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TOFC > SEC Filings for TOFC > Form 8-K on 2-Nov-2012All Recent SEC Filings

Show all filings for TOWER FINANCIAL CORP



Termination of a Material Definitive Agreement

Item 1.02 Termination of a Material Definitive Agreement.

On November 1, 2012, Tower Financial Corporation initiated a process to terminate its Revised and Restated Tower Financial Corporation Supplemental Executive Retirement Plan, or SERP, effective September 30, 2012. The SERP, last amended on July 22, 2008,was originally adopted in 2002, and amended in 2005, to provide lifetime retirement benefits to its former President and Chief Executive Officer, Donald F. Schenkel, and has been doing so since Mr. Schenkel's retirement on January 1, 2010. The retirement benefits, per the terms of the SERP, were established at $156,750 annually and, at September 30, 2012, reflected an accrued benefit and corresponding liability on the Company's books of $1,516,223.

Under the terms of the SERP, the Company is entitled at any time to terminate the SERP, by its election to do so and by payment of the remaining benefit to Mr. Schenkel, in cash, in the form of a single lump sum, subject to the delayed payment rules prescribed by Section 409A of the Internal Revenue Code. The Company's Board of Directors has determined that it is in the Company's best interest to terminate the SERP and has provided Mr. Schenkel with the appropriate notice to initiate that process.

Under the Section 409A delayed payment rules, the lump sum payment cannot be paid out in less than 12 months before or, in the exercise of the Company's discretion, more than 24 months after the anniversary date of the SERP's termination. In the meantime, and until the payout date, the Company will continue to pay Mr. Schenkel his annual retirement benefits

($13,062.50 per month). The cumulative amount of these remaining monthly benefits, until final payout, will be treated as an offset and credit against the ultimate lump sum payment due to Mr. Schenkel.

Following the final lump sum payment to Mr. Schenkel, the Company will have no further obligation or liability, to Mr. Schenkel or otherwise, under the terms of the SERP. In addition, the Company will no longer be required to accrue additional annual expenses, going forward, based upon Mr. Schenkel's life expectancy . For the nine months through September 30, 2012, these additional expenses amounted to approximately $80,000, and, as a result of the SERP termination, these additional prospective annual expenses will cease.

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