The purpose of this
Agreement is to provide specified benefits to the Director, a member of a select
group of management or highly compensated employees who contribute materially to
the continued growth, development and future business success of the Company.
This Agreement shall be unfunded for tax purposes.
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:
1.1 "Beneficiary" means each designated person or entity, or the estate of the
deceased Director, entitled to any benefits upon the death of the Director
pursuant to Article 4.
1.2 "Beneficiary Designation Form" means the form established from time to time
by the Plan Administrator that the Director completes, signs and returns to the
Plan Administrator to designate one or more beneficiaries.
1.3 "Board" means the Board of Directors of the Company as from time to time
constituted.
1.4 "Code" means the Internal Revenue Code of 1986, as amended, and all
regulations and guidance thereunder, including such regulations and guidance as
may be promulgated after the Effective Date of this Agreement.
1.5 "Disability" means the Director: (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months; or (ii) is, by
reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees or directors of the Company.
Medical determination of Disability may be made by either the Social Security
Administration or by the provider of an accident or health plan covering
employees or directors of the Company, provided that the definition of
"disability" applied under such insurance program complies with the requirements
of the preceding sentence. Upon the request of the Plan Administrator, the
Director must submit proof to the Plan Administrator of the Social Security
Administration's or the provider's determination.
1.6 "Effective Date" means January 1, 2005.
1.7 "Normal Retirement Age" means the Annual Meeting of Shareholders following
the calendar year in which the Director attains age seventy (70).
1.8 "Normal Retirement Date" means the later of Normal Retirement Age or
Termination of Service.
1.9 "Plan Administrator" means the plan administrator described in Article 6.
1.10 "Plan Year" means each twelve (12) month period commencing on January 1 and
ending on December 31 of each year.
1.11 "Specified Employee" means an employee who at the time of Termination of
Service is a key employee of the Company, if any stock of the Company is
publicly traded on an established securities market or otherwise. For purposes
of this Agreement, an employee is a key employee if the employee meets the
requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in
accordance with the regulations thereunder and disregarding section 416(i)(5))
at any time during the twelve (12) month period ending on December 31 (the
"identification period"). If the employee is a key employee during an
identification period, the employee is treated as a key employee for purposes of
this Agreement during the twelve (12) month period that begins on the first day
of April following the close of the identification period.
1.12 "Termination for Cause" has the meaning set forth in Article 5.
1.13 "Termination of Service" means termination of the Director's service with
the Company for reasons other than death or Disability. Whether a Termination of
Service has occurred is determined in accordance with the requirements of Code
Section 409A based on whether the facts and circumstances indicate that the
Company and Director reasonably anticipated that no further services would be
performed after a certain date or that the level of bona fide services the
Director would perform after such date (whether as an employee or as an
independent contractor) would permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed (whether
as an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the Company if
the Director has been providing services to the Company less than thirty-six
(36) months).
1.14 "Years of Service" means the total number of twelve (12) month periods
during which the Director has served on the Board.
Article 2
Distributions During Lifetime
2.1 Normal Retirement Benefit. Upon Termination of Service on or after Normal
Retirement Age, the Company shall distribute to the Director the benefit
described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is the
greater of: (i) fifty percent (50%) of the Director's three (3) prior years
average total annual or monthly Fees; or (ii) fifty percent (50%) of any
consecutive three (3) prior years average total annual or monthly Fees.
2.1.2 Payment of Benefit. The Company shall distribute the annual benefit
to the Director in twelve (12) equal monthly installments commencing on the
first day of the month following Termination of Service. The annual benefit
shall be distributed to the Director for two hundred forty (240) monthly
installments.
2.2 Disability Benefit. If the Director experiences a Disability prior to Normal
Retirement Age which results in Termination of Service, the Company shall
distribute to the Director the benefit described in this Section 2.2 in lieu of
any other benefit under this Article.
2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the
greater of: (i) fifty percent (50%) of the Director's three (3) prior years
average total annual or monthly Fees; or (ii) fifty percent (50%) of any
consecutive three (3) prior years average total annual or monthly Fees.
2.2.2 Payment of Benefit. The Company shall distribute the annual benefit
to the Director in twelve (12) equal monthly installments commencing on the
first day of the month following Termination of Service. The annual benefit
shall be distributed to the Director for two hundred forty (240) monthly
installments.
2.3 Restriction on Commencement of Distributions. Notwithstanding any provision
of this Agreement to the contrary, if the Director is considered a Specified
Employee, the provisions of this Section 2.3 shall govern all distributions
hereunder. If benefit distributions which would otherwise be made to the
Director due to Termination of Service are limited because the Director is a
Specified Employee, then such distributions shall not be made during the first
six (6) months following Termination of Service. Rather, any distribution which
would otherwise be paid to the Director during such period
shall be accumulated and paid to the Director in a lump sum on the first day of
the seventh month following Termination of Service. All subsequent distributions
shall be paid in the manner specified.
