Exhibit 10.8
Supplemental Executive Retirement Plan
THIS AGREEMENT is made and entered into this 29th day of May, 2003, by and
between Northway Financial, Inc., a corporation organized and existing
under the laws of the State of New Hampshire (hereinafter referred to as
the "Corporation"), and William J. Woodward, an Executive of the
Corporation (hereinafter referred to as the "Executive").
WHEREAS, the Executive has been in the employ of the Corporation and its
subsidiaries and is now serving the Corporation as its Chairman of the
Board; and
WHEREAS, in order to induce the Executive to continue in the employ of the
Corporation and in recognition of his past service, the Board of Directors
entered into a Collateral Assignment Split Dollar Agreement with the
Executive on September 19, 2000; and
WHEREAS, in light of changes in law, the Corporation and the Executive have
agreed to terminate the Collateral Assignment Split Dollar Agreement and
the Executive has agreed to endorse the life insurance policy thereunder to
the Corporation;
WHEREAS, it is the desire of the Corporation and the Executive to enter
into this Agreement under which the Corporation will agree to make certain
payments to the Executive upon the Executive's retirement or to the
Executive's beneficiaries in the event of the Executive's death prior to
the Executive's retirement;
FURTHERMORE, it is the intent of the parties hereto that this Agreement be
considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Executive, and be considered a
non-qualified benefit plan for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Executive is fully advised
of the Corporation's financial status and has had substantial input in the
design and operation of this benefit plan; and
NOW THEREFORE, in consideration of the termination of the Collateral
Assignment Split Dollar Agreement and the services the Executive has
performed for the Corporation in the past, and based upon the mutual
promises and covenants herein contained, the Corporation and the Executive
agree as follows:
DEFINITIONS
AFTER-TAX COST OF FUNDS:
After-Tax Cost of Funds means 3.75 percent multiplied by one minus the
Corporation's combined marginal Federal and state corporate income tax rate
for the prior Plan Year, as determined by the Board in its sole discretion.
ANNUAL RETIREMENT CREDIT:
The Annual Retirement Credit for the Executive for each Plan Year shall be
equal to the excess (if any) of the Policy Gain for the policy year ending
in the Plan Year over the Cost of Funds Expense for that Plan Year, divided
by one minus the Corporation's combined marginal Federal and state
corporate income tax rate for the prior Plan Year as determined by the
Board in its sole discretion. The determination of the Annual Retirement
Credit is made as of the end of the Plan Year. It is intended that the
Annual Retirement Credit in any particular Plan Year can be negative or
positive, and any negative Annual Retirement Credit for a particular Plan
Year prior to the Retirement Date shall adjust the Pre-Retirement Account
immediately; any negative Annual Retirement Credit for a particular Plan
Year after the Retirement Date will be applied to reduce the Annual
Retirement Credit for the following Plan Years.
BOARD:
Board means Board of Directors of the Corporation.
COST OF FUNDS EXPENSE:
The Cost of Funds Expense for any Plan Year shall be calculated by taking
the amount of premiums paid during such Plan Year for the life insurance
policy described in the definition of "Policy Gain" (or would have been
paid if the policy had been purchased), plus the amount of any benefit
payments during such Plan Year multiplied by the Corporation's combined
marginal Federal and State Corporate income tax rate for the prior Plan
Year, as determined by the Board in its sole discretion, plus the amount of
all previous years' Cost of Funds Expense, and multiplying that sum by the
After-Tax Cost of Funds.
PLAN YEAR:
Any reference to the "Plan Year" shall mean a calendar year from January
1st to December 31st.
POLICY GAIN:
The Policy Gain for any policy year shall be the aggregate annual income
from the life insurance contract described hereinafter as defined by FASB
Technical Bulletin 85-4, assuming no withdrawals of cash value or any
borrowing.
Insurance Company: The Travellers Life Insurance Co.
