Exhibit 10.2
FORM OF
THE FIRST NATIONAL BANK OF LITCHFIELD
FIRST AMENDED AND RESTATED
DIRECTOR INCENTIVE RETIREMENT AGREEMENT
THIS FIRST
AMENDMENT AND RESTATEMENT to the DIRECTOR INCENTIVE
RETIREMENT AGREEMENT
dated the ___ day of ___________, 200_ (this "Agreement")
is made this 20th day of November, 2008 by and between The First
National Bank
of Litchfield,
a national bank, located in Litchfield, Connecticut (the
"Company"), and ___________________ (the "Director").
INTRODUCTION
In an effort to reward past service, encourage continued service on
the
Company's Board of Directors, and as a method to attract future
Directors, the
Company is willing to provide to the Director a deferred incentive
opportunity.
The Company will pay the benefits from its general assets.
AGREEMENT
The Director and the Company agree as follows:
ARTICLE 1
Definitions
1.1 Definitions.
Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Annual Fees" means the Board of Director retainer fees,
the Board of Director meeting fees and the Board of Director
committee
fees earned by the Director during the Plan Year.
1.1.2 "Change of
Control" means a
change in the ownership or
effective control of the Company, or in the ownership of a
substantial
portion of the assets of the Company, as defined in Treasury
Regulation
ss.409A-3(i)(5) under Section 409A of the Code.
1.1.3 "Code"
means the Internal Revenue Code of 1986, as
amended.
1.1.4 "Deferral Account" means the Company's accounting of the
Director's accumulated Deferrals plus accrued interest.
1.1.5 "Disability"
means the Director is
unable to engage in
any substantial
gainful
activity
by reason of any medically
determinable physical
or mental impairment that can be expected to
result in death or can be expected to last for a continuous
period
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of not less than twelve (12) months. As a condition to any benefits,
the Company may
require the Director to submit to such
physical or
mental
evaluations and
tests as the Board of Directors deems
appropriate. The
Director will be deemed disabled if determined to be
totally disabled by the Social Security Administration.
1.1.6 "Early Retirement Date" means the date that the Director
has terminated
service before his 72nd birthday provided he has
completed at least 10 Years of Service.
1.1.7 "Earnings" means the Company's reported Net Income after
taxes.
1.1.8 "Earnings
Growth" means the
percentage
change in the
Company's Earnings
over a one-year period, measured on December 31 of
each year.
1.1.9 "Effective Date" means ______________ __, 200_.
1.1.10 "Election
Form" means the Form
attached as Exhibit 1.
The Election
Form must be
completed at the time of signing of this
Agreement and may not
be amended with respect to any deferrals for any
Plan Year unless such amended Election Form is received by June 30 of
the Plan Year; if not received by such date, the amended
Election Form
will be effective with respect to deferrals for the Plan Year
commencing after the date the instructions are received by the
Company.
1.1.11 "Extraordinary
Items" means those
items recognized by
Generally
Accepted
Accounting
Principles as
extraordinary
that
substantially affect
shareholder
equity and/or the
Company's assets.
Examples of such items
are mergers,
acquisitions,
stock splits and
other
items of that nature.
1.1.12 "Growth of Stock Rate" means the percentage change in
the First Litchfield
Financial
Corporation's fair market value common
stock price
("Stock Price") over a one year period, measured on
December 31 of each year, with a guaranteed minimum of 4% and a
maximum
of 15%, cumulatively.
1.1.13 "Return
On Equity" means the Company's Earnings,
adjusted for Extraordinary Items, divided by the Company's common
stock
equity at the end of the same fiscal year.
1.1.14 "Normal
Retirement
Age" means the Director's 72nd
birthday.
1.1.15 "Normal
Retirement Date" means the later of the Normal
Retirement Age or Termination of Service.
1.1.16 "Plan Year" means the calendar year. The initial Plan
Year shall be a short Plan Year commencing on the Effective Date and
ending on December 31 of the same year.
1.1.17 "Termination of
Service" means the Director ceasing to
be a member
of the Company's Board of Directors for any reason
whatsoever.
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1.1.18 "Unforeseeable
Emergency"
means a severe financial
hardship to the Director resulting from an illness or accident of
the
Director, the Director's spouse or a dependent of the Director,
loss of
the Director's property due to casualty, or similar extraordinary and
unforeseeable
circumstances arising
as a result of events
beyond the
control of the Director, as limited by Section
409A(a)(1)(B)(ii)(II) of
the Code and Treasury
Regulations ss.409A-3
under Section 409A of the
Code.
1.1.19 "Years
of Service" means the total number of
twelve-month periods
during which the Director served on the Company's
Board of Directors
on a full-time
basis, inclusive of any approved
leave of absence.
