HOME FEDERAL SAVINGS & LOAN ASSOCIATION
EXECUTIVE DEFERRED INCENTIVE AGREEMENT
THIS AGREEMENT is made this day of _____________, 199___, by and
between HOME FEDERAL SAVINGS & LOAN ASSOCIATION, a federally chartered savings
and loan association located in Nampa, Idaho (the "Company"), and
_______________________ (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide to the Executive a deferred incentive opportunity.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following
words and phrases shall have the meanings specified:
1.1.1 "Change of Control" means the conversion of the
Company to a savings bank or other stock owned company, followed within
twelve (12) months by replacement of fifty percent (50%) or more of the
member of the Company's Board of Directors.
1.1.2 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.3 "Disability" means the Executive's inability to
perform substantially all normal duties of the Executive's position, as
determined by the Company's Board of Directors in its sole discretion.
As a condition to any benefits, the Company may require the Executive
to submit to such physical or mental evaluations and tests as the Board
of Directors deems appropriate.
1.1.4 "Early Retirement Date" means the Executive attaining
age 62.
1.1.5 "Growth of Net Worth" means the percentage change in
the Company's net worth ("Net Worth") over a one year period, measured
on September 30 of each year. For example, deferrals occurring in
199_/199_ would be credited the Growth Rate of Net Worth determined on
September 30, 199_ by taking the Company's Net Worth on September 30,
199_ less the Company's Net Worth on September 30, 199_ divided by the
September 30, 199_ Net Worth.
1
1.1.6 "Normal Retirement Date" means the Executive
attaining age 65.
1.1.7 "Plan Year" means the fiscal year ending on each
September 30th except that the first plan year shall be a short plan
year commencing on the effective date of this Agreement and ending on
September 30, 199_.
1.1.8 "Return On Assets" means the Company's after tax net
income at the end of the most recent fiscal year, adjusted for
Extraordinary Items, divided by the Company's average assets for the
fiscal year.
1.1.9 "Termination of Employment" means the Executive
ceasing to be employed by the Company for any reason whatsoever,
voluntary or involuntary, other than by reason of an approved leave of
absence.
Article 2
Incentive
2.1 Incentive Award. The Return On Assets ("ROA") determined as of
December 31 of each plan year shall determine the Executive's Incentive Award
Percentage, in accordance with the following chart:
If ROA is Greater or Equal to and Less Than Incentive Award Percentage
------------------------------ -------------- --------------------------
0 1% 0%
1% 1.039% 6%
1.04% 1.059% 8%
1.06% 1.079% 10%
1.08% 1.099% 12%
1.1% 1.19% 14%
1.12% 1.139% 17%
1.14% 1.159% 20%
1.16% 1.179% 23%
1.18% 1.199% 26%
1.2% 1.219% 29%
1.22% 1.239% 33%
1.24% 1.259% 37%
1.26% 1.279% 40%
1.28% 1.299% 44%
1.3% ----- 48%
In addition to the required association Return on Assets achievement criteria as
illustrated in the above chart, the company must also maintain a stable to
improving Return on Assets measurement trend in relation to the aggregate Return
on Assets reported by a "Peer Group of Institutions". The list of institutions
making up the aggregate Peer Group of Institutions and the criteria to be used
in judging whether or not the standard of a stable to improving trend is met
shall be the sole and absolute discretion of the Company's Board of Directors.
If the stable to
2
improving standards is not met, the Company's Board of Directors may amend the
above grid at their sole discretion.
2.2 Incentive Award. The Incentive Award is calculated annually by
taking the Executive's base salary for the year in which the ROA was calculated
times the Incentive Award Percentage.
2.3 Incentive Deferral. On December 31 of each plan year, the
Company shall defer the Incentive Award into the Deferral Account.
2.4 Hardship. If an unforeseeable financial emergency arising from
the death of a family member, divorce, sickness, injury, catastrophe or similar
event outside the control of the Executive occurs, the Executive, by written
instructions to the Company may petition the Company to distribute Incentive
Deferral Awards under this Agreement, pursuant to Section 4.6.
Article 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a
"Deferral Account" on its books for the Executive, and shall credit to the
Deferral Account the following amounts:
3.1.1 Deferrals. The Incentive Deferral as determined under
Article 2.
3.1.2 Interest. On September 3oth of each Plan Year prior
to the payment of any benefits under this Agreement, interest on the
Deferred Account Balance since the preceding credit under this Section
3.1.2, if any, at an annual rate, compounded annually, equal to the
Growth of Net Worth determined as of the end of the most recent
completed fiscal year.
3.2 Statement of Accounts. The Company shall provide to the
Executive, by April 1 of each plan year this Agreement is in effect, a statement
setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a
device for measuring amounts to be paid under this Agreement. The Deferral
Account is not a trust fund of any kind. The Executive is a general unsecured
creditor of the Company for the payment of benefits. The benefits represent the
mere Company promise to pay such benefits. The Executive's rights are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by the Executive's creditors.
