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EMPLOYMENT AGREEMENT
(As Amended 6/28/00)
AGREEMENT made as of the 1st day of January, 2007 ,
("Agreement") among ARROW FINANCIAL CORPORATION, a New York
corporation with its principal place of business at 250 Glen
Street, Glens Falls, New York 12801 ("Arrow"), its wholly-owned
subsidiary, GLENS FALLS NATIONAL BANK AND TRUST COMPANY, a national
banking association with its principal place of business at 250
Glen Street, Glens Falls, New York 12801 (the "Bank"), and
THOMAS L. HOY , residing at 25 Pershing Road, Queensbury,
New York 12804 (the "Executive").
Recitals
WHEREAS, Arrow and the Bank, consider the maintenance of a
competent and experienced executive management team to be essential
to the long-term success of Arrow and the Bank; and
WHEREAS, in this regard, Arrow and the Bank have determined that
it is in the best interests of each that the Executive continue to
serve as Chairman, President and Chief Executive
Officer of Arrow and the Bank, pursuant to a written employment
agreement; and
WHEREAS, Arrow and the Bank have agreed with the Executive that
the pre-existing employment agreement between the Executive and
each of them should be replaced by this Agreement.
NOW, THEREFORE, in furtherance of the interests described above
and in consideration of the respective covenants and agreements
herein contained, the parties hereto agree as follows:
1.
Employment
Arrow and the Bank agree to employ the Executive and the
Executive agrees to continue to serve as Chairman, President and
Chief Executive Officer of Arrow and the Bank during the term
of this Agreement.
2 .
Term
1
(a)
The term of this Agreement shall commence on the date hereof
and, unless the Executive becomes a Retired Early Employee under
Paragraph 6 of this Agreement or such employment is earlier
terminated as provided in Paragraph 7 of this Agreement, employment
under this Employment Agreement shall terminate on December 31,
2009 , or such earlier date on which the Executive’s
retirement (including early retirement if the Executive so elects)
becomes effective under any retirement plan of Arrow then in
effect.
(b)
Annual Review . On or before December 31 of each
year during the term of this agreement, the Board of Directors of
Arrow (the "Arrow Board"), or the committee of the Arrow Board, if
any, duly authorized to make determinations regarding executives
and the terms of their employment (the "Committee"), will consider
and vote upon a proposal to extend to the Executive an offer to
replace this Agreement with a new employment agreement (the
"Replacement Agreement") commencing January 1 of the ensuing year.
The Replacement Agreement will be for a new term of three
years, will provide for a base annual salary for the Executive at
commencement of the Replacement Agreement at least equal to the
base annual salary of the Executive as of December 31 of the year
just completed (the "Preceding Year-End"), will provide for other
benefits having an aggregate value to the Executive at least equal
to the aggregate value of the other benefits provided to the
Executive as of the Preceding Year-End, and will contain other
terms and conditions relating to the Executive’s position and
duties, place of performance, rights upon a change of control of
Arrow or the Bank or a change of authority of the Executive, and
rights in connection with any early termination of the employment
of the Executive that are, in each such instance, at least as
favorable to the Executive as the terms and conditions relating to
such matters under this Agreement and generally shall be as
favorable to the Executive as is this Agreement, as of the
Preceding Year-End. If the Arrow Board or the Committee shall
vote to offer such a Replacement Agreement to the Executive and the
Executive shall accept, this Agreement shall terminate as of
December 31 of the year of such offer and acceptance and the
Replacement Agreement shall take effect as of January 1 of the
ensuing year.
If the Arrow Board or the Committee shall elect not to offer
such a Replacement Agreement to the Executive or the Executive,
having been offered such a Replacement Agreement, shall elect not
to accept such Replacement Agreement, this Agreement and the
employment of the Executive hereunder shall continue in full force
and effect from the date of such election until the termination of
this Agreement in accordance with its terms (such period to be
referred to hereinafter as the "Winding-Down Period"), and the
rights and obligations of each of the parties hereunder shall
continue unchanged during the Winding-Down Period except as may be
specifically provided otherwise in this Agreement.
3.
