EXHIBIT 10.7(b)
THE OHIO VALLEY BANK COMPANY
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
THIS EXECUTIVE DEFERRED COMPENSATION AGREEMENT is made this 17th day of
April, 2003, by THE OHIO VALLEY BANK COMPANY (the "Company"), a state-chartered
commercial bank located in Gallipolis, Ohio, and JEFFREY E. SMITH (the
"Executive"). The purpose of this Agreement is to provide specified benefits to
the Executive, a member of a select group of management or highly compensation
employees who contribute materially to the continued growth, development and
future business success of the Company. This Agreement shall be unfunded for tax
purposes and for purposes of Title I of the Employee Retirement Income Security
Act ("ERISA").
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:
1.1 "Base Salary" shall mean the annual cash compensation relating to services
performed during any calendar year, excluding distributions from
nonqualified deferred compensation plans, bonuses, commissions, overtime,
fringe benefits, stock options, relocation expenses, incentive payments,
non-monetary awards, and other fees, and automobile and other allowances
paid to an Executive for employment services rendered (whether or not such
allowances are included in the Executive's gross income). Base Salary shall
be calculated before reduction for compensation voluntarily deferred or
contributed by the Executive pursuant to all qualified or non-qualified
plans of the Company and shall be calculated to include amounts not
otherwise included in the Executive's gross income under Code Sections 125,
402(e)(3), 402(h), or 403(b) pursuant to plans established by the Company;
provided, however, that all such amounts will be included in compensation
only to the extent that had there been no such plan, the amount would have
been payable in cash to the Executive.
1.2 "Beneficiary" means each designated person, or the estate of a deceased
Executive, entitled to benefits, if any, upon the death of the Executive
determined pursuant to Article 6.
1.3 "Beneficiary Designation Form" means the form established from time to time
by the Plan Administrator that the Executive completes, signs, and returns
to the Plan Administrator to designate one or more beneficiaries.
1.4 "Board" means the Board of Directors of the Company as from time to time
constituted.
1.5 "Bonus" means the cash bonus, if any, awarded to each Executive for
services performed during the Plan Year and that does not qualify as
Performance-Based Compensation.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Compensation" means the total Base Salary, Bonus, and Performance-Based
Compensation that would be paid to an Executive during a Plan Year, absent
deferrals, less FICA taxes associated with such Base Salary, Bonus, and
Performance-Based Compensation.
1.8 "Deferral Account" means the Company's accounting of the Executive's
accumulated Deferrals, plus accrued interest.
1.9 "Deferrals" means the amount of the Executive's Compensations which the
Executive elects to defer according to this Agreement.
1.10 "Disability" means the Executive (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 executives 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 executives of the
Company. The Executive must submit proof to the Plan Administrator of
Social Security Administration's or the provider's determination upon the
request of the Plan Administrator.
1.11 "Early Retirement" means Separation from Service before Normal Retirement
Age for reasons other than death, Disability, or Termination for Cause.
1.12 "Effective Date" means January 1, 2003.
1.13 "Election Form(s)" means the form(s) established from time to time by the
Plan Administrator that the Executive completes, signs and returns to the
Plan Administrator to make elections under the Agreement.
1.14 "Normal Retirement Age" means the Executive attaining age sixty-five (65).
1.15 "Normal Retirement Date" means the later of Normal Retirement Age or
Separation from Service.
1.16 "Performance-Based Compensation" means the cash bonus, if any, awarded to
the Executive that qualifies as "performance-based compensation" under
Section 409A of the Code and the regulations thereunder.
1.17 "Plan Administrator" means the plan administrator described in Article 8.
1.18 "Plan Year" means a 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 Agreement and end on the following December 31.
1.19 "Secretary" means the Secretary of the United States Department of the
Treasury.
1.20 "Separation from Service" means the termination of the Executive's
employment with the Company for reasons other than death or Disability.
