ARROW FINANCIAL
CORPORATION
SELECT EXECUTIVE
RETIREMENT PLAN
(Grandfathered
Benefits)
As Amended and Restated
Effective as of January 1, 2005
For Benefits Accrued and
Vested on or Before December 31, 2004
ARROW FINANCIAL
CORPORATION
SELECT EXECUTIVE
RETIREMENT PLAN
(Grandfathered
Benefits)
The Arrow Financial
Corporation Select Executive Retirement Plan (the
“Plan”) is hereby amended and restated effective
January 1, 2005, by the Arrow Financial Corporation, a New York
State chartered holding company organized under the laws of New
York and having its principal office at 250 Glen Street in the City
of Glens Falls, Warren County, New York (hereinafter referred to as
the “Employer”). This amended and restated portion of
the Plan shall apply only to those benefits accrued and vested as
of December 31, 2004 under the terms of the Plan on such date
(“Grandfathered Benefits”).
WITNESSETH:
WHEREAS, the Employer
has determined that certain of its employees and employees of
affiliated companies constituting a select group of management or
highly compensated employees should receive supplemental retirement
benefits to compensate such employees for valuable past services
rendered; and
WHEREAS, the Employer
has amended and restated its qualified defined benefit pension plan
effective January 1, 2003 into a cash balance pension plan and has
also determined it to be advantageous to convert certain Plan
benefits into the form of a cash balance plan; and
WHEREAS, the Employer
has heretofore authorized adoption of this restated Plan in two
separate and distinct portions for the purpose of bifurcating
benefits into Grandfathered Benefits accrued and vested as of
December 31, 2004, which are frozen and not subject to Internal
Revenue Code Section 409A, and benefits which accrue or vest
thereafter and which are subject to the requirements of Code
Section 409A.
NOW THEREFORE, in
consideration of the premises, this portion of the Plan is hereby
restated in its form as in effect on December 31, 2004, with
respect to Grandfathered Benefits as follows:
ARTICLE
I
DEFINITIONS
1.01
“Administrator” means
the Compensation Committee of the Employer unless the Board of
Directors designates a different Administrator pursuant to Article
IV.
1.02
“Beneficiary” means the
person designated to receive benefits of the Participant or the
person otherwise entitled to receive benefits pursuant to the
provisions of the Plan.
1.03
“Board of
Directors” or “Board” means the Board of
Directors of the Arrow Financial Corporation.
1.04
“Code” means
the Internal Revenue Code of 1986, as amended.
1.05
“Defined Benefit
Pension Plan” means the Arrow Financial Corporation
Employees’ Pension Plan and Trust, as amended and restated
effective January 1, 2003, or any successor plan
thereto.
1.06
“Effective
Date” of this restated Plan means January 1, 2005.
1.07
“Employer”
means the Arrow Financial Corporation.
1.08
“ERISA”
means the Employee Retirement Income Security Act.
1.09
“ESOP” means
the Arrow Financial Corporation Employee Stock Ownership Plan, as
amended from time to time, or any successor thereto.
1.10
“Participant” means any
employee of the Arrow Financial Corporation or any subsidiary
corporation who has met the eligibility requirements of Article II
and who is participating in the Plan.
1.11
“Participating
Employer” means the Employer and any subsidiary corporation
that elects to participate in this Plan.
1.12
“Plan” means
the Arrow Financial Corporation Select Executive Retirement
Plan.
1.13
“Plan Year”
means the calendar year.
1.14
“Retirement
Benefit” means the benefit to be provided to Participants as
determined by Article III and specified in Schedules A and B of the
Plan.
1.15
“Trust”
means the rabbi trust fund, if any, which may be established by the
Employer to pay benefits under the Plan.
1.16
“Year of
Service” means a Year of Eligibility Service as defined in
the Defined Benefit Pension Plan.
ARTICLE
II
ELIGIBILITY AND
PARTICIPATION
2.01
Eligibility
The Plan shall provide
Retirement Benefits solely to those employees or former employees
as set forth in Schedules A and B of the Plan.
The Participants
eligible for Retirement Benefits under Schedule A and Schedule B
shall constitute a select group of management or highly compensated
employees as set forth in ERISA.
0.2
Participating
Employers
The Plan shall
constitute a single Plan of Arrow Financial Corporation, which
shall have full authority as Employer to amend, modify, administer
and terminate the Plan. Only employees of Arrow Financial
Corporation, or any other subsidiary corporation shall be eligible
to participate in the Plan, provided that such other Participating
Employer consents to such participation either by executing this
Plan or a separate consent agreement. Any such Participating
Employer may thereafter withdraw its consent, in which event the
Plan shall be deemed terminated with respect to the employees of
such Participating Employer. The Employer, on behalf of its
employees, and any other Participating Employer, on behalf of its
employees, shall pay the required Retirement Benefits to their
Participants pursuant to the provisions of the Plan.
ARTICLE
III
PLAN
BENEFITS
0.1
Retirement
Benefits
Retirement Benefits
shall be paid by the Participating Employer to the Participant in
the amount, time and in the manner specified in this Article and in
Schedules A and B of the Plan. Notwithstanding any provision of
this portion of the Plan to the contrary, benefits accrued and
vested as of December 31, 2004 shall be frozen and not increase for
any reason with respect to the application of the provisions
herein, and any benefit that vests or increases from the
aforementioned frozen Grandfathered Benefit after December 31, 2004
shall be subject to the terms of the portion of the Plan applicable
to such benefits.