Article 4
Lifetime Benefits
4.1 Normal Retirement Benefit. If the Executive terminates
employment on or after the Normal Retirement Date for reasons other than death,
the Company shall pay to the Executive
3
the benefit described in this Section 4.1.
4.1.1 Amount of Benefit. The benefit under this Section 4.1
is the Deferral Account balance determined at the end of the Plan Year
immediately prior to the Executive's Termination of Employment.
4.1.2 Payment of Benefit. The Company shall pay the benefit
described in Section 4.1.1 to the Executive in 180 equal monthly
installments commencing on the first day of the month following the
Executive's Termination of Employment. The Company shall annuitize the
benefic amount over 180 months crediting interest on the unpaid balance
of the benefit amount at the annual rate of 7.5%, compounded monthly,
during the installment period.
4.2 Early Retirement Benefit. If the Executive terminates
employment after the Early Retirement Date but before the Normal Retirement
Date, and for reasons other than death or Disability, the Company shall pay to
the Executive the benefit described in this Section 4.2.
4.2.1 Amount of Benefit. The benefit under this Section 4.2
is the greater of (a) or (b) as follows:
(a) the benefit calculated under Section 4.3.1; or
(b) the Deferral Account balance determined at the end of the
Plan Year immediately prior to the Executive's Termination of Employment
multiplied by the applicable percentage from the following table based on the
number of months the Termination of Employment precedes the Normal Retirement
Date:
Number of Months Applicable Percentage
---------------- ---------------------
1 to 12 91.67%
13 to 24 83.33%
25 to 36 75.00%
4.2.2 Payment of Benefit. The Company shall pay the benefit
to the Executive in 180 equal monthly installments commencing on the
first day of the month following the Executive's Termination of
Employment. The Company shall annuitize the benefit amount over 180
months crediting interest on the unpaid balance of the benefit amount
at the annual rate of 7.5%, compounded monthly, during the installment
period.
4.3 Early Termination Benefit. If the Executive terminates
employment before the Early Retirement Date, and for reasons other than death or
Disability, the Company shall pay to the Executive the benefit described in this
Section 4.3.
4.3.1 Amount of Benefit. The benefit under this Section 4.3
is the Deferral Account balance determined at the end of the Plan Year
immediately prior to the Executive's Termination of Employment
multiplied by the applicable percentage from the following
4
table based on the Plan Years completed on the Early Retirement Date:
Plan Years Applicable Percentage
---------- ---------------------
Less than 1 0%
1 10%
2 20%
3 30%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
4.3.2 Payment of Benefit. The Company shall pay the benefit
amount described in Section 4.3.1 to the Executive in 180 equal monthly
installments commencing on the first day of the month following the
Executive's Normal Retirement Agreement. The Company shall annuitize
the benefit amount over 180 months crediting interest on the unpaid
balance of the benefit amount at an annual rate of 7.5%, compounded
monthly, during the installment period.
4.4 Disability Benefit. If the Executive terminates employment for
Disability prior to the Normal Retirement Date, the Company shall pay to the
Executive the benefit described in this Section 4.4.
4.4.1 Amount of Benefit. The benefit under this Section 4.4
is the Deferral Account balance determined at the end of the Plan Year
immediately prior to the Executive's Termination of Employment.
4.4.2 Payment of Benefit. The Company shall pay the benefit
to the Executive in 180 equal monthly installments commencing on the
first day of the month following the Executive's Termination of
Employment. The Company shall annuitize the benefit amount over 180
months crediting interest on the unpaid balance of the benefit amount
at an annual rate of 7.5%, compounded monthly, during the installment
period.
4.5 Change of Control Benefit. Upon a Change of Control while the
Executive is in the active service of the Company, the Company shall pay to the
Executive the benefit described in this Section 4.5 in lieu of any other benefit
under this Agreement.
4.5.1 Amount of Benefit. The benefit under this Section 4.5
is the Deferral Account balance determined at the end of the Plan Year
immediately prior to the date of the Executive's Termination of
Employment upon a Change of Control.
5
4.5.2 The Company shall pay the benefit to the Executive in
180 equal monthly installments commencing on the first day of the month
following the Executive's Normal Retirement Age. The Company shall
annuitize the benefit amount over 180 months crediting interest on the
unpaid balance of the benefit amount at an annual rate of 7.5%,
compounded monthly, during the installment period.
4.6 Hardship Distribution. Upon the Company's determination
(following petition by the Executive) that the Executive has suffered an
unforeseeable financial emergency as described in Section 2.3, the Company shall
distribute to the Executive all or a portion of the Deferral Account balance as
determined by the Company, but in no event shall the distribution be greater
than is necessary to relieve the financial hardship.
Article 5
Death Benefits
5.1 Death During Active Service. If the Executive dies while in
the active service of the Company, the Company shall pay to the Executive's
beneficiary the benefit described in this Section 5.1.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is
the greater of the Deferral Account balance for the Plan Year ending
immediately prior to the date of the Executive's death or
$____________.