2.4 Distributions Upon Taxation of Amounts Deferred. If, pursuant to Code
Section 409A, the Federal Insurance Contributions Act or other state, local or
foreign tax, the Director becomes subject to tax on the amounts deferred
hereunder, then the Company may make a limited distribution to the Director in a
manner that conforms to the requirements of Code section 409A. Any such
distribution will decrease the Director's benefits distributable under this
Agreement.
2.5 Change in Form or Timing of Distributions. All changes in the form or timing
of distributions hereunder must comply with the following requirements. The
changes:
(a) may not accelerate the time or schedule of any distribution, except as
provided in Code Section 409A and the regulations thereunder;
(b) must, for benefits distributable under Sections 2.1 and 2.2, delay the
commencement of distributions for a minimum of five (5) years from the date the
first distribution was originally scheduled to be made; and
(c) must take effect not less than twelve (12) months after the election is
made.
Article 3
Distribution at Death
3.1 Death During Active Service. If the Director dies while in the active
service of the Company, the Company shall distribute to the Beneficiary the
benefit described in this Section 3.1. This benefit shall be distributed in lieu
of the benefits under Article 2.
3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is the
greater of: (i) fifty percent (50%) of the Director's three (3) prior years
average total annual or monthly Fees; or (ii) fifty percent (50%) of any
consecutive three (3) prior years average total annual or monthly Fees.
3.1.2 Payment of Benefit. The Company shall distribute the annual benefit
to the Beneficiary in twelve (12) equal monthly installments commencing the
first day of the fourth month following the Director's death. The annual benefit
shall be distributed to the Beneficiary for sixty (60) months.
3.2 Death During Benefit Period or Before Benefit Distributions Commence. If the
Director dies after any benefit distributions have commenced under this
Agreement but before receiving all such distributions, or if the Director is
entitled to benefit distributions under this Agreement but dies prior to the
commencement of said benefit distributions, the Company shall distribute to the
Beneficiary the lesser of: (i) the remaining benefits due the Director; or (ii)
sixty (60) additional monthly benefits, commencing on the first day of the
fourth month following the Director's death.
Article 4
Beneficiaries
4.1 In General. The Director shall have the right, at any time, to designate a
Beneficiary to receive any benefit distributions under this Agreement upon the
death of the Director. The Beneficiary designated under this Agreement may be
the same as or different from the beneficiary designated under any other plan of
the Company in which the Director participates.
4.2 Designation. The Director shall designate a Beneficiary by completing and
signing the Beneficiary Designation Form and delivering it to the Plan
Administrator or its designated agent. If the Director names someone other than
the Director's spouse as a Beneficiary, the Plan Administrator may, in its sole
discretion, determine that spousal consent is required to be provided in a form
designated by the Plan Administrator, executed by the Director's spouse and
returned to the Plan Administrator. 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. The Director shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the Beneficiary
Designation Form and the Plan Administrator's rules and procedures. Upon the
acceptance by the Plan Administrator of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be cancelled. The Plan
Administrator shall be entitled to rely on the last Beneficiary Designation Form
filed by the Director and accepted by the Plan Administrator prior to the
Director's death.
4.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by the
Plan Administrator or its designated agent.
4.4 No Beneficiary Designation. If the Director dies without a valid Beneficiary
designation, or if all designated Beneficiaries predecease the Director, then
the Director's spouse shall be the designated Beneficiary. If the Director has
no surviving spouse, any benefit shall be paid to the personal representative of
the Director's estate.
4.5 Facility of Distribution. If the Plan Administrator determines in its
discretion that a benefit is to be distributed to a minor, to a person declared
incompetent or to a person incapable of handling the disposition of that
person's property, the Plan Administrator may direct distribution of such
benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent person or incapable person. The Plan
Administrator may require proof of incompetence, minority or guardianship as it
may deem appropriate prior to distribution of the benefit. Any distribution of a
benefit shall be a distribution for the account of the Director and the
Beneficiary, as the case may be, and shall completely discharge any liability
under this Agreement for such distribution amount.
Article 5
General Limitations
5.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not distribute any benefit under this Agreement
if the Company terminates the Director's service for:
(a) Gross negligence or gross neglect of duties to the Company;
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Director's service
and resulting in a material adverse effect on the Company.
5.2 Suicide or Misstatement. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not distribute any benefit under this Agreement
if the Director commits suicide within two (2) years after the Effective Date,
or if an insurance company which issued a life insurance policy covering the
Director and owned by the Company denies coverage (i) for material misstatements
of fact made by the Director on an application for such life insurance, or (ii)
for any other reason.
