EXHIBIT 10.3
THE OHIO VALLEY BANK COMPANY
DIRECTOR RETIREMENT AGREEMENT
THIS DIRECTOR RETIREMENT AGREEMENT (the "Agreement") is adopted this 16th
day of March, 2004, by and between THE OHIO VALLEY BANK COMPANY, a
state-chartered commercial bank located in Gallipolis, Ohio (the "Bank") and
BRENT A. SAUNDERS (the "Director"). The purpose of this Agreement is to
encourage the Director to remain a member of the Bank's Board of Directors. 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 "Accrual Balance" means the liability that should be accrued by the Bank,
under Generally Accepted Accounting Principles ("GAAP"), for the Bank's
obligation to the Director under this Agreement, by applying Accounting
Principles Board Opinion Number 12 ("APB 12") as amended by Statement of
Financial Accounting Standards Number 106 ("FAS 106") and the Discount
Rate. Any one of a variety of amortization methods may be used to determine
the Accrual Balance. However, once chosen, the method must be consistently
applied. The Accrual Balance shall be reported annually by the Bank to the
Director.
1.2 "Beneficiary" means each designated person, or the estate of the deceased
Director, entitled to benefits, if any, upon the death of the Director
determined pursuant to Article 4.
1.3 "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.
1.4 "Board" means the Board of Directors of the Bank as from time to time
constituted.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Compensation" means the total fees payable to the Director during a Plan
Year.
1.7 "Disability" means 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 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 12 months, receiving income replacement
benefits for a period of not less than 3 months under an accident and
health plan covering employees of the Bank. 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 of the Bank.
Upon the request of the Plan Administrator, the Director must submit proof
to the Plan Administrator of Social Security Administration's or the
provider's determination.
1.8 "Discount Rate" means the rate used by the Plan Administrator for
determining the Accrual Balance. The initial Discount Rate is six percent
(6%). However, the Plan Administrator, in its discretion, may adjust the
Discount Rate to maintain the rate within reasonable standards according to
GAAP and/or applicable bank regulatory guidance.
1.9 "Early Termination" means Separation from Service before Normal Retirement
Age for reasons other than death, Disability or Termination for Cause.
1.10 "Effective Date" means November 1, 2001.
1.11 "Normal Retirement Age" means the Annual Meeting of Shareholders following
the calendar year in which the Director attains the age of seventy (70).
1.12 "Normal Retirement Date" means the later of the Normal Retirement Age or
Separation from Service.
1.13 "Plan Administrator" means the plan administrator described in Article 6.
1.14 "Plan Year" means each twelve-month period commencing on January 1 and
ending on December 31 of each year. The initial Plan Year shall commence on
the Effective Date of this Plan and end on the following December 31.
1.15 "Separation from Service" means the termination of the Director's service
with the Bank for reasons other than death or Disability. Whether a
Separation form Service takes place is determined based on the facts and
circumstances surrounding the termination of the Director's service and
whether the Bank and the Director intended for the Director to provide
significant services for the Bank following such termination. A termination
of service will not be considered a Separation from Service if:
(a) the Director continues to provide services as a director of the Bank at an
annual rate that is twenty percent (20%) or more of the services rendered,
on average, during the immediately preceding three full calendar years of
service (or, if in the service of the Bank less than three years, such
lesser period) and the annual remuneration for such services is twenty
percent (20%) or more of the average annual remuneration earned during the
final three full calendar years of service (or, if less, such lesser
period), or
(b) the Director continues to provide services to the Bank in a capacity other
than as a director of the Bank at an annual rate that is fifty percent
(50%) or more of the services rendered, on average, during the immediately
preceding three full calendar years of service (or if in the service of the
Bank less than three years, such lesser period) and the annual remuneration
for such services is fifty percent (50%) or more of the average annual
remuneration earned during the final three full calendar years of service
(or if less, such lesser period).
1.16 "Termination for Cause" has that meaning set forth in Section 5.2.
1.17 "Years of Service" means the total number of twelve-month periods during
which the Director has served on the Bank's Board of Directors.
Article 2
Distributions During Lifetime
2.1 Normal Retirement Benefit. Upon the Director reaching Normal Retirement Age
while in the active service of the Bank, the Bank 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 Compensation; or (ii) fifty percent (50%)
of any consecutive three (3) prior years average total annual or monthly
Compensation.
2.1.2 Distribution of Benefit. For Directors with ten (10) Years of Service or
less, the Bank shall pay the annual benefit to the Director in twelve (12)
equal monthly installments payable on the first day of each month
commencing with the month following the Director's Normal Retirement Date.
