EMPLOYMENT
AGREEMENT
(As Amended
6/28/00)
AGREEMENT made as
of the 1st day of January, 2006 , (“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, 2008 ,
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 acce
