ARROW FINANCIAL
CORPORATION
SELECT EXECUTIVE
RETIREMENT PLAN
As Amended and Restated
Effective as of January 1, 2005
For Benefits Accrued or
Vested After December 31, 2004
ARROW FINANCIAL
CORPORATION
SELECT EXECUTIVE
RETIREMENT PLAN
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 that accrue
or become vested after December 31, 2004.
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 for compliance with Internal Revenue Code Section 409A
with respect to benefits that accrue or become vested after
December 31, 2004 under the following terms:
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, and amended from time to time
thereafter, 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 the 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.
0.2
Restoration of
Employment
If a Participant is
restored to full-time employment with the Participating Employer,
payments under the Plan shall continue. Upon the
Participant’s subsequent termination of employment with the
Participating Employer, any additional Retirement Benefits that
have accrued under the Plan shall be paid in accordance with the
terms and provisions of the Plan with respect to such additional
benefits.
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, except however, where the Participant is a Key
Employee (as defined by the Code) of a Participating Employer, in
which case benefits shall commence no sooner than the date that is
6 months following the Participant’s separation from service
with the Participating Employer.
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 of the actuarially
equivalent life annuity forms of payment permitted under the terms
of the Defined
Benefit Pension Plan. However, such benefit form election must be
made prior to commencement of the benefits hereunder and be
independent, in terms of time and form, of any such election made
with respect to the Defined Benefit Pension Plan.
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 of Control" of Arrow Financial Corporation
(“Arrow”) means:
(i)
The acquisition by one
person, or more than one person acting as a group, of ownership of
stock of Arrow that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or
total voting power of the stock of the Arrow;
(ii)
The acquisition by one
person, or more than one person acting as a group, of ownership of
stock of Arrow, that together with stock of Arrow acquired during
the twelve-month period ending on the date of the most recent
acquisition by such person or group, constitutes 30% or more of the
total voting power of the stock of Arrow;
(iii)
A majority of the
members of Arrow’s board of directors is replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the members of Arrow’s board of
directors before the date of the appointment or
election;
(iv)
One person, or more than
one person acting as a group, acquires (or has acquired during the
twelve-month period ending on the date of the most recent
acquisition by such person or group) assets from Arrow that have a
total gross fair market value (determined without regard to any
liabilities associated with such assets) equal to or more than 40%
of the total gross fair market value of all of the assets of Arrow
immediately before such acquisition or acquisitions.
Persons will not be
considered to be acting as a group solely because they purchase or
own stock of the same corporation at the same time, or as a result
of the same public offering. However, persons will be
considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with
Arrow.
This definition of
Change in Control shall be interpreted in accordance with, and in a
manner that will bring the definition into compliance with, the
regulations under Section 409A of the Internal Revenue Code of
1986.
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 pursuant to the form of payment elected by
the Participant.
i.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.
i.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
i
