ARROW FINANCIAL CORPORATION
2008 LONG-TERM INCENTIVE PLAN
Section 1. Establishment and
Purpose
Arrow Financial Corporation (the
“Company”) hereby establishes an incentive
compensation plan to be named the Arrow Financial Corporation
2008 Long-Term Incentive Plan (the “Plan”), for
certain employees, directors and other individuals rendering
services to the Company and its subsidiaries. The purpose
of this Plan is to encourage those individuals who receive
awards under the Plan to acquire and maintain an interest in the
common stock of the Company and thus to have added incentives to
work for the success of the Company and its subsidiaries.
Section 2. Definitions
Whenever used herein, the following terms shall
have the respective meanings set forth below:
(a)
Award means any grant of Option(s),
Restricted Stock or Restricted Stock Unit(s) under the Plan.
(b)
Award Agreement means a written agreement
evidencing an Award under the Plan, which shall be executed by
the Company and the Participant.
(c)
Board means the Board of Directors of the
Company.
(d)
Code means the Internal Revenue Code of
1986, as amended and in effect from time to time.
(e)
Committee means the Compensation
Committee of the Board or any subcommittee thereof or successor
committee thereto charged from time to time with the
administration of the Plan, or, in the absence of any such
committee or subcommittee thusly charged, the Board.
(f)
Company means Arrow Financial
Corporation, a New York corporation.
(g)
Consultant means any individual other
than an Employee or Director who is rendering consulting or
advisory services to the Company or any Subsidiary.
(h)
Date of Grant for any Award granted under
the Plan means the date the Committee or Board votes to approve
the grant of the Award at a meeting thereof duly called and
held, or if such approval is effected by a written consent of
the Committee or the Board, the date the last person whose
written consent is required in order to make such written
consent effective signs the written consent.
(i)
Director means any director of the
Company who is not also an employee of the Company, but shall
not include any individual whose title includes the word
“director” but who does not possess all powers
possessed by a director as a matter of law, as would typically
be the case, for example, for an honorary, advisory or emeritus
director.
(j)
Disability means permanent and total
disability as defined in Section 22(e)(3) of the Code, as
determined by the Committee in good faith upon receipt of and in
reliance on sufficient competent medical advice.
(k)
Employee means any employee (including
any officer or director who is also an employee) of the Company
or any Subsidiary.
(l)
Exercise Price of an Option means the
purchase price per share of Stock upon exercise of the Option as
specified in the Award Agreement, subject to adjustment as
provided in Section 12.
(m)
Fair Market Value of the Stock as of any
particular date means the fair market price per share of Stock
for such date, determined in the manner specified from time to
time by the Committee or the Board, taking into consideration
applicable legal requirements and prevailing regulatory and
industry standards.
(n)
Option means a right granted under this
Plan to purchase Stock at the Exercise Price for a specified
period of time and subject to specified conditions; such an
Option may be either an Incentive Stock Option within the
meaning of Section 422 of the Code or a so-called Nonqualified
Stock Option, not qualifying under Section 422 of the Code.
(o)
Participant means any Employee, Director
or Consultant receiving an Award granted under the Plan.
(p)
Period of Restriction means the period
during which any Restricted Stock or a Restricted Stock Unit
awarded under the Plan is restricted pursuant to Section 10.
(q)
Permitted Transferee means any person to
whom an Award has been transferred pursuant to Section
13(b).
(r)
Restricted Stock means shares of Stock
awarded to a Participant under the Plan, which shares during a
specified Period of Restriction are both subject to certain
restrictions on transfer and subject to forfeiture, as specified
in Section 10.
(s)
Restricted Stock Unit means a right to
receive a designated number of shares of Stock at some future
date or dates following a Period of Restriction, which shares
during such period are both subject to certain restrictions on
transfer and subject to forfeiture, as specified in Section
10.
(t)
Retirement means, for an Employee, any
retirement where the employee is eligible for normal or early
retirement benefits under the terms of the Company’s
principal retirement plan in effect at such time, and, for a
Director, retirement from service as a director on or after the
date established in the bylaws or corporate policies of the
Company as the retirement age for such director.
(u)
Stock means the common stock, par value
$1.00 per share, of the Company.
(v)
Subsidiary means a subsidiary corporation
of the Company as defined in Section 425 of the Code.
(w)
Taxable Event means an event requiring
Federal, state or local tax to be withheld with respect to an
Award granted hereunder, including under usual circumstances the
exercise of a Nonqualified Stock Option, the expiration of a
Period of Restriction with respect to Restricted Stock, the
delivery of shares of Stock subject to a Restricted Stock Unit,
or the making by a Participant of an election under Section
83(b) of the Code with respect to any Award.
