CHFC 2018 Proxy Statement

Deductibility of Executive Compensation Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to the Chief Executive Officer and the three other most highly compensated executive officers, other than the Chief Financial Officer, employed on the last day of any fiscal year. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements aremet. The CompensationCommittee considers deductibility as one factor whenmaking a decision regarding executive compensation. In order tomaximize the deductibility of the executives’ pay, the shareholder-approved long-termincentive plan is structured such that performance-based equity compensation paid under those plans for our most senior executives should constitute as qualifying as performance-based compensation under Section 162(m). However, in some cases, the Compensation Committee may determine it is appropriate to provide compensation that may exceed deductibility limits in order to recognize performance, meet market demands and retain key executives. In 2018, new tax regulations will generally eliminate the performance-based compensation exclusion under Section 162(m) of the Code. As a result, we expect that some of our executive compensation will exceed deductibility limits. Employment Contracts In the past year, as a result of our management changes, we have entered into several new or amended employment contracts with executives. The terms have been negotiated and determined with the consideration of the best interests of the Corporation and shareholders. In attracting and securing a talented executive team we believe we have positioned the Corporation to successfully execute our growth strategy and vision. We describe the material terms of our employment agreements in effect in 2017 with Mr. Provost, Mr. Torgow, Mr. Klaeser and Mr. Rathbun and our offer letter agreement with Mr. Rathbun below under “ Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.” Severance and Change in Control Arrangements We provide change in control benefits, and in certain circumstances severance benefits, specifically to retain our key executives, including our named executive officers, during a potential change in control and also to provide income continuation in the event of certain involuntary terminations. Each of our employment agreements withMr. Provost, Mr. Torgow, Mr. Klaeser andMr. Shafer include certain severance payments upon termination of employment or a change in control of the Corporation. With respect to a change in control, each of these employment agreements provides “double trigger” benefits to the executive, meaning that the severance benefits are paid only in the event such officer is terminated generally without cause by us or for good reason by the officer following a change in control. For a detailed description of the severance and change in control benefits applicable to these executive officers, see the discussion below under “Potential Payments Upon Termination or Change in Control.” Mr. Rathbun's offer letter includes certain severance payments upon termination of his employment. In addition, our change in control agreement with Mr. Rathbun, entered into on February 27, 2018, also includes "double-trigger" change in control benefits. For a detailed description of the severance and change in control benefits applicable to Mr. Rathbun, see the discussion below under "Potential Payments Upon Termination or Change of Control." In addition, effective August 8, 2017, Mr. Ramaker retired as our Chief Executive Officer and President. In connection with his retirement, we entered into a General Release Agreement with Mr. Ramaker that provides for certain payments and other benefits. For a detailed description of the severance benefits Mr. Ramaker received under his release agreement, see the discussion below under “ Narrative to SummaryCompensationTable andGrants of Plan-BasedAwardsTable ” and "Actual Post-Retirement Payments Payable to Mr. Ramaker." 39