The annual benefit shall be paid to the Director for ten (10) years. For
Directors with more than ten (10) Years of Service, the Bank shall pay the
annual benefit to the Director in twelve (12) equal monthly installments
payable on the first day of each month commencing with the month following
the Director's Normal Retirement Date. The annual benefit shall be paid to
the Director for twenty (20) years.
2.2 Disability Benefit. If the Director's Disability results in Separation from
Service prior to Normal Retirement Age, the Bank 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 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 Compensation; or (ii) fifty percent (50%) of any
consecutive three (3) years average total annual or monthly Compensation.
2.2.2 Distribution of Benefit. For Directors with ten (10) Years of Service or
less, the Bank shall pay the annual benefit to the Director in twelve (12)
equal monthly installments payable on the first day of each month
commencing with the month following the Director's Normal Retirement Date.
The annual benefit shall be paid to the Director for ten (10) years. For
Directors with more than ten (10) Years of Service, the Bank shall pay the
annual benefit to the Director in twelve (12) equal monthly installments
payable on the first day of each month commencing with the month following
the Director's Normal Retirement Date. The annual benefit shall be paid to
the Director for twenty (20) years.
2.3 Restriction on Timing of Distribution. Notwithstanding any provision of
this Agreement to the contrary, if the Director is considered a "specified
employee" under Section 409A of the Code and regulations thereunder,
benefit distributions that qualify as a "separation from service" under
Section 409A of the Code and regulations thereunder may not commence
earlier than six (6) months after the date of such separation from service.
Article 3
Distribution at Death
3.1 Death During Active Service. If the Director dies while in the active
service of the Bank, the Bank 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 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 Compensation; or (ii) fifty percent (50%) of any
consecutive three (3) prior years average total annual or monthly
Compensation.
3.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to
the Beneficiary in twelve (12) equal monthly installments payable on the
first day of each month commencing with the month following the Director's
death and following receipt by the Bank of the Director's death
certificate. The annual benefit shall be paid to the Director's beneficiary
for five (5) years.
3.2 Death During Distribution of a Benefit. If the Director dies after any
benefit distributions have commenced under this Agreement but before
receiving all such distributions, the Bank shall distribute to the
Beneficiary the benefit described in this Section 3.2. This benefit shall
be distributed in lieu of any other benefits under this Article.
3.2.1 Amount of Benefit. The annual benefit under this Section 3.2 is the
greater of: (i) fifty percent (50%) of the Director's three (3) prior years
average total annual or monthly Compensation; or (ii) fifty percent (50%)
of any consecutive three (3) prior years average total annual or monthly
compensation.
3.2.2 Distribution of Benefit. The Bank shall pay the Beneficiary at the same
time and in the same amounts they would have paid to the Director had the
Director survived. The number of payments shall be the lesser of: (i) the
remaining benefit payments due to the Director; or (ii) five (5) years of
benefits, paid monthly.
3.3 Death After Separation from Service But Before Benefit Distributions
Commence. If the Director is entitled to benefit distributions under this
Agreement, but dies prior to the commencement of said benefit
distributions, the Bank shall distribute to the Beneficiary the same
benefits that the Director was entitled to prior to death except that the
benefit distributions shall commence within thirty (30) days following
receipt by the Bank of the Director's death certificate.
Article 4
Beneficiaries
4.1 Beneficiary. The Director shall have the right, at any time, to designate a
Beneficiary (ies) 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 designation
under any other plan of the Bank in which the Director participates.
4.2 Beneficiary Designation: Change. 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. 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, as in effect from time to time. 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, the benefits shall be made 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 Director's Beneficiary, as the case may be,
and shall be a complete discharge of any liability under the Agreement for
such distribution amount.
Article 5
General Limitations
5.1 Excess Parachute Payment. Notwithstanding any provision of this Agreement
to the contrary, the Bank shall not pay any benefit under this Agreement to
the extent the benefit would create an excise tax under the excess
parachute rules of Section 280G of the Code.
5.2 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall not distribute any benefit under this
Agreement if Director's service is terminated by the Board for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude
in connection with the Director's service with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Bank policy committed in connection with the Director's service
and resulting in a material adverse effect on the Bank.
5.3 Suicide or Misstatement. No benefits shall be distributed if the Director
commits suicide within three (3) years after the Effective Date of this
Agreement, or if an insurance company which issued a life insurance policy
covering the Director and owned by the Bank 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.
5.4 Removal. Notwithstanding any provision of this Agreement to the contrary,
the Bank 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.
Article 6
Administration of Agreement
6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or
person(s) as the Board shall appoint. The Plan Administrator 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 the
Agreement.
