FIRST AMENDMENT
TO THE
▇▇▇▇▇ BANK
SALARY CONTINUATION AGREEMENT
DATED AUGUST 13TH, 2002
FOR
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
THIS FIRST AMENDMENT is adopted this 4th day of April, 2006, effective as
of the first day of January, 2005, by and between ▇▇▇▇▇ BANK, a state bank
located in Honesdale, Pennsylvania (the "Company") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Executive").
The Company and the Executive executed the Salary Continuation Agreement
effective as of October 1st, 1999 and restated August 13th, 2002 (the
"Agreement").
The undersigned hereby amend the Agreement for the purpose of bringing
the Agreement into compliance with Section 409A of the Internal Revenue Code.
Therefore, the following changes shall be made:
Section 1.1.1 of the Agreement shall be deleted in its entirety and
replaced by the following:
1.1.1 "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 such change is defined in Section 409A of the
Code and regulations thereunder.
The following Section 1.1.9a shall be added to the Agreement immediately
following Section 1.1.9:
1.1.9a "Specified Employee" means a key employee (as defined in Section 416(i)
of the Code without regard to paragraph 5 thereof) of the Company if any
stock of the Company is publicly traded on an established securities
market or otherwise.
Section 1.1.11 of the Agreement shall be deleted in its entirety and
replaced by the following:
1.1.11 "Termination of Employment" means the termination of the Executive's
employment with the Company for reasons other than death or Disability.
Whether a Termination of Employment takes place is determined based on
the facts and circumstances surrounding the termination of the
Executive's employment and whether the Company and the Executive intended
for the Executive to provide significant services for the Company
following such termination. A change in the Executive's employment status
will not be considered a Termination of Employment if:
(a) the Executive continues to provide services as an employee of the
Company at an annual rate that is twenty percent (20%) or more of
the services rendered, on
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average, during the immediately preceding three full calendar
years of employment (or, if employed less than three years, such
lesser period) and the annual remuneration for such services is
twenty percent (20%) or more of the average annual remuneration
earned during the final three full calendar years of employment
(or, if less, such lesser period), or
(b) the Executive continues to provide services to the Company in a
capacity other than as an employee of the Company at an annual
rate that is fifty percent (50%) or more of the services rendered,
on average, during the immediately preceding three full calendar
years of employment (or if employed less than three years, such
lesser period) and the annual remuneration for such services is
fifty percent (50%) or more of the average annual remuneration
earned during the final three full calendar years of employment
(or if less, such lesser period).
The following Sections 2.5, 2.6 and 2.7 shall be added to the Agreement
immediately following Section 2.4.5:
2.5 Restriction on Timing of Distribution. Notwithstanding any provision of
this Agreement to the contrary, if the Executive is considered a
Specified Employee at Termination of Employment under such procedures as
established by the Company in accordance with Section 409A of the Code,
benefit distributions that are made upon Termination of Employment may
not commence earlier than six (6) months after the date of such
Termination of Employment. Therefore, in the event this Section 2.5 is
applicable to the Executive, any distribution which would otherwise be
paid to the Executive within the first six months following the
Termination of Employment shall be accumulated and paid to the Executive
in a lump sum on the first day of the seventh month following the
Termination of Employment. All subsequent distributions shall be paid in
the manner specified.
2.6 Distributions Upon Income Inclusion Under Section 409A of the Code. Upon
the inclusion of any amount into the Executive's income as a result of
the failure of this non-qualified deferred compensation plan to comply
with the requirements of Section 409A of the Code, to the extent such tax
liability can be covered by the Executive's accrual balance, a
distribution shall be made as soon as is administratively practicable
following the discovery of the plan failure.
2.7 Change in Form or Timing of Distributions. All changes in the form or
timing of distributions hereunder must comply with the following
requirements. The changes:
(a) may not accelerate the time or schedule of any distribution,
except as provided in Section 409A of the Code and the regulations
thereunder;
(b) must, for benefits distributable under Sections 2.1, 2.2, 2.3 and
2.4, delay the commencement of distributions for a minimum of five
(5) years from the date the first distribution was originally
scheduled to be made; and
(c) must take effect not less than twelve (12) months after the
election is made.
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Article 7 of the Agreement shall be deleted in its entirety and replaced
by the following:
ARTICLE 7
AMENDMENTS AND TERMINATION
7.1 Amendments. This Agreement may be amended only by a written agreement
signed by the Company and the Executive. However, the Company may
unilaterally amend this Agreement to conform with written directives to
the Company from its auditors or banking regulators or to comply with
legislative changes or tax law, including without limitation Section 409A
of the Code and any and all Treasury regulations and guidance promulgated
thereunder.
7.2 Plan Termination Generally. The Company may unilaterally terminate this
Agreement at any time. Except as provided in Section 7.3, the termination
of this Agreement shall not cause a distribution of benefits under this
Agreement. Rather, upon such termination benefit distributions will be
made at the earliest distribution event permitted under Article 2 or
Article 3.