(x)
Termination Event means the termination
of a Participant’s service with the Company and its
Subsidiaries, including without limitation termination of
service by virtue of the death, Disability or Retirement of the
Participant. Leaves of absence required by law or
otherwise granted by the Company to Employees and transfers of
the employment or service of a Participant within the Company
and its Subsidiaries as a group, or to a successor to the
Company or a Subsidiary incident to a merger or similar business
combination involving the Company or such Subsidiary, shall not
constitute a Termination Event.
Section 3. Administration
The Plan will be administered by the Committee
and the Committee’s interpretations of the provisions of
the Plan shall be final and binding. The Committee will
have sole authority and discretion to determine those Employees
and Consultants who will receive Awards under the Plan, if any,
and the number and type of such Awards and the conditions
applicable thereto, and the Board will have sole authority and
discretion to determine those Directors who will receive Awards
under the Plan, if any, and the number and type of such Awards
and the conditions applicable thereto, subject in each case to
the terms of the Plan. The Committee shall have the
authority to designate, from time to time, a subcommittee
consisting of two or more of its members, with authority to make
such determinations with respect to the Plan as the Committee
would otherwise be authorized to make (which subcommittee shall
also be referred to as the “Committee”). The
Committee and the Board also shall have the authority to
delegate to one or more executive officers of the Company such
duties and tasks under the Plan as the Committee or the Board
otherwise would be required or expected to perform, subject to
applicable law. Any determination by the Committee or
Board under the Plan may be made without notice or meeting, and
all actions made or taken by the Committee or Board pursuant to
the provisions of the Plan shall be final and binding and
conclusive for all purposes and upon all persons.
Section 4. Duration
No Award may be granted under the Plan after the
date that is ten (10) years after the date the Plan is approved
by the Board. The Plan, unless earlier terminated pursuant
to Section 16, will expire upon the forfeiture, cancellation or
vesting (including exercise, if appropriate) of the last Award
granted or that may be granted under the Plan.
Section 5. Shares Reserved Under the
Plan
There is hereby authorized and reserved for
issuance under the Plan an aggregate of 300,000 shares of Stock,
which is the maximum number of shares available for Awards
granted under the Plan, subject to adjustment as provided in
Section 12. Such shares may be authorized and unissued
shares or treasury shares. Upon the grant of Awards under
the Plan, the shares of Stock underlying such Awards will be
deducted from the number of shares available for future Awards
under the Plan, provided that, (i) upon the forfeiture of
outstanding Options, Restricted Stock or Restricted Stock Units
prior to the exercise thereof (in the case of Options) or the
vesting thereof (in the case of Restricted Stock or Restricted
Stock Units), the shares underlying such forfeited Awards will
be added back to the number of shares available for future
Awards under the Plan, and (ii) in the event any Options granted
under the Plan are exercised and the purchase price therefore is
paid, in whole or in part, by the surrender of shares of Stock
to the Company (including the “deemed” surrender of
such shares, in those cases where actual surrender of shares is
waived by the Company under the terms of the Plan and the Option
is permitted to be exercised by a deemed surrender of shares),
there shall be added back to the number of shares available for
future Awards under the Plan the number of shares thus
surrendered (or “deemed” surrendered) not including
any shares withheld by the Company upon such exercise in payment
of applicable withholding or other taxes. Notwithstanding
any other provision of this Plan or any Award granted hereunder,
the maximum number of shares that may be granted in the form of
Restricted Stock or Restricted Stock Units shall be 100,000,
subject to adjustment as provided in Section 12.
Section 6. Participation
In selecting Employees, Directors and/or
Consultants to receive Awards under the Plan and in determining
the type and amount of their respective Awards, the Committee or
the Board, as appropriate, shall consider such factors as it
deems pertinent. The grant of an Award to an Employee,
Director or Consultant in any year shall not obligate the
Committee or the Board to grant an Award to any other Employee,
Director or Consultant in such year or to any Employee, Director
or Consultant in any other year.
Section 7. Types of Awards
The following types of Awards may be granted
under the Plan: (a) Incentive Stock Options, (b)
Nonqualified Stock Options, (c) Restricted Stock, and (d)
Restricted Stock Units, as described below, provided that
Incentive Stock Options may only be granted to those individuals
eligible to receive such Awards under Section 422 of the Code.
Except as specifically limited herein, the Committee or
the Board, as appropriate, shall have complete discretion in
determining the type and number of Awards to be granted to any
Participant and the terms and conditions of such Awards, which
terms and conditions need not be uniform as between or among
different Participants.