Whether a Separation from Service takes place is determined based on the
facts and circumstances surrounding the termination of the Executive's
employment and whether the Company and the Executive intended for the
Executive to provide significant services for the Company following such
termination. A termination of employment will not be considered a
Separation from Service if:
(a) the Executive continues to provide services as an employee of the Company
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 employment (or, if employed 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 employment (or, if less, such lesser period),
or
(b) the Executive continues to provide services to the Company in a capacity
other than as an employee of the Company 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 employment (or if
employed 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 employment (or if less, such lesser period).
1.21 "Termination for Cause" has that meaning set forth in Section 7.1.
1.22 "Unforeseeable Emergency" means a severe financial hardship to the
Executive resulting from an illness or accident of the Executive, the
Executive's spouse, or a dependent (as defined in Section 152(a) of the
Code) of the Executive, loss of the Executive's property due to casualty,
or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Executive.
Article 2
Deferral Election
2.1 Elections Generally. Unless otherwise provided for by the Secretary, the
Participant may file annually Base Salary, Bonus, and Performance-Based
Compensation Election Form(s) with the Plan Administrator no later than:
(a) For Base Salary and Bonus, the end of the Plan Year preceding the Plan Year
in which services leading to such Base Salary and Bonus will be performed;
and
(b) For Performance-Based Compensation, no later than six months before the end
of the service period during which the Performance-Based Compensation is
measured.
The Election Form(s) shall set forth the amount of Base Salary, Bonus, and
Performance-based Compensation to be deferred and shall--for Base Salary
and Bonus only--be effective to defer only such compensation earned for
services performed after the date the Election Form(s) are received by the
Plan Administrator. Subsequent Election Form(s), subject to Section 2.3(b),
shall only be effective for the Plan Year following the Plan Year in which
they are received and approved by the Plan Administrator.
2.2 Initial Election. After being notified by the Plan Administrator of
eligibility for participation in the Agreement, a Participant may make an
initial deferral election under this Agreement by delivering to the Plan
Administrator a signed Election Form(s) and Beneficiary Designation Form
within thirty (30) days. The Election Form(s) shall set forth the amount of
Base Salary, Bonus, and Performance-Based Compensation and shall be
effective to defer, subject to Section 2.1(b), only Base Salary, Bonus, and
Performance-based Compensation earned for services performed after the date
the Election Form(s) are received by the Plan Administrator.
2.3. Change in Form or Timing of Distributions. For distribution of benefits
under Article 4, Participant may elect to delay the timing or change the
form of distributions by submitting the appropriate Election Form(s) to the
Plan Administrator. Any such elections:
(a) may not accelerate the time or schedule of any distribution, except as
allowed by the Secretary;
(b) must, for benefits payable under Section 4.1, be made at least twelve (12)
months prior to the first scheduled distribution;
(c) must, for benefits payable under Sections 4.1 and 4.2, 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
(d) must take effect not less than twelve (12) months after the election is
made.
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 Compensations deferred by the Executive as of the time the
Compensations would have otherwise been paid to the Executive.
3.1.2 Interest. On the last day of each month and immediately prior to the
distribution of any benefits, but only until commencement of benefit
distributions under this Agreement, interest shall be credited on the
Deferral Account at an annual rate determined by the Board in its sole and
absolute discretion, compounded annually.
3.2 Statement of Accounts. The Plan Administrator shall provide to the
Executive, within one hundred twenty (120) days after the end of 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 distribution 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.
Article 4
Distributions During Lifetime
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 4.1 in
lieu of any other benefit under this Article.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral
Account balance at the Executive's Normal Retirement Age.
4.1.2 Distribution of Benefit. The Company shall pay the benefit to the
Executive as elected by the Executive on the Election Form(s) commencing
within thirty (30) days following Normal Retirement Age.