6.2 Agents. In the administration of this Agreement, the Plan Administrator may
employ agents and delegate to them such administrative duties as it sees
fit, (including acting through a duly appointed representative), and may
from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions. The decision or action of the Plan
Administrator with respect to any question arising out of or in connection
with the administration, interpretation and application of the Agreement
and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Agreement.
6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless
the members of 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 or any of its members.
6.5 Bank Information. To enable the Plan Administrator to perform its
functions, the Bank shall supply full and timely information to the Plan
Administrator on all matters relating to the date and circumstances of the
retirement, Disability, death, or Separation from Service of the Director,
and such other pertinent information as the Plan Administrator may
reasonably require.
6.6 Annual Statement. The Plan Administrator shall provide to the Director,
within one hundred twenty (120) days after the end of each Plan Year, a
statement setting forth the benefits to be distributed under this
Agreement.
Article 7
Claims and Review Procedures
7.1 Claims Procedure. A Director or Beneficiary ("claimant") who has not
received benefits under the Agreement that he or she believes should be
distributed shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting
to the Plan Administrator a written claim for the benefits.
7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall
respond to such claimant within 90 days after receiving the claim. If the
Plan Administrator determines that special circumstances require additional
time for processing the claim, the Plan Administrator can extend the
response period by an additional 90 days by notifying the claimant in
writing, prior to the end of the initial 90-day period, that an additional
period is required. The notice of extension must set forth the special
circumstances and the date by which the Plan Administrator expects to
render its decision.
7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the
claim, the Plan Administrator shall notify the claimant in writing of such
denial. The Plan Administrator 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 Plan Administrator denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review
by the Plan Administrator of the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant, within
60 days after receiving the Plan Administrator's notice of denial, must
file with the Plan Administrator 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 Plan Administrator 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 Plan
Administrator 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 Plan Administrator Response. The Plan Administrator shall
respond in writing to such claimant within 60 days after receiving the
request for review. If the Plan Administrator determines that special
circumstances require additional time for processing the claim, the Plan
Administrator can extend the response period by an additional 60 days by
notifying the claimant in writing, prior to the end of the initial 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 Plan
Administrator expects to render its decision.
7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in
writing of its decision on review. The Plan Administrator 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 Amendment. This Agreement may be amended only by a written agreement signed
by the Bank and the Director. Provided, however, that the Bank may amend
this Agreement to conform with written directives to the Bank from its
banking regulators.
8.2 Plan Termination Generally. The Bank may unilaterally terminate this
Agreement at any time. Except as provided in Section 8.3, the termination
of this Agreement shall not cause a distribution of benefit payments under
this Agreement. Rather, upon 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, the Bank may make distributions in the following
circumstances, in accordance with Section 409A of the Code or the
regulations thereunder:
(a) Within thirty (30) days before, or twelve (12) months after a Change in
Control
(b) Upon the Bank's dissolution or with the approval of a bankruptcy court; or
(c) Upon the Bank's termination of this and all Similar Plans, provided that
all distributions are made no earlier than twelve (12) months and no later
than twenty-four (24) months following such termination, and the Bank does
not adopt any new Similar Plans for a minimum of five (5) years following
the date of such termination.
Article 9
Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Director and the Bank, and
their beneficiaries, survivors, executors, successors, administrators and
transferees.
9.2 No Guarantee of Service. This Agreement is not a contract for services. It
does not give the Director the right to remain in the service of the Bank,
nor does it interfere with the shareholder's right to discharge the
Director. It also does not require the Director to remain in the service of
the Bank nor interfere with the Director's right to terminate services 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. The Bank shall withhold any taxes that are required to be
withheld, under Section 409A of the Code and regulations thereunder, from
the benefits provided under this Agreement. The Director acknowledges that
the Bank's sole liability regarding taxes is to forward any amounts
withheld to the appropriate taxing authority(ies).
9.5 Applicable Law. The 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 Beneficiary are general unsecured
creditors of the Bank for the distribution of benefits under this
Agreement. The benefits represent the mere promise by the Bank 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
Bank to which the Director and Beneficiary have no preferred or secured
claim.
9.7 Reorganization. The Bank shall not merge or consolidate into or with
another bank, 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 Bank
under this Agreement. Upon the occurrence of such event, the term "Bank" 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 Bank 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 Bank or
the Plan Administrator to perform any act required by this Agreement, the
Bank 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 Bank.
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 Bank
or 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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420 Third Avenue
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P O Box 240
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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 on 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 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 this 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 WITNESS WHEREOF, the Director and a duly authorized representative of
the Bank have signed this Agreement.
DIRECTOR: BANK:
THE OHIO VALLEY BANK COMPANY
/s/ Brent A. Saunders By: /s/ Jeffrey E. Smith
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Brent A. Saunders
Title: President and CEO
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