Policy Number: C0044C0101
Policy Name: Travellers Corporate Variable Life 2000
Plan Number: 0044C
Insured's Age and Sex: 54, male
Face Amount: $5,259,341
Annual Premium: $400,000
Number of Premium Payments: Five
Assumed Purchase Date: November 1, 2000
Assumed Premium Payment Date: Anniversary Date
If such contract of life insurance is actually purchased by the
Corporation, and operated in conformance with the assumptions set forth
above, then the actual policy as of the date it was actually purchased
shall be used in calculations under this Agreement. If such contract of
life insurance is not purchased or is subsequently surrendered or lapsed,
or otherwise operated inconsistent with the assumptions set forth above,
then the Corporation shall receive annual policy illustrations that assume
the above-described policy was purchased or had not subsequently
surrendered or lapsed or operated in a manner inconsistent with the
assumptions set forth above, and that assume 5.5% annual crediting rate on
the policy, net of all expenses but prior to cost of insurance charges.
Said illustration shall be received from the insurance company and will
indicate the increase in policy values for purposes of calculating the
amount of the Policy Gain.
In either case, reference to the life insurance contract is merely for
purposes of calculating a benefit. The Corporation has no obligation to
purchase such life insurance and, if purchased, the Executive and the
Executive's beneficiaries shall have no ownership interest in such policy
and shall always have no greater interest in the benefits under this
Agreement than that of an unsecured creditor of the Corporation.
PRE-RETIREMENT ACCOUNT:
A Pre-Retirement Account shall be established as a liability reserve
account on the books of the Corporation for the benefit of the Executive.
Prior to the Executive's Retirement Date, such liability reserve account
shall be adjusted each Plan Year, until the aforestated event occurs, by
the Annual Retirement Credit.
RETIREMENT DATE:
Retirement Date shall mean the first day of the calendar month following
the month in which the Executive terminates employment with the
Corporation.
RETIREMENT BENEFITS
RETIREMENT BENEFITS:
Upon the Executive's termination of employment with the Corporation for
reasons other than death or for Cause, he shall be entitled to receive the
balance in the Pre-Retirement Account as of his Retirement Date commencing
thirty (30) days following his Retirement Date in equal annual installments
over ten (10) years. If the Executive should die before receipt of the ten
(10) annual installments, the balance shall be paid to his designated
beneficiary in a lump sum. Additionally, for each Plan Year commencing
after the Retirement Date and until the Executive's death, the Corporation
shall pay the Executive an annual payment equal to the Annual Retirement
Credit for the prior Plan Year, provided however, that no payment shall be
made if the Annual Retirement Credit is negative. Such payment, if any,
shall be made as soon as practicable after the Annual Retirement Credit has
been determined.
DEATH:
Should the Executive die while employed by the Corporation, the Employer
shall provide a death benefit of $2,000,000 payable in a lump sum to the
individual or individuals the Executive may have designated in writing and
filed with the Corporation. In the absence of any effective beneficiary
designation, the unpaid balance shall be paid as set forth herein to the
duly qualified executor or administrator of the Executive's estate. Said
payment due hereunder shall be made the first day of the second month
following the decease of the Executive.
TERMINATION FOR CAUSE:
Should the Executive be terminated for Cause at any time, all benefits
under this Agreement shall be forfeited. The term "for Cause" shall mean a
finding by the Board that the Executive (i) acted dishonestly or engaged in
willful misconduct in the performance of his duties for the Corporation;
(ii) breached a fiduciary duty to the Corporation for personal profit to
himself; or (iii) willfully violated any law, rule or regulation (other
than traffic violations or similar offenses) or any final cease and desist
order.
DEATH BENEFIT:
Except as set forth above, there is no death benefit provided under this
Agreement.
RESTRICTIONS UPON FUNDING
The Corporation shall have no obligation to set aside, earmark or entrust
any fund or money with which to pay its obligations under this Agreement.
The Executive, his beneficiaries, or any successor in interest shall be and
remain simply a general creditor of the Corporation in the same manner as
any other creditor having a general claim for matured and unpaid
compensation.