4.2 Early Retirement Benefit. Upon the Executive's Early Retirement, the
Company shall pay to the Executive the benefit described in this Section
4.2 in lieu of any other benefit under this Article.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral
Account balance at the Executive's Separation from
Service.
4.2.2 Distribution of Benefit. The Company shall pay the benefit to the
Executive as elected by the Executive on the Election Form(s) commencing
within thirty (30) days following Separation from Service.
4.3 Disability Benefit. If the Executive's Disability results in the
Executive's Separation from Service prior to Normal Retirement Age, the
Company shall pay to the Executive the benefit described in this Section
4.3 in lieu of any other benefit under this Article.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the Deferral
Account balance at the Executive's Separation from Service.
4.3.2 Distribution of Benefit. The Company shall pay the benefit to the
Executive as elected by the Executive on the Election Form(s) commencing
within thirty (30) days following Separation from Service due to Disability
4.4 Hardship Distribution. If the Executive experiences an Unforeseeable
Emergency, the Executive may petition the Board to receive a payout from
the Agreement. The Board in its sole discretion may grant such petition. If
granted, the Executive shall receive, within sixty (60) days, a payout from
the Agreement (i) only to the extent deemed necessary by the Board to
satisfy the Executive's Unforeseeable Emergency, plus an amount necessary
to pay taxes reasonably anticipated as a result of the distribution; and
(ii) after taking into account the extent to which such hardship is or may
be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Executive's assets (to the extent the liquidation
would not itself cause severe financial hardship).
4.5 Restriction on Timing of Distribution. Notwithstanding any provision of
this Agreement to the contrary, if the Executive 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 5
Distributions at Death
5.1 Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall distribute to the Beneficiary the
benefit described in this Section 5.1. This benefit shall be distributed in
lieu of the benefits under Article 4.
5.1.1 Amount of Benefit. The benefit under this Section 5.1 is the greater of:
(a) Deferral Account balance at the Executive's Separation from Service; or
(b) the Deferral Account Balance projected to be accrued at Normal
Retirement Age.
5.1.2 Distribution of Benefit. The Company shall pay the benefit to the
Beneficiary as elected by the Executive on the Election Form(s) commencing
within sixty (60) days following receipt by the Company of the Executive's
death certificate.
5.2 Death During Distribution of a Benefit. If the Executive dies after any
benefit distributions have commenced under this Agreement but before
receiving all such distributions, the Company shall pay to the Beneficiary
the remaining benefits at the same time and in the same amounts as they
would have been paid to the Executive had the Executive survived.
5.3 Death After Separation from Service But Before Benefit Distributions
Commence. If the Executive is entitled to benefit distributions under this
Agreement, but dies prior to the commencement of said benefit
distributions, the Company shall pay to the Beneficiary the same benefits
that the Executive was entitled to prior to death except that the benefit
distributions shall commence within thirty (30) days following the
Executive's death.
Article 6
Beneficiaries
6.1 Beneficiary. Each Executive shall have the right, at any time, to designate
a Beneficiary(ies) to receive any benefits payable under the Agreement to a
Beneficiary upon the death of the Executive. The Beneficiary designated
under this Agreement may be the same as or different from the beneficiary
designation under any other plan of the Company in which the Executive
participates.
6.2 Beneficiary Designation; Change. The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation Form, and
delivering it to the Plan Administrator or its designated agent. 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. The
Executive 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 Executive and
accepted by the Plan Administrator prior to the Executive's death.
6.3 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.
6.4 No Beneficiary Designation. If the Executive dies without a valid
Beneficiary designation, or if all designated Beneficiaries predecease the
Executive, then the Executive's spouse shall be the designated Beneficiary.
If the Executive has no surviving spouse, the benefits shall be made to the
personal representative of the Executive's estate.
6.5 Facility of Distribution. If the Plan Administrator determines in its
discretion that a benefit is to be paid 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
Executive and the Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Agreement for such distribution
amount.
