HILLS BANK AND TRUST COMPANY
DEFERRED COMPENSATION PLAN
THIS AGREEMENT, entered into this 1st day of September, 1995, between Hills Bank
and Trust Company, a Corporation organized under the laws of the State of Iowa
(Employer) and Xxxxxx X. Xxxxx (Employee).
In consideration of the agreements hereinafter contained, the parties hereto
agree as follows:
1. The Employer agrees to provide the Employee with a deferred compensation
arrangement in conjunction with his employment with the Employer.
2. (a) The Employee shall be given the opportunity to elect to reduce his
salary by executing a salary reduction agreement on a form provided by
the Employer. Said agreement shall be executed prior to the first pay
period to which it is to be applicable, and shall specify the amount
and method of reduction in the salary of the Employee. The agreement
shall limit the annual amount that can be deferred into the plan by
the employee to no more than fifteen percent of said Employee's stated
compensation.
(b) In addition to the amounts credited to this plan pursuant to paragraph
2(a) above, the Employer may elect to credit an additional amount to
the plan. Said amount must be determined by the Employer prior to the
end of the calendar year in which it is to be credited to the plan. It
is the intent of the Employer to credit an amount into this plan equal
to the benefit the Employee is not able to receive in the Employer's
qualified plans due to statutory and administrative limitations.
3. (a) The Employer shall credit to a book reserve ("the deferred
compensation account") any such amounts that the Employee elects to
defer pursuant to paragraph 2(a) above and any additional amounts
which the Employer elects to credit to the plan during the year
pursuant to paragraph 2(b) above. Amounts to be credited pursuant to
paragraph 2(a) shall be credited as of the last day of the month in
which the salary reduction is made. Amounts to be credited pursuant to
paragraph 2(b) shall be credited as of the date(s) designated by the
Employer.
(b) Other than the establishment of the deferred compensation account, the
Employer shall not be required to set aside or in any way fund any
amounts credited to the deferred compensation plan under this
agreement. Such book reserve shall constitute an obligation on the
part of the Employer that shall be satisfied only from the general
assets of the Employer.
(c) The deferred compensation account will be adjusted annually by a
growth factor to be determined as follows:
A. Amounts deferred by the Employee during the year shall accrue
interest at a rate equal to the one year treasury constant
maturity rate, adjusted on each June 30 and December 31. Such
interest accruals shall be calculated from the last day of the
month that the Employee's salary deferral is credited to the
deferred compensation account up to December 31 of the year of
such deferral.
The account shall also be credited with interest, at the same
rate, on any amounts paid to the Employee from the Employee's
deferred compensation account during the year. Such interest
shall be calculated from January 1 of the year of payment
through the end of month prior to the month in which such
payment to the Employee is made.
B. The balance of the Employee's deferred compensation account as
of January 1 of each year shall be adjusted as of December 31 of
the same year by a factor representing the change in the S&P 500
Index for that year. The adjustment shall be calculated by
multiplying the January 1 balance (less any payments made to the
Employee during the year) by a ratio equal to the S&P Index at
December 31 divided by the S&P Index as of the previous January
1.
Such adjustment can be either positive or negative.
5. The value of the deferred compensation account shall constitute the entire
amount of deferred compensation due to the Employee pursuant to this
agreement.
6. The benefits to be paid to the Employee shall be as follows:
(a) In the event of termination of employment, for whatever reason, prior
to the attainment of age 60, the value of the deferred compensation
account shall be paid in full as soon as is administratively possible
after the end of the calendar year of termination. If the value of the
deferred compensation account at the end of the calendar year of
termination is in excess of $100,000, the Employer shall have the
option to pay fifty percent of the deferred compensation account as
soon as administratively possible after the end of the calendar year
of termination and to pay the balance of the account as soon as
administratively possible after the end of the calendar year following
the calendar year of termination. For this purpose, the value of the
balance of the deferred compensation account after the initial payment
shall be determined as of December 31 of the year after the year of
termination.
(b) In the event of termination of employment, for whatever reason, after
the attainment of age 60, the deferred compensation account shall be
paid in 10 annual installments commencing in the calendar year
following the year of termination of employment. Each installment
shall be determined by dividing the value of the deferred compensation
account as of the end of the calendar year, by the number of
installment payments remaining to be made. Payments made under this
paragraph shall be made as soon as is administratively possible
following the end of each calendar year.
If the deferred compensation account decreases to less than $10,000 as
of the end of any calendar year after payments under this paragraph
have commenced, the Employer shall have the right to accelerate the
payment of the remaining balance in a single lump-sum payment.
(c) In the event that the Employee's employment is decreased to part-time
status after the attainment of age 60, the Board shall have the right
to commence distributions pursuant to paragraph (b) above as if the
Employee has terminated employment in the year that his status changes
to part-time. The Board shall have the right to elect to commence
distribution by the end of any calendar year during or after the
change in employment status with distributions beginning in the
following year (but not later than the year the employee attains age
65). Once distributions have commenced under this paragraph they will
continue pursuant to paragraph (b) regardless of subsequent changes in
employment status.
(d) If the Employee is still employed at age 65, payment shall commence
pursuant to paragraph (b) above as if the Employee terminated
employment in the year he reaches age 65.
7. In the event of the death of the Employee prior to the complete payment of
benefits payable pursuant to this plan, payments will commence, or
continue in favor of the beneficiary designated by the Employee to receive
such payments. The beneficiary may be designated or changed (without the
consent of any prior beneficiaries) by the Employee on a form provided by
the Employer. If no such beneficiary has been designated by the Employee,
or if no designated beneficiary shall survive the Employee, payments due
pursuant to this plan shall be paid to the personal representative of the
Employee's estate.
8. If payments are to be made to a beneficiary due to the death of the
Employee, said beneficiary shall be given the option of naming a
designated beneficiary.
9. Nothing contained in this agreement and no action taken pursuant to the
provisions of this Agreement shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Employer and
the Employee, his designated beneficiary or any other person. In the event
that the Employer would decide to fund any obligation due under this
agreement, such funds shall continue for all purposes to be a part of the
general funds of the Employer and no person other than the Employer shall
by virtue of the provisions contained in this agreement have any interest
in such funds. To the extent that any person acquires a right to receive
payments from the Employer pursuant to this agreement, such right shall be
no greater than the right of any unsecured general creditor of the
Employer.
10. The rights of the Employee or any other person to the payment of deferred
compensation or other benefits under this agreement shall not be assigned,
pledged or encumbered except by will or by the laws of descent and
distribution.
11. All distributions made under this agreement shall be paid in cash, subject
to any required federal or state tax withholding. The Employee shall not
have the right to receive a distribution of shares of stock or any other
property.
12. Nothing contained herein shall be construed as conferring upon the
Employee the right to continue in the employment of the Employer in any
capacity.
13. The Employer shall have the full power and authority to interpret,
construe and administer this Plan and the Employer's interpretation and
construction thereof, and actions thereunder, including any valuation of
the deferred compensation account, or the amount of or the recipient of
the payment to be made therefrom, shall be binding and conclusive on all
persons for all purposes.
14. The Employer reserves the right to discontinue the Employee's option to
elect a salary reduction amount at any time prior to the Employee's
execution of salary reduction agreement.
15. This agreement shall be construed in accordance with and governed by
the laws of the State of Iowa.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed by its
duly authorized officers and employees as of the 1st day of September, 1995.
HILLS BANK AND TRUST COMPANY
By:
Employer
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx
Employee