0.2
Restoration of
Employment
If a Participant is
restored to full-time employment with the Participating Employer,
payments under the Plan shall be discontinued. Upon the
Participant’s subsequent termination of employment with the
Participating Employer, the Participant’s Retirement Benefits
under the Plan shall be paid in accordance with the terms and
provisions of the Plan.
3.03
Time and Manner of
Payment
(a)
The Retirement Benefit
of a Participant shall commence within 30 days after the date a
Participant qualifies for benefit commencement under Schedules A
and B of the Plan. Retirement Benefits payable under Schedule
A shall be paid by the Participating Employer to those individuals
and in such amounts and in such form as listed in Schedule A.
Benefits payable under Paragraph 3 of Schedule B shall be
paid in any form as permitted under the terms of the Defined
Benefit Pension Plan. Notwithstanding the foregoing, benefits
payable under Schedule A and Paragraph 3 of Schedule B may not be
paid in the form of a lump sum. Benefits shall be paid
monthly, quarterly, or annually, as elected and fixed by the
Participating Employer prior to commencement of benefits. If
benefits commence after the first day of the calendar year, the
total benefits paid, regardless of whether annual, quarterly, or
monthly payments were elected, during the first year shall be
determined as if such benefits were payable monthly commencing with
the month in which the first payment is made. Benefits
payable under Paragraph 4 of Schedule B shall be paid as specified
therein.
(b)
In the event of a
“change in control” of the Employer, all Participants
shall be fully vested in their Retirement Benefits and the lump sum
value of such Retirement Benefits shall be immediately paid to such
Participants and the Plan will be terminated. For purposes of
this Section 3.03(b), the lump sum value of each
Participant’s Retirement Benefit, deferred to the earliest
commencement date of such Retirement Benefit, shall be the
Actuarial Equivalent (present value) of such Retirement Benefit,
based upon the assumptions defined in the Defined Benefit Pension
Plan. In addition, the lump sum value of Retirement Benefits
payable under Schedule B shall be calculated without regard to the
reduction set forth in Section 5.04. In no event shall any
payment be made that would constitute an excess parachute payment
under Code Section 280G. For purposes of this Section
3.03(b), a “change in control” shall be deemed to have
occurred:
(i)
If any individual,
corporation (other than the Employer), partnership, trust,
association, pool, syndicate, or any other entity or any group of
persons acting in concert becomes the beneficial owner, as that
concept is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Ac of 1934, as
the result of any one or more securities transactions (including
gifts and stock repurchases but excluding transactions described in
subdivision (ii), following) of securities of the Employer
possessing twenty-five percent (25%) or more of the voting power
for the election of directors of such entity,
(ii)
If there shall be
consummated any consolidation, merger or stock-for-stock exchange
involving the Employer or the securities of the Employer in which
the holders of voting securities of the Employer immediately prior
to such consummation own, as a group, immediately after such
consummation, voting securities of the Employer (or, if the
Employer does not survive such transaction, voting securities of
the corporation surviving such transaction) having less than fifty
percent (50%) of the total voting power in an election of directors
of the Employer (or such other surviving corporation), excluding
securities received by any members of such group which represent
disproportionate percentage increases in their shareholdings
vis-a-vis the other members of such group,
(iii)
If “approved
directors” shall constitute less than a majority of the
entire Board, with “approved directors” defined to mean
the members of the Board as of the date of adoption of this
restated Plan and any subsequently elected members of such Board
who shall be nominated or approved by a majority of the approved
directors on the Board prior to such election or shall be elected,
appointed or approved by the Employer, or
(iv)
If there shall be
consummated any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions, excluding any
transaction described in subdivision (ii), above), of all, or
substantially all, of the assets of the Employer to a party which
is not controlled by or under common control with the
Employer.
3.04
Survivor Benefits for
Participants listed in Schedule B
(a)
If benefits have not
commenced to the Participant before death, the Retirement Benefit
of a Beneficiary must commence 30 days after the date of the
Participant’s death. Such benefit shall be paid in the
form of a life annuity. The benefit shall be payable monthly,
quarterly, or annually, as elected and fixed by the Participating
Employer prior to commencement of benefits. If benefits
commence after the first day of the calendar year, the total
benefits paid, regardless of whether annual, quarterly, or monthly
payments were elected, during the first year shall be determined as
such benefits were payable monthly commencing with the month in
which the first payment is made.
(b)
If a Participant dies
after benefits have commenced but before all guaranteed benefits
have been paid, any remaining guaranteed benefits shall be paid to
his or her Beneficiary.
0.5
Right of Participants
to Plan Benefits
No Retirement Benefit of
the Plan shall be subject in any manner, either voluntarily or
involuntarily, to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge; and any act or
violation of the foregoing shall be null and void. No benefit
under the Plan shall in any manner be subject to the debts,
contracts, liabilities, engagements, or torts of any Participant or
Beneficiary. Benefits shall not be subject to attachment or
legal process and the same shall not be recognized by the
Participating Employer except to such extent as may be required by
law. The rights of any Participant to benefits under the Plan
prior to the actual receipt of such benefit shall be limited to
those of a general unsecured creditor of the Participating
Employer.
0.6
Rights of
Participating Employer to Assets
Any asset of the
Participating Employer which may be used to pay benefits under the
Plan shall be an unrestricted asset of the Participating Employer
and not deemed to be held under any trust for the benefit of the
Participants or their Beneficiaries or represent security for any
of the Participating Employers’ obligations under the Plan.
In addition, these assets and any other assets of the
Participating Employer will be subject to the claims of the general
creditors of such Participating Employer if the Participating
Employer becomes insolvent. If the Participating Employer is
unable to pay its debts as they mature or is a party in any
bankruptcy proceeding under federal or state law, the Participating
Employer will be considered