Article 7
General Limitations
7.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not pay any benefit under this Agreement
that is in excess of the Executive's Deferrals (i.e., Deferral Account
minus interest credited thereon) if Executive's service is terminated by
the Board for:
(a) Gross negligence or gross neglect of duties to the Company; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude
in connection with the Executive's service to the Company; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
service and resulting in an adverse effect on the Company; or
(d) Issuance of a final removal or prohibition order issued by a state or
federal banking agency with jurisdiction over the Company.
7.2 No Withdrawal Election. Except as expressly provided herein, the Executive
may not elect, at any time, to withdraw any portion of the Deferral Account
balance.
Article 8
Administration Of Agreement
8.1 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.
8.2 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 Company.
8.3 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.
8.4 Indemnity of Plan Administrator. The Company 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.
8.5 Company 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 Compensations of its
Executives, the date and circumstances of the retirement, Disability, death
or Separation from Service of its Executives, and such other pertinent
information as the Plan Administrator may reasonably require.
Article 9
Claims and Review Procedures
9.1 Claims Procedure. The Executive 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:
9.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting
to the Company a written claim for the benefits.
9.1.2 Timing of Company Response. The Company shall respond to such claimant
within 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 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 Company
expects to render its decision.
9.1.3 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 under ERISA
Section 502(a) following an adverse benefit determination on review.
9.2 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:
9.2.1 Initiation - Written Request. To initiate the review, the claimant, within
60 days after receiving the Company's notice of denial, must file with the
Company a written request for review.
9.2.2 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 (as defined in
applicable ERISA regulations) to the claimant's claim for benefits.
9.2.3 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.
9.2.4 Timing of Company Response. The Company shall respond in writing to such
claimant within 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 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 Company expects to render its decision.
9.2.5 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 (as defined in applicable ERISA regulations) to
the claimant's claim for benefits, and
(d) A statement of the claimant's right to bring a civil action under ERISA
Section 502(a).
Article 10
Amendments and Termination
10.1 Amendment. This Agreement may be amended only by a written agreement signed
by the Company and the Executive. Provided, however, that the Company may
amend this Agreement to conform with written directives to the Company from
its banking regulators.
10.2 Termination. This Agreement may be terminated only by a written agreement
signed by the Company and the Executive. Upon such termination, the
Deferral Account balance shall be paid to the Executives in a lump sum
within thirty (30) days following the earlier of:
(a) Separation from Service;
(b) Death;
(c) Such time as permitted by the Secretary under regulations issued pursuant
to Section 409A of the Code.
Article 11
Miscellaneous
11.1 Binding Effect. This Agreement shall bind the Executive and the Company and
their beneficiaries, survivors, executors, administrators and transferees.
11.2 No Guarantee of Employment. This Agreement is not a contract for
employment. It does not give the Executive the right to remain an executive
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
executive nor interfere with the Executive's right to separate from service
at any time.
11.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
11.4 Tax Withholding. The Company 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 Executive acknowledges
that the Company's sole liability regarding taxes is to forward any amounts
withheld to the appropriate taxing authority(ies).
11.5 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.
11.6 Unfunded Arrangement. The Executive 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
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 or other informal funding asset is a general asset of the Company to
which the Executive and the Beneficiary have no preferred or secured claim.
11.7 Reorganization. The Company shall not merge or consolidate into or with
another company or 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 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.
11.8 Entire Agreement. This Agreement 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 (i) this Agreement other than
those specifically set forth herein.
11.9 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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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 or the receipt for
registration or certification.
Any notice or filing required or permitted to be given to the Executive under
this Agreement shall be sufficient if in writing and hand-delivered, or sent by
mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement as
of April 17, 2003.
EXECUTIVE: COMPANY:
THE OHIO VALLEY BANK COMPANY
/s/ Jeffrey E. Smith By: /s/ James L. Dailey
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Jeffrey E. Smith Title: Chairman of the Board