Annual Incentive Compensation Plan Performance-Based

 

New employees must be employed by September 30th in a given calendar year (the “Plan Year”) to be eligible for an award related to performance in that Plan Year.

 

Employees hired after September 30th must wait until the next Plan Year to be eligible for an award.

 

Employees hired before September 30th who work a partial year will receive pro-rated awards based on months worked.  A full month will be credited for any partial month worked.

 

Plan participants must receive a minimum performance rating of “satisfactory” or better for the Plan Year to be eligible for any payout.

 

A Plan participant must be an active employee as of the award payout date to receive an award.

 

Notwithstanding the above, eligible employees whose employment is involuntarily terminated by the Company for any reason other than “Cause” or who terminate employment due to disability (as defined in the Company’s long-term disability plan), death or retirement (as defined in the Company’s qualified defined benefit pension plan) will receive a pro-rated award for the Plan Year based on months worked, even if they are not employed as of the award payout date. Such pro rata award will be determined at the same time as awards for continuing participants are determined (i.e., normally at the end of the Plan Year in accordance with Section IX) and payment will be made on the award payout date.  For purposes of this Plan, “Cause” means (a) willful malfeasance or willful misconduct by the eligible employee in connection with his or her employment; (b) continuing failure to perform such duties as are requested by any employee to whom the eligible employee reports, directly or indirectly or by the Board of Directors of the Company (the “Board”); (c) failure by the eligible employee to observe material policies of the Company; or (d) the commission by the eligible employee of (i) any felony or (ii) any misdemeanor involving moral turpitude.

I

20.00%

40.00%

80.00%

85%

15%

II

12.50%

25.00%

50.00%

65%

35%

III-A

10.00%

20.00%

40.00%

25%

75%

III-B

10.00%

20.00%

30.00%

50%

50%

IV-A

7.50%

15.00%

30.00%

25%

75%

IV-B

7.50%

15.00%

22.50%

50%

50%

V-A

6.25%

12.50%

25.00%

25%

75%

V-B

6.25%

12.50%

18.75%

40%

60%

VI

5.00%

10.00%

15.00%

35%

65%

VII

3.75%

7.50%

11.25%

25%

75%

VIII

2.50%

5.00%

7.50%

25%

75%

 

Minimum Performance:  The minimum level of performance needed to begin to be eligible to receive an incentive award. (Rule of Thumb – achieved 90% of the time)

 

Target Performance:  The budgeted, or expected, level of performance based upon both historical data and management’s best judgment of expected performance during the performance period.  (Rule of Thumb – achieved 50% to 60% of the time)

 

Maximum Performance:  The level of performance which based upon historical performance and management’s judgment would be exceptional or significantly beyond the expected. (Rule of Thumb – achieved 10% to 20% of the time)

 

Company Performance – The overall Company performance will be based on the Company’s overall success as measured by criteria determined by the Board and CEO. The percentage of payout for overall Company performance will be allocated based on the specific weighting of the Company goal based on the participant’s tier, and the actual performance compared to the pre-determined minimum, target, and maximum performance levels.

 

Department or Individual Performance – Plan participants below Tier I of the Plan will also have a portion of their annual incentive award based on a combination of department and/or individual performance criteria.  The number of performance criteria included, the specific type of performance criteria to use, and the weighting of each criterion for the overall incentive award will vary based on the tier and Plan participant.

 

The actual award payouts will be calculated using a ratable approach, where award payouts are calculated as a proportion of minimum, target and maximum award opportunities.  If actual performance falls between a performance level, the payout will also fall between the pre-defined performance level on a pro-rated basis.