7.3 Plan Terminations Under Section 409A. Notwithstanding anything to the
contrary in Section 7.2, if the Company terminates this Agreement in the
following circumstances:
(a) Within thirty (30) days before, or twelve (12) months after 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 described in Section 409A(2)(A)(v) of the Code,
provided that all distributions are made no later than twelve (12)
months following such termination of the Agreement and further
provided that all the Company's arrangements which are
substantially similar to the Agreement are terminated so the
Executive and all participants in the similar arrangements are
required to receive all amounts of compensation deferred under the
terminated arrangements within twelve (12) months of the
termination of the arrangements;
(b) Upon the Company's dissolution or with the approval of a
bankruptcy court provided that the amounts deferred under the
Agreement are included in the Executive's gross income in the
latest of (i) the calendar year in which the Agreement terminates;
(ii) the calendar year in which the amount is no longer subject to
a substantial risk of forfeiture; or (iii) the first calendar year
in which the distribution is administratively practical; or
(c) Upon the Company's termination of this and all other non-account
balance plans (as referenced in Section 409A of the Code or the
regulations thereunder), provided that all distributions are made
no earlier than twelve (12) months and no later than twenty-four
(24) months following such termination, and the Company does not
adopt any new non-account balance plans for a minimum of five (5)
years following the date of such termination;
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the Company may distribute the accrual balance, as shown on
Schedule A of the Agreement to the Executive, in a lump sum
subject to the above terms.
Section 8.7 of the Agreement shall be deleted in its entirety.
The following Sections 8.10 and 8.11 shall be added to the Agreement
immediately following Section 8.9:
8.10 Compliance with Section 409A. This Agreement shall at all times be
administered and the provisions of this Agreement shall be interpreted
consistent with the requirements of Section 409A of the Code and any and
all regulations thereunder, including such regulations as may be
promulgated after the Effective Date of this Agreement.
8.11 Rescission. Any modification to the terms of this Agreement that would
inadvertently result in an additional tax liability on the part of the
Executive, shall have no effect provided the change in the terms of the
plan is rescinded by the earlier of a date before the right is exercised
(if the change grants a discretionary right) and the last day of the
calendar year during which such change occurred.
IN WITNESS OF THE ABOVE, the Executive and the Company hereby consent to
this First Amendment.
EXECUTIVE: ▇▇▇▇▇ BANK
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title President and CEO
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By execution hereof, ▇▇▇▇▇▇▇ Financial consents to and agrees to be bound
by the terms and conditions of this First Amendment and to guarantee said terms.
ATTEST: ▇▇▇▇▇▇▇ FINANCIAL
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title President and CEO
------------------------------------
4
SECOND AMENDMENT
TO THE
▇▇▇▇▇ BANK
SALARY CONTINUATION AGREEMENT
DATED AUGUST 13TH, 2002
FOR
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
THIS SECOND AMENDMENT is adopted this 4th day of April, 2006, effective
as of the first day of January, 2006, by and between ▇▇▇▇▇ BANK, a state bank
located in Honesdale, Pennsylvania (the "Company") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Executive").
The Company and the Executive executed the Salary Continuation Agreement
effective as of October 1st, 1999 and restated on August 13th, 2002 (the
"Agreement").
The undersigned hereby amend the Agreement for the purpose of providing a
monthly increase of .3274% in the benefits payable to the Executive upon
Termination of Employment after Normal Retirement Age. Therefore, the following
changes shall be made:
Section 2.1.1 of the Agreement shall be deleted in its entirety and
replaced by the following:
2.1.1 Amount of Benefit. The annual Normal Retirement Benefit under this
Section 2.1 is $61,000 (sixty-one thousand dollars). The Company may increase
the annual benefit under this Section 2.1 at the sole and absolute discretion of
the Company's Board of Directors. Any increase in the annual benefit shall
require the recalculation of all the amounts on Schedule A attached hereto. The
annual benefit amounts on Schedule A are calculated by amortizing the annual
Normal Retirement Benefit using the interest method of accounting, a 7.50%
discount rate, monthly compounding and monthly payments. Additionally, for the
period after Normal Retirement Age but prior to Termination of Employment, the
Company shall increase the annual Normal Retirement Benefit by .3274%,
compounding monthly.
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IN WITNESS OF THE ABOVE, the Executive and the Company hereby consent
to this Second Amendment.
EXECUTIVE: ▇▇▇▇▇ BANK
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title President and CEO
------------------------------------
By execution hereof, ▇▇▇▇▇▇▇ Financial consents to and agrees to be bound
by the terms and conditions of this Second Amendment and to guarantee said
terms.
ATTEST: ▇▇▇▇▇▇▇ FINANCIAL
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Title President and CEO
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