Position and Duties
The Executive shall continue to serve as Chairman, President
and Chief Executive Officer of Arrow and the Bank and shall
have duties, responsibilities, and authority as normally attend
such positions or as may reasonably be assigned to the Executive
from time to time by the Arrow Board or the Board of Directors of
the Bank (the "Bank Board"). The Executive shall devote
substantially all his working time and efforts to the business and
affairs of Arrow and the Bank, provided however, that the Executive
may, with the approval of the Arrow Board, serve as a director or
officer of any non-competing business or engage in any other
activity, including but not limited to, charitable or community
activity, to the extent that they do not inhibit the performance of
his duties hereunder.
4.
Place of Performance
In connection with the Executive's employment hereunder, the
Executive shall be based at the principal executive offices of the
Bank, except for required travel on business. The Executive
shall not be required to change his residence from the area in
which he now resides. The Bank shall furnish the Executive
with office space, stenographic assistance, and such other
facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties
hereunder.
5.
Compensation
(a)
Salary . Upon commencement of this Agreement, the
base annual salary of the Executive should be $370,000.00 ,
payable by the Bank in equal bi-weekly installments or at such
other intervals as shall be agreed upon by the parties. In
addition, the Executive shall receive from the Bank or Arrow such
annual bonus, if any, as may be determined by the Arrow Board or
the Committee. The Executive's base annual salary may be
increased from time to time in accordance with the normal business
practices of Arrow and the Bank as determined by the Arrow Board or
the Committee, and, if so increased, such base annual salary shall
not thereafter during the Executive's employment under this
Agreement be decreased and the obligation of the Bank hereunder to
pay the Executive's base annual salary shall thereafter relate to
such increased base annual salary. Compensation of the
Executive by base annual salary payments shall not prevent the
Executive from participating in any other compensation or benefit
plan of Arrow or the Bank in which he is entitled to participate
and participation in any such other compensation or benefit plan
shall not in any way limit or reduce the obligation of the Bank to
pay the Executive's base annual salary hereunder.
(b)
Other Benefits . In addition to the compensation
provided for in subparagraph (a) above, the Executive shall be
entitled during the term of his employment under this Agreement (i)
to participate in any and all employee benefit programs or stock
purchase programs of Arrow or the Bank now or hereafter in effect
and open to participation by qualifying employees of Arrow or the
Bank generally, including but not limited to the retirement plan,
supplemental retirement plan, employee stock purchase plan and
employee stock ownership plan of Arrow or the Bank, and (ii) to
enjoy certain personal benefits provided by Arrow or the Bank,
including but not limited to:
(A)
life insurance on the life of the Executive, at no cost to the
Executive, under a group plan maintained by Arrow;
(B) life insurance on the life of the Executive, at no
cost to the Executive,
in the form of a $500,000 Extra Ordinary Life Insurance
Policy;
(C)
disability insurance for the Executive, at no cost to the
Executive, under a group plan maintained by Arrow;
(D)
comprehensive medical and dental insurance under a group plan
provided by Arrow, with the Executive to pay only those amounts
required to be paid thereunder by covered employees generally under
the cost-sharing arrangements in effect from time to time under
such plan;
(E)
reimbursement in full of all business, travel and entertainment
expenses incurred by the Executive in performing his duties
hereunder; and
(F)
fully paid vacation during each calendar year in accordance with
the vacation policies of Arrow in effect from time to time.
Arrow shall not make any material changes in any of the personal
benefits itemized above adversely affecting the Executive unless
such change occurs pursuant to a program applicable to all
executive officers of Arrow and the adverse effect on the Executive
is not proportionately greater than the adverse effect of the
change on any other executive officer of Arrow previously enjoying
such benefit.
6.
Change of Control or Change of Authority
(a)
Retired Early Employee . If a Change of Control or
Change of Authority (as such terms are defined in subparagraph 6(f)
below) occurs during the term of the Executive's employment under
this Employment Agreement, either the Executive, on the one hand,
or Arrow or the Bank, on the other, may elect by written notice,
given to the other party or parties, at any time within twelve (12)
months after such Change of Control or Change of Authority, to
terminate the employment of the Executive by Arrow and the Bank,
whereupon the Executive will become a "Retired Early Employee," and
will be entitled to receive such payments as are provided hereafter
in this Paragraph 6. Such election and the termination of the
Executive's employment shall become effective on the first day of
the second calendar month commencing after delivery of the notice
or on such earlier date as the Executive in his sole discretion may
specify (the "Effective Date").