 

Plan participant = Executive with a Salary of $100,000

 

Award Opportunity = 20% of Salary at target and 40% of Salary at maximum

 

Performance Objectives = 50% based on Company performance and 50% based on Department or Individual performance

50%

100%

Net Income

X Value

Y Value

Z Value

Y Value (Target)

Salary x Target Performance % x Company Goal % x Goal Weight %

50%

50%

Fee Income

X

Y

Z

Y (Target)

Salary x Target Performance % x Dept./Ind. Goal % x Goal Weight %

20%

Deposit Growth

A

B

C

C (Maximum)

Salary x Max Performance % x Dept./Ind. Goal % x Goal Weight %

5%

Loan Growth

Q

R

S

Q (Minimum)

Salary x Minimum Performance % x Dept./Ind. Goal % x Goal Weight %

$100,000 x 10% x

50% x 5% = $250

25%

Other

L

M

N

M/N (Between Target & Max)

Salary x Between Targ. & Max Performance & x Dept./Ind. Goal % x Goal Weight %

 

Plan Gate: In order for the Annual Incentive Plan to be “activated”, the Company must achieve a minimum performance level.  This performance level is not related to the Company minimum, target, or maximum performance goals.  It is instead a minimum level of performance for which any incentive awards will be paid out.  If this minimum level of performance is not met, the Plan will not be “turned on” for that given year and no payouts will be made.

 

Payments will be made between January 1st and March 15th following the Plan Year for which the award was earned unless previously deferred under the Company’s Voluntary Deferred Compensation Plan in accordance with the terms of such Voluntary Deferred Compensation Plan.

 

Except as otherwise provided in Section XI below, a Plan participant must be an employee at the time of the award payout in order to receive a payout.

 

The result of the performance criteria is calculated as a percent of the participant’s Salary, as defined in Section IV, for the year with respect to which the award is payable.

 

Provide recommendations for the award opportunity amounts at target and maximum for tiers II and below.  The CEO will review the objectives and evaluations, adjust guideline awards for performance and recommend final awards to the Board.  Awards for Plan participants other than Executive Reports will be presented to the Board in aggregate.

 

Provide other appropriate recommendations that may become necessary during the life of the Plan.  This could include such items as changes to Plan provisions.

 

 

No Guarantee of Employment.  This Plan is not an employment policy or contract.  It does not give the Plan participant the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Plan participant.

 

Non-Transferability. Awards under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner otherwise than by will or by the laws of descent and distribution.

 

 Successors and Assigns. The Plan shall be binding on and enure to the benefit of all successors and assigns of the Company and a Plan participant, including without limitation, the estate of such participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the participant’s creditors.

 

Reorganization. If the Company shall merge into or consolidate with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person such succeeding or continuing company, firm, or person shall succeed to, assume and discharge the obligations of the Company under this Plan.  Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to the successor or survivor company.

 

Tax Withholding.  The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Plan.

 

Applicable Law.  The Plan and all rights hereunder shall be governed by the laws of the State of Connecticut, without regard to its conflicts of law principles. Anything in this Plan to the contrary notwithstanding, the terms of this Plan shall be interpreted and applied in a manner consistent with the requirements of Section 409A of the Code and the Treasury Regulations thereunder so as not to subject an employee to the payment of any tax penalty or interest which may be imposed by Section 409A of the Code and the Company shall have no right to accelerate or make any payment under this Plan except to the extent such action would not subject an employee to the payment of any tax penalty or interest under Section 40 9A of the Code. It is intended that payments made under this Plan, which have not been deferred in accordance with the Company’s Voluntary Deferred Compensation Plan, shall be exempt from compliance with Section 409A of the Code pursuant to the exemption for short-term deferrals set forth in Section 1.409A-1(b)(4) of the Treasury Regulations.  No awards under this Plan may be deferred except in accordance with the terms of the Company’s Voluntary Deferred Compensation Plan. If all or a portion of the payments provided under this Plan constitute taxable income to an employee for any taxable year that is prior to the taxable year in which such payments are to be paid to such employee as a result of the Plan’s failure to comply with the requirements of Section 409A of the Code and the Treasury Regulations, the applicable payment shall be paid immediately to the employee to the extent such payment is required to be included in the employee’s income.