5.3 Removal. Notwithstanding any provision of this Agreement to the contrary,
the Company shall not distribute any benefit under this Agreement if the
Director is subject to a final removal or prohibition order issued by an
appropriate federal banking agency pursuant to Section 8(e) of the Federal
Deposit Insurance Act.
5.4 Excess Parachute Payment. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not distribute any benefit under this Agreement
to the extent the benefit would be an excess parachute payment under Section
280G of the Code.
Article 6
Administration of Agreement
6.1 Plan Administrator Duties. The Plan Administrator shall administer this
Agreement according to its express terms and shall also have the discretion and
authority to (i) make, amend, interpret and enforce all appropriate rules and
regulations for the administration of this Agreement and (ii) decide or resolve
any and all questions, including interpretations of this Agreement, as may arise
in connection with this Agreement to the extent the exercise of such discretion
and authority does not conflict with Code Section 409A.
6.2 Agents. In the administration of this Agreement, the Plan Administrator may
employ agents and delegate to them such administrative duties as the Plan
Administrator 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.
6.3 Binding Effect of Decisions. Any decision or action of the Plan
Administrator with respect to any question arising out of or in connection with
the administration, interpretation or application of this Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in this Agreement.
6.4 Indemnity of Plan Administrator. The Company shall indemnify and hold
harmless 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.
6.5 Bank 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 Director's death,
Disability or Termination of Service, and such other pertinent information as
the Plan Administrator may reasonably require.
Article 7
Claims And Review Procedures
7.1 Claims Procedure. The Director or Beneficiary ("claimant") who has not
received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by
submitting to the Company a written claim for the benefits. If such a claim
relates to the contents of a notice received by the claimant, the claim must be
made within sixty (60) days after such notice was received by the claimant. All
other claims must be made within one hundred eighty (180) days of the date on
which the event that caused the claim to arise occurred. The claim must state
with particularity the determination desired by the claimant.
7.1.2 Timing of Company Response. The Company shall respond to such
claimant within ninety (90) days after receiving the claim. If the Company
determines that special circumstances require additional time for processing the
claim, the Company can extend the response period by an additional ninety (90)
days by notifying the claimant in writing, prior to the end of the initial
ninety (90) day period, which an additional period is required. The notice of
extension must set forth the special circumstances and the date by which the
Company expects to render its decision.
7.1.3 Notice of Decision. If the Company denies part or all of the claim,
the Company shall notify the claimant in writing of such denial. The Company
shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of the Agreement on which the denial
is based,
(c) A description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is needed,
(d) An explanation of the Agreement's review procedures and the time limits
applicable to such procedures, and
(e) A statement of the claimant's right to bring a civil action following an
adverse benefit determination on review.
7.2 Review Procedure. If the Company denies part or all of the claim, the
claimant shall have the opportunity for a full and fair review by the Company of
the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant,
within sixty (60) days after receiving the Company's notice of denial, must file
with the Company a written request for review.
7.2.2 Additional Submissions - Information Access. The claimant shall then
have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Company shall also provide the claimant,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant to the claimant's claim for
benefits.
7.2.3 Considerations on Review. In considering the review, the Company
shall take into account all materials and information the claimant submits
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.
7.2.4 Timing of Company Response. The Company shall respond in writing to
such claimant within sixty (60) days after receiving the request for review. If
the Company determines that special circumstances require additional time for
processing the claim, the Company can extend the response period by an
additional sixty (60) days by notifying the claimant in writing prior to the end
of the initial sixty (60) day period that an additional period is required. The
notice of extension must set forth the special circumstances and the date by
which the Company expects to render its decision.
7.2.5 Notice of Decision. The Company shall notify the claimant in writing
of its decision on review. The Company shall write the notification in a manner
calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of the Agreement on which the denial
is based,
(c) A statement that the claimant is entitled to receive, upon request and free
of charge, reasonable access to, and copies of, all documents, records and
other information relevant to the claimant's claim for benefits, and
(d) A statement of the claimant's right to bring a civil action.
Article 8
Amendments and Termination
8.1 Amendments. This Agreement may be amended only by a written agreement signed
by the Company and the Director. However, the Company may unilaterally amend
this Agreement to conform to written directives to the Company from its auditors
or banking regulators or to comply with legislative changes or tax law,
including without limitation Section 409A of the Code and any and all Treasury
regulations and guidance promulgated thereunder.
8.2 Plan Termination Generally. This Agreement may be terminated only by a
written agreement signed by the Company and the Director. Except as provided in
Section 8.3, the termination of this Agreement shall not cause a distribution of
benefits under this Agreement. Rather, after such termination benefit
distributions will be made at the earliest distribution event permitted under
Article 2 or Article 3.