The Corporation reserves the absolute right, at its sole discretion, to
either fund the obligations undertaken by this Agreement or to refrain from
funding the same and to determine the extent, nature and method of such
funding. Should the Corporation elect to fund this Agreement, in whole or
in part, through the purchase of life insurance, mutual funds or otherwise,
the Corporation reserves the absolute right, in its sole discretion, to
terminate such funding at any time, in whole or in part. At no time shall
any Executive be deemed to have any lien nor right, title or interest in or
to any specific funding investment or to any assets of the Corporation.
If the Corporation elects to invest in a life insurance policy upon the
life of the Executive, then the Executive shall assist the Corporation by
freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance.
MISCELLANEOUS
ALIENABILITY AND ASSIGNMENT PROHIBITION:
Neither the Executive, nor the Executive's surviving spouse, nor any other
beneficiary(ies) under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify or
otherwise encumber in advance any of the benefits payable hereunder nor
shall any of said benefits be subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the Executive or
the Executive's beneficiary(ies), nor be transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. In the event the
Executive or any beneficiary attempts assignment, commutation,
hypothecation, transfer or disposal of the benefits hereunder, the
Corporation's liabilities shall forthwith cease and terminate.
BINDING OBLIGATION OF THE CORPORATION AND ANY SUCCESSOR IN INTEREST:
This Agreement shall be binding upon the Corporation and any successor in
interest.
AMENDMENT OR REVOCATION:
It is agreed by and between the parties hereto that, during the lifetime of
the Executive, this Agreement may be amended or revoked at any time or
times, in whole or in part, by the mutual written consent of the Executive
and the Corporation.
EFFECT ON OTHER CORPORATION BENEFIT PLANS:
Nothing contained in this Agreement shall affect the right of the Executive
to participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan constituting a part of the Corporation's existing or future
compensation structure.
HEADINGS:
Headings and subheadings in this Agreement are inserted for reference and
convenience only and shall not be deemed a part of this Agreement.
APPLICABLE LAW:
The validity and interpretation of this Agreement shall be governed by the
laws of the State of New Hampshire.
PARTIAL INVALIDITY:
If any term, provision, covenant, or condition of this Agreement is
determined by an arbitrator or a court, as the case may be, to be invalid,
void, or unenforceable, such determination shall not render any other term,
provision, covenant, or condition invalid, void, or unenforceable, and the
Agreement shall remain in full force and effect notwithstanding such
partial invalidity.
EMPLOYMENT:
No provision of this Agreement shall be deemed to restrict or limit any
existing employment agreement by and between the Corporation and the
Executive, nor shall any conditions herein create specific employment
rights to the Executive nor limit the right of the Employer to discharge
the Executive with or without cause. In a similar fashion, no provision
shall limit the Executive's rights to voluntarily sever the Executive's
employment at any time.
ADMINISTRATION:
This Agreement shall be administered by the Board who shall have the right
to interpret the terms and provisions hereof in its sole discretion.
CLAIMS PROCEDURE
IF THE EXECUTIVE, BENEFICIARY OR THEIR AUTHORIZED REPRESENTATIVE
(HEREINAFTER THE "CLAIMANT") ASSERTS A RIGHT TO A BENEFIT UNDER THIS
AGREEMENT (OTHER THAN A DISABILITY BENEFIT) WHICH HAS NOT BEEN RECEIVED,
THE CLAIMANT MUST FILE A CLAIM FOR SUCH BENEFIT WITH THE BOARD ON FORMS
PROVIDED BY THE BOARD. THE BOARD SHALL RENDER ITS DECISION ON THE CLAIM
WITHIN 90 DAYS AFTER ITS RECEIPT OF THE CLAIM.
If special circumstances apply, the 90-day period may be extended by an
additional 90 days, provided that written notice of the extension is
provided to the Claimant during the initial 90-day period and such notice
indicates the special circumstances requiring an extension of time and the
date by which the Board expects to render its decision on the claim.
IF THE BOARD WHOLLY OR PARTIALLY DENIES THE CLAIM, THE BOARD SHALL PROVIDE
WRITTEN NOTICE TO THE CLAIMANT WITHIN THE TIME LIMITATIONS OF THE
IMMEDIATELY PRECEDING PARAGRAPH. SUCH NOTICE SHALL SET FORTH:
the specific reasons for the denial of the claim;
specific reference to pertinent provisions of the Agreement on which the
denial is based;
a description of any additional material or information necessary to
perfect the claim and an explanation of why such material or information is
necessary;
a description of the Agreement's claims review procedures, and the time
limitations applicable to such procedures; and
a statement of the Claimant's right to bring a civil action under Section
502(a) of ERISA if the claim denial is appealed to the Board and the Board
fully or partially denies the claim.