ARTICLE 2
Incentive
2.1 Incentive Award.
Return On Equity (the
"ROE") and Earnings Growth
determined as of December 31 of each plan year shall determine the Director's
Incentive Award
Percentage,
in accordance
with the attached
Schedule A. The
chart on Schedule
A is specifically subject to change annually at the sole
discretion of
the Company's Board of Directors. The Incentive Award is
calculated annually by
taking the Director's
Annual Fees for the
Plan Year in
which the ROE and
Earnings Growth was
calculated
times the Incentive Award
Percentage.
2.2
Incentive Deferral. On March 1 following each Plan Year, the
Company shall declare and pay the Incentive Award in the form of compensation
and the Director shall defer such amount to the Deferral
Account.
ARTICLE 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a
Deferral
Account on its books for the Director, and shall credit to the Deferral
Account
the following amounts:
3.1.1 Deferrals.
The Incentive
Deferral as determined
under
Article 2.
3.1.2 Interest.
On March 1 following each Plan Year and
immediately prior to
the payment
of any benefits, interest on the
account balance since the preceding credit under this Section
3.1.2, at
an annual rate, compounded annually, equal to the Growth of Stock
Rate
for the same period.
3.2 Statement of
Accounts. The Company
shall provide to the Director,
within one hundred
twenty (120) days after each Plan Year, a statement setting
forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device
for
measuring amounts to be paid under this Agreement. The Deferral
Account is not a
trust fund of any kind. The Director is a general unsecured creditor of the
Company for the payment of benefits. The
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benefits represent the mere Company promise to pay such benefits.
The Director's
rights are
not subject in any manner to anticipation, alienation, sale,
transfer, assignment,
pledge, encumbrance, attachment, or garnishment by
the
Director's creditors.
3.4 Hardship. If an
Unforeseeable
Emergency occurs, the Director, by
written instructions
to the Company, may elect to reduce future deferrals under
this Agreement
with respect to
Incentive Awards for the current Plan Year
if
such instructions
are received by June
30 of the Plan Year, or if not received
by such date,
the Plan Year
commencing
after the date the
instructions
are
received by the Company.
ARTICLE 4
Lifetime Benefits
4.1 Normal Retirement Benefit. If the Director terminates service
on or
after the Normal
Retirement Age for reasons other than death, the Company shall
pay to the Director
the benefit
described in this Section 4.1 in lieu of
any
other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is
the Deferral Account balance on the Director's Normal Retirement
Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to
the Director
commencing on the
first day of the month
following the
Director's Normal
Retirement Date in the
form elected by the Director
on the Election Form.
If the Director
elects to receive
payments in
equal monthly
installments,
the Company shall continue to credit
interest on
the remaining account balance during any applicable
installment period
fixed at the rate in effect under Section 3.1.2 on
the date of the Director's Termination of Service.
4.2 Early Retirement
Benefit. If the Director terminates service on or
after the Early
Retirement Date and
before the Normal
Retirement Age, and for
reasons other than Change of Control, death or Disability, the
Company shall pay
to the Director the
benefit described in
this Section 4.2 in lieu of any other
benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is
the Deferral Account balance on the Director's Early Retirement
Date.
4.2.2 Payment of Benefit. The Company shall pay the benefit to
the Director in the form and on the date elected by the Director on
the
Election Form. If the Director elects the Deferred Payment Option
or to
receive payments in
equal monthly
installments,
the Company shall
continue to credit interest on the remaining account balance during
any
applicable installment period fixed at the rate in effect under
Section
3.1.2 on the date of the Director's Termination of Service.
4.2.3 Deferred
Payment Option. Under this Section 4.2, the
Director may elect to
defer payment of his
Early Retirement
Benefit
until the date elected
by the Director on
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the Election Form, not
to exceed the first day of the month following
his Normal Retirement Age.
4.3 Early Termination
Benefit. If the Director terminates service
before the Early Retirement Age or Normal Retirement Age for reasons other
than
Change of Control,
death or Disability,
the Company shall pay
to the Director
the benefit described
in this Section 4.3 in lieu of any other benefits under
this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is
the vested portion of
the Deferral Account
balance on the
Director's
Termination of Service.
4.3.2 Vesting of
Awards. For
purposes of this
Section 4.3,
Incentive Awards
will vest 20% per year from the date the award was
declared. The interest
credited to each Incentive Award will also vest
20% per year from the date the award was declared.
4.3.3 Payment of Benefit. The Company shall pay the benefit to
the Director in a single lump sum within 60 days after Termination of
Service.
4.4 Disability
Benefit.
If the Director terminates service for
Disability prior to
the Early Retirement
Age or Normal
Retirement
Age, the
Company shall pay to
the Director the benefit described in this Section 4.4
in
lieu of any other benefit under this Agreement.
4.4.1
Amount of Benefit. The benefit under this Section 4.4 is
the Deferral Account balance at Termination of Service.
4.4.2 Payment of Benefit. The Company shall pay the benefit to
the Director
commencing on the
first day