8.3 Plan Terminations Under Section 409A. Notwithstanding anything to the
contrary in Section 8.2, if this Agreement terminates in the following
circumstances:
(a) Within thirty (30) days before or twelve (12) months after 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 described in Section
409A(a)(2)(A)(v) of the Code, provided that all distributions are made no
later than twelve (12) months following such termination of the Agreement
and further provided that all the Company's arrangements which are
substantially similar to the Agreement are terminated so the Director and
all participants in the similar arrangements are required to receive all
amounts of compensation deferred under the terminated arrangements within
twelve (12) months of the termination of the arrangements;
(b) Upon the Company's dissolution or with the approval of a bankruptcy court
provided that the amounts deferred under the Agreement are included in the
Director's gross income in the latest of (i) the calendar year in which the
Agreement terminates; (ii) the calendar year in which the amount is no
longer subject to a substantial risk of forfeiture; or (iii) the first
calendar year in which the distribution is administratively practical; or
(c) Upon the Company's termination of this and all other arrangements that
would be aggregated with this Agreement pursuant to Treasury Regulations
Section 1.409A-1(c) if the Director participated in such arrangements
("Similar Arrangements"), provided that (i) the termination and liquidation
does not occur
proximate to a downturn in the financial health of the Company, (ii) all
termination distributions are made no earlier than twelve (12) months and
no later than twenty-four (24) months following such termination, and
(iii) the Company does not adopt any new arrangement that would be a
Similar Arrangement for a minimum of three (3) years following the date
the Company takes all necessary action to irrevocably terminate and
liquidate the Agreement;
the Company may distribute the amount the Bank has accrued with respect to the
Bank's obligations hereunder, determined as of the date of the termination of
the Agreement, to the Director in a lump sum subject to the above terms.
Article 9
Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Director and the Company and
their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Service. This Agreement is not a contract for employment. It
does not give the Director the right to remain as a member of the Board, nor
does it interfere with the Company's right to discharge the Director. It also
does not require the Director to remain a member of the Board nor interfere with
the Director's right to terminate service at any time.
9.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding and Reporting. The Company shall withhold any taxes that are
required to be withheld, including but not limited to taxes owed under Section
409A of the Code and regulations thereunder, from the benefits provided under
this Agreement. Director acknowledges that the Company's sole liability
regarding taxes is to forward any amounts withheld to the appropriate taxing
authorities. The Company shall satisfy all applicable reporting requirements,
including those under Section 409A of the Code and regulations thereunder.
9.5 Applicable Law. This 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.
9.6 Unfunded Arrangement. The Director and the Beneficiary are general unsecured
creditors of the Company for the distribution of benefits under this Agreement.
The benefits represent the mere promise by the Company to distribute 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 or other informal
funding asset is a general asset of the Company to which the Director and the
Beneficiary have no preferred or secured claim.
9.7 Reorganization. The Company shall not merge or consolidate into or with
another Company, or reorganize, or sell substantially all of its assets to
another bank, firm, or person unless such succeeding or continuing bank, 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 bank.
9.8 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.
9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this
Agreement requires, and the context will permit, the use of the masculine gender
includes the feminine and use of the singular includes the plural
9.10 Alternative Action. In the event it shall become impossible for the Company
or the Plan Administrator to perform any act required by this Agreement, the
Company or Plan Administrator may in its discretion perform such alternative act
as most nearly carries out the intent and purpose of this Agreement and is in
the best interests of the Company, provided that such alternative acts do not
violate Section 409A of the Code.
9.11 Headings. Article and section headings are for convenient reference only
and shall not control or affect the meaning or construction of any of its
provisions.
9.12 Validity. In case any provision of this Agreement shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Agreement shall be construed and enforced as if
such illegal and invalid provision has never been inserted herein.
9.13 Notice. Any notice or filing required or permitted to be given to the Plan
Administrator under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address below:
The Ohio Valley Bank Company
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Attn: BOLI Administrator
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P O Box 240 420 Third Avenue
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Gallipolis OH 45631-0240
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Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark or the
receipt for registration or certification.
Any notice or filing required or permitted to be given to the Director
under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Director.
9.14 Compliance with Section 409A. This Agreement shall be interpreted and
administered consistent with Code Section 409A.
IN WITNESS WHEREOF, the Director and an authorized representative of
the Company have signed this Agreement.
DIRECTOR: THE OHIO VALLEY BANK COMPANY
/s/ Jeffrey E. Smith By: /s/ Paula W. Clay
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Jeffrey E. Smith Title: AVP and Assistant Secretary