A CLAIMANT WHOSE APPLICATION FOR BENEFITS IS DENIED MAY REQUEST A FULL AND
FAIR REVIEW OF THE DECISION DENYING THE CLAIM BY FILING, IN ACCORDANCE WITH
SUCH PROCEDURES AS THE BOARD MAY ESTABLISH, A WRITTEN APPEAL WHICH SETS
FORTH THE DOCUMENTS, RECORDS AND OTHER INFORMATION RELATING TO THE CLAIM
WITHIN 60 DAYS AFTER RECEIPT OF THE NOTICE OF THE DENIAL FROM THE BOARD. IN
CONNECTION WITH SUCH APPEAL AND UPON REQUEST BY THE CLAIMANT, A CLAIMANT
MAY REVIEW (OR RECEIVE FREE COPIES OF) ALL DOCUMENTS, RECORDS OR OTHER
INFORMATION RELEVANT TO THE CLAIMANT'S CLAIM FOR BENEFIT, ALL IN ACCORDANCE
WITH SUCH PROCEDURES AS THE BOARD MAY ESTABLISH. IF A CLAIMANT FAILS TO
FILE AN APPEAL WITHIN SUCH 60-DAY PERIOD, HE SHALL HAVE NO FURTHER RIGHT TO
APPEAL.
A DECISION ON THE APPEAL BY THE BOARD SHALL INCLUDE A REVIEW BY THE BOARD
THAT TAKES INTO ACCOUNT ALL COMMENTS, DOCUMENTS, RECORDS AND OTHER
INFORMATION SUBMITTED BY THE CLAIMANT RELATING TO THE CLAIM, WITHOUT REGARD
TO WHETHER SUCH INFORMATION WAS SUBMITTED OR CONSIDERED IN THE INITIAL
CLAIM DETERMINATION. THE BOARD SHALL RENDER ITS DECISION ON THE APPEAL NOT
LATER THAN 60 DAYS AFTER THE RECEIPT BY THE BOARD OF THE APPEAL. IF SPECIAL
CIRCUMSTANCES APPLY, THE 60-DAY PERIOD MAY BE EXTENDED BY AN ADDITIONAL 60
DAYS, PROVIDED THAT WRITTEN NOTICE OF THE EXTENSION IS PROVIDED TO THE
CLAIMANT DURING THE INITIAL 60-DAY PERIOD AND SUCH NOTICE INDICATES THE
SPECIAL CIRCUMSTANCES REQUIRING AN EXTENSION OF TIME AND THE DATE BY WHICH
THE BOARD EXPECTS TO RENDER ITS DECISION ON THE CLAIM ON APPEAL.
If the Board wholly or partly denies the claim on appeal, the Board shall
provide written notice to the Claimant within the time limitations of the
immediately preceding paragraph. Such notice shall set forth:
the specific reasons for the denial of the claim;
specific reference to pertinent provisions of the Agreement on which the
denial is based;
a statement of the Claimant's right 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
a statement of the Claimant's right to bring a civil action under Section
502(a) of ERISA.
The foregoing claims procedures described in this Section V shall be
administered in accordance with Section 503 of ERISA and guidance issued
thereunder. Any written notice required to be given to the Claimant may, at
the option of the Board and in accordance with guidance issued under
Section 503 of ERISA, be provided electronically.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set
forth hereinabove and that, upon execution, each has received a conforming
copy.
NORTHWAY FINANCIAL, INC.
/s/ Ronald Cormier By: /s/ Stephen G. Boucher
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Witness Title: Chairman, Human Resources,
Compensation and Nominating
Committee, Northway Financial, Inc.
/s/ J. N. Rozek /s/ William J. Woodward
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Witness William J. Woodward