(b)
Cash Payments . If the Executive should become a
Retired Early Employee hereunder, the Bank shall, during the period
commencing on the Effective Date and ending two years thereafter
(the "Pay-Out Period"), make equal monthly payments to the
Executive (which shall not be deemed base annual salary payments)
in an amount such that the present value of all such payments,
determined as of the Effective Date, equals two hundred ninety-nine
percent (299%) of the Base Amount, as such term is defined in
subparagraph 6(f) below. If at any time during the Pay-Out
Period the Arrow Board in its sole discretion shall determine, upon
application of the Retired Early Employee supported by substantial
evidence, that the Retired Early Employee is then under a severe
financial hardship resulting from (i) a sudden and unexpected
illness or accident of the Retired Early Employee or any of his
dependents (as defined in section 152(a) of the Internal Revenue
Code), (ii) loss of the Retired Early Employee's property due to
casualty, or (iii) other similar extraordinary and unforeseeable
circumstance arising as a result of events beyond the control of
the Retired Early Employee, the Bank shall make available to the
Retired Early Employee, in one (1) lump sum, an amount up to but
not greater than the present value of all monthly payments
remaining to be paid to him in the Pay-Out Period, calculated as of
the date of such determination by the Arrow Board, for the purpose
of relieving such severe financial hardship to the extent the same
has not been or may not be relieved by (xi) reimbursement or
compensation by insurance or otherwise, (xii) liquidation of the
Retired Early Employee's assets (to the extent such liquidation
would not itself cause severe financial hardship), or (xiii)
distributions from other benefit plans. If (a) the lump sum
amount thus made available is less than (b) the present value of
all such remaining monthly payments, the Bank shall continue to pay
to the Retired Early Employee monthly payments for the duration of
the Pay-Out Period, but from such date forward such monthly
payments will be in a reduced amount such that the present value of
all such reduced payments will equal the difference between (b) and
(a), above. The Retired Early Employee may elect to waive any
or all payments due him under this subparagraph.
(c)
Death of Retired Early Employee . If the Retired
Early Employee dies before receiving all monthly payments payable
to him under subparagraph 6(b), above, the Bank shall pay to the
Retired Early Employee's spouse, or if the Retired Early Employee
leaves no spouse, to the estate of the Retired Early Employee, one
(1) lump sum payment in an amount equal to the present value of all
such remaining unpaid monthly payments, determined as of the date
of death of the Retired Early Employee.
(d)
Indemnification of Executive . In the event a
Change of Control or Change of Authority occurs, Arrow and the Bank
shall indemnify the Executive for all legal fees and expenses
subsequently incurred by the Executive in seeking to obtain or
enforce any right or benefit provided under this Employment
Agreement, not limited to the rights and benefits provided under
this Paragraph 6 and whether or not the Executive has become a
Retired Early Employee hereunder, provided, however, that such
right to indemnification will not apply if and to the extent that a
court of competent jurisdiction shall determine that any such fees
and expenses have been incurred as a result of the Executive's bad
faith. Indemnification payments payable hereunder by Arrow or
the Bank shall be made not later than thirty (30) days after a
request for payment has been received from the Executive with such
evidence of indemnifiable fees and expenses as Arrow or the Bank
may reasonably request.
(e)
No Offset . Amounts payable to a Retired Early
Employee under this Paragraph 6 shall not be subject to any offset
or reduction for (i) any amounts owed or claimed to be owed by the
Retired Early Employee to Arrow or the Bank or their affiliates or
(ii) any amounts of compensation or income received or generated by
the Retired Early Employee as a result of any other employment or
self-employment of the Retired Early Employee during the Pay-Out
Period. The Retired Early Employee shall be under no
obligation to seek other employment or gainful pursuit during the
Pay-Out Period as a result of this Agreement, and shall be
prohibited from accepting certain other forms o
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