Exhibit 10.39
THE FIRST NATIONAL BANK OF LITCHFIELD
-------------------------------------
FIRST AMENDED AND RESTATED
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
THIS FIRST AMENDMENT AND RESTATEMENT to the EXECUTIVE INCENTIVE RETIREMENT
AGREEMENT dated the 20th day of November, 2008 (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
Matthew R. Robison (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 is (i) 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 or (ii) receiving income replacement benefits for a period of
not less than three (3) months under an accident and health plan covering
the employees of the Bank by reason of any medically determinable physical
or mental impairment which can be expected to result in death or last for
a continuous period of at least twelve (12) months. 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. The Executive will be deemed disabled if determined to
35
be totally disabled by the Social Security Administration.
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 "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 stock redemptions, mergers, acquisitions, stock
splits and other items of that nature.
1.1.12 "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.
1.1.13 "Normal Retirement Age" means the Executive's 65th birthday.
1.1.14 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.15 "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.
1.1.16 "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.
1.1.17 "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.
36
1.1.18 "Unforeseeable Emergency" means a severe financial hardship
to the participant resulting from an illness or accident of the Executive,
the Executive's spouse or a dependent of the Executive, loss of the
Executive's property due to casualty, or similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Executive, as limited by Section 409A(a)(1)(B)(ii)(II) of
the Code and Treasury Regulation 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 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 Earnings Growth
and Return On Equity (the "ROE") 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 ROE 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 Emergency occurs, the Executive, by
written instructions to the
37
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 there is a Termination of Employment of
the Executive on or after the Executive's 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 seventh month following the
Executive's Termination of Employment 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 there is a Termination of Employment of
the Executive 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 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 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 no earlier than the date which is
six (6) months after Termination of Employment 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 there is a Termination of Employment of the
Executive 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.
38
4.3.3 Payment of Benefit. The Company shall pay the benefit to the
Executive in a single lump sum no earlier than the date which is six (6)
months 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 Subsequent Election. If the Executive makes any election under
Sections 4.1.2, 4.2.2, 4.4.2 or 5.1.2 subsequent to December 31, 2004 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 Hardship Distribution. Upon the Company's determination (following
petition by the Executive) that the Executive has suffered an Unforeseeable
Emergency, the Company shall distribute to the Executive 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.
39
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 Death.
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
40
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 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
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
41
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
42
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 supersedes the prior agreement
between Company and the Executive on the subject matter hereof dated December
19, 2002 and 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 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 employment 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).
(Signatures on next page.)
43
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
The First National Bank of Litchfield
Matthew R. Robison By: Joseph J. Greco
- ------------------ ---------------
Title: President & CEO
---------------
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]
MR Lump sum
--
____ 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]
MR Lump sum, payable on the first day of the month following my Early
- -- Retirement Date.
____ Deferred Lump sum, payable on __________________.
____ 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]
MR 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]
MR Lump sum
- --
____ Equal monthly installments for 180 months.
44
Signature: /s/ Matthew R. Robison
----------------------
Date: December 4, 2008
Accepted by the Company this 4th day of December, 2008.
By: /s/ Joseph J. Greco
-------------------
Title: President & CEO
43
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: Nancy Robison
________________________________________________________________________________
Contingent: ___________________________________________________________________
________________________________________________________________________________
Note: To name a trust as beneficiary, please provide the name of the trustee(s)
and the exact name and date of the trust agreement.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ Matthew R. Robision
-----------------------
Date: December 4, 2008
Accepted by the Company this 4th day of December, 2008.
By: /s/ Joseph J. Greco
------------------
Title: President & CEO
----------------
45
Schedule A
Deferred Bonus as a % of Annual Fees
-----------------------------------------------------------
14.0% 11.0 12.1 13.1 14.1 15.1 16.1
-----------------------------------------------------------
13.0% 10.3 11.3 12.2 13.1 14.1 15.0
-----------------------------------------------------------
12.0% 9.6 10.5 11.4 12.2 13.1 14.0
-----------------------------------------------------------
Earnings 11.0% 8.9 9.7 10.5 11.3 12.1 13.0
Growth -----------------------------------------------------------
10.0% 8.2 8.8 9.7 10.4 11.2 11.9
-----------------------------------------------------------
9.0% 7.5 8.1 8.8 9.5 10.2 10.9
-----------------------------------------------------------
8.0% 6.8 7.5 8.0 8.6 9.2 9.8
-----------------------------------------------------------
7.0% 6.1 6.5 7.2 7.7 8.3 8.8
-----------------------------------------------------------
6.0% 5.3 5.9 6.3 6.8 7.3 7.8
-----------------------------------------------------------
5.0% 4.6 5.0 5.5 5.9 6.3 6.7
-----------------------------------------------------------
11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
Return on Equity
46