Section 8. Incentive Stock
Options
(a)
Awards authorized for grant under the Plan
include Incentive Stock Options, that is, “incentive stock
options” intended to qualify under Section 422 of the
Code, provided no Incentive Stock Options may be granted to
Directors or other persons not authorized to receive such Awards
under the Code. Such Incentive Stock Options shall be
Options to purchase shares of Stock at an Exercise Price
established by the Committee upon grant, which shall not be less
than, but may be more than, one hundred percent (100%) of the
Fair Market Value of the Stock as of the Date of Grant.
Under no circumstances may the Exercise Price of any
Incentive Stock Option granted under the Plan be less than the
Fair Market Value of the Stock on the Date of Grant. The
aggregate Fair Market Value (determined as of the Date of Grant)
of the Stock underlying any Incentive Stock Option granted under
the Plan to any one Participant (together with all other
incentive stock options previously granted to such Participant
under the Plan and under all other stock option plans of the
Company and its Subsidiaries) that are first exercisable during
any calendar year shall not exceed $100,000.
(b)
The Committee shall establish upon grant of an
Incentive Stock Option the period of time during which such
Option may be exercisable by the Participant, provided that no
Incentive Stock Option will continue to be exercisable, in whole
or in part, more than ten years after the Date of Grant.
Subject to this limitation, the Committee may provide that
full exercisability of such Option will be phased in and/or
phased out over some designated period of time. The
Committee also may provide at any time that exercisability of an
Incentive Stock Option is or will be accelerated, to the extent
such Option is not already then exercisable, for such reasons
and as of such times, including, if appropriate, upon the
occurrence of such event or events (e.g., the Retirement of the
Participant or a “change in control” of the
Company), as the Committee may specify. Notwithstanding
the foregoing, exercisability of an Incentive Stock Option
granted under the Plan is conditioned upon continued service of
the Participant with the Company or its Subsidiaries at the time
of exercise, consistent with Section 422 of the Code, provided
that the Committee may specify, upon its grant of an Incentive
Stock Option or subsequently, that exercisability of such Option
will continue for some designated period of time after a
Termination Event for the Participant, which may vary depending
upon the particular type of Termination Event. The maximum
period of time for exercisability of an Incentive Stock Option
after a Termination Event (which shall be the applicable period
of time of exercisability after a Termination Event for each
Incentive Stock Option granted under the Plan if the Committee
does not specify otherwise) is as follows: (i) if the
Termination Event is not the death or Disability of the
Participant, exercisability may be extended for a maximum of 3
months after the date of termination; (ii) if the Termination
Event is the Disability of the Participant, exercisability may
be extended for a maximum of 12 months after the date of
termination (unless the Participant dies within such 12-month
period, in which event exercisability may be extended until the
later of the date 3 months after the date of death or the last
day of such 12-month period); and (iii) if the Termination Event
is the death of the Participant, exercisability may be extended
until the date ten years after the original Date of Grant,
provided that during any such period of exercisability following
a Termination Event, the Incentive Stock Option may be exercised
only to the extent such Option was exercisable at the time of
such Termination Event. Notwithstanding the preceding
sentence, in no event may any Incentive Stock Option granted
under the Plan be exercised after the date ten years after the
Date of Grant.
(c)
Upon exercise of an Incentive Stock Option, in
whole or in part, the Exercise Price with respect to the number
of shares as to which the Option is then being exercised may be
paid by check or, if the Committee has so authorized (and
subject to any conditions imposed by the Committee) and if the
holder of the Option so elects, in whole or in part by delivery
to the Company of shares of Stock then owned by the holder.
Any holder-owned Stock to be used in full or partial
payment of the Exercise Price shall be valued at the Fair Market
Value of the Stock on the date of exercise. Upon such
exercise, the Company shall issue the shares as to which an
Incentive Stock Option has been exercised to the holder of the
Option or the designee of such holder, evidenced by book entry
or electronic delivery or by delivery of a duly executed stock
certificate. If so provided by the Committee upon the
grant of such an Option, the shares of Stock issuable upon
exercise thereof may be subject to certain restrictions upon
their subsequent transfer or sale. In the event the
Exercise Price is to be paid in full or in part by surrender of
Stock, in lieu of actual surrender of shares of Stock by the
holder, the Company may waive such surrender (under
circumstances in which such waiver is consistent with the
purposes and functioning of the Plan) and deem such shares to
have been surrendered, and thereafter issue to or on behalf of
the holder a number of shares equal to the total number of
shares as to which the Option is then being exercised less the
number of shares which absent such waiver would have been
surrendered by the holder to the Company upon such exercise.
(