5.1.2 Payment of Benefit. The Company shall pay the benefit
to the Executive in 180 monthly installments commencing on the first
day of the month following the Executive's Death. The Company shall
annuitize the benefit amount over 180 months crediting interest on the
unpaid balance of the benefit amount at an annual rate of 7.5%,
compounded monthly, during the installment period.
5.2 Death During Benefit Period. If the Executive dies after
benefit payments have commenced under this Agreement but before receiving all
such payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
Article 6
Beneficiaries
6.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
accepted by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.
6
6.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. The Company may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
Article 7
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
7.1 Excess Parachute Payment. To the extent the benefit would
create an excise tax under the parachute payment rules of Section 280G of the
Code.
7.2 Suicide. If the Executive commits suicide within two years
after the date of this Agreement, or if the Executive has made any material
misstatement of fact on any application for life insurance purchased by the
Company.
Article 8
Claims and Review Procedures
8.1 Claims Procedure. The Company shall notify the Executive, the
Executive's beneficiary, or any other party who claims a right to an interest
under the Agreement (the "Claimant") in writing, within ninety (90) days of his
or her written application for benefits, of his or her eligibility or
ineligibility for benefits under the Agreement. If the Company determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial, (2) a specific reference to the
provisions of the Agreement on which the denial is based, (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed, and (4) an explanation of
the Agreement's claims review procedure and other appropriate information as to
the steps to be taken if the Claimant wishes to have the claim reviewed. If the
Company determines that there are special circumstances requiring additional
time to make a decision, the Company shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
8.2 Review Procedure. If the Claimant is determined by the Company
not to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by
7
the Company of the petition, the Company shall afford the Claimant (and counsel,
if any) an opportunity to present his or her position to the Company orally or
in writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents. The Company shall notify the Claimant of its decision in
writing within the sixty-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Claimant and
the specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant.
Article 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive except that the Company, in its sole
discretion, may amend or terminate this Agreement at any time if, pursuant to
legislative, judicial or regulatory action, continuation of the Agreement would
(i) cause benefits to be taxable to the Executive prior to actual receipt, or
(ii) result in significant financial penalties or other significantly
detrimental ramifications to the Company (other than the financial impact of
paying the benefits). In the event of any termination, the Executive shall be
treated as if the date of termination of the Agreement were his Termination of
Employment under Section 2.2.
Article 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Executive and
the Company, and their beneficiaries, survivors, executors, administrators and
transferees.
10.2 No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
10.5 Applicable Law. The Agreement and all rights hereunder shall
be governed by the laws of the State of Idaho, except to the extent preempted by
the laws of the United States of America.
8
10.6 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Company for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Company to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's life
is a general asset of the Company to which the Executive and beneficiary have no
preferred or secured claim
10.7 Reorganization. The Company shall not merge or consolidate
into or with another company, or reorganize, or sell substantially all of its
assets to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of the
Company under this Agreement. Upon the occurrence of such event, the term
"Company" as used in this Agreement shall be deemed to refer to the successor or
survivor company.
10.8 Entire Agreement. This Agreement is the entire agreement
between the parties and it contains all of the covenants and agreements between
the Executive and the Company.
10.9 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
10.9.1 Interpreting the provisions of the Agreement;
10.9.2 Establishing and revising the method of accounting
for the Agreement;
10.9.3 Maintaining a record of benefit payments;
10.9.4 Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
9
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
Home Federal Savings & Loan Association
By
------------------------------- ------------------------------------
Title
------------------------------- ----------------------------------
(print name)
10
FIRST AMENDMENT
TO THE
HOME FEDERAL SAVINGS & LOAN ASSOCIATION
EXECUTIVE DEFERRED INCENTIVE AGREEMENT
DATED DECEMBER 19, 1997
FOR
-------------------------
THIS AMENDMENT executed on this ________ day of __________________, 200_,
by and between HOME FEDERAL SAVINGS & LOAN ASSOCIATION, a federally-chartered
savings and loan association located in Nampa, Idaho (the "Company"), and
_____________ (the "Executive").
On _________ __, 199_, the Company and the Executive executed the HOME
FEDERAL SAVINGS & LOAN ASSOCIATION EXECUTIVE DEFERRED INCENTIVE AGREEMENT (the
"Agreement").
The undersigned hereby amends, in part, said Agreement for the purpose of
updating the 1) Disability definition, 2) Disability payout provision, 3) Death
Benefit payout provision, and 4) Claims and Review Procedures. Therefore,
Section 1.1.3 of the Agreement shall be deleted in its entirety and
replaced by the new Section 1.1.3 as follows:
1.1.3 "Disability" means the Executive's suffering a sickness,
accident or injury which has been determined by the carrier of any individual or
group disability insurance policy covering the Executive, or by the Social
Security Administration, to be a disability rendering the Executive totally and
permanently disabled. The Executive must submit proof to the Company of the
carrier's or Social Security Administration's determination upon the request of
the Company.
Section 4.4.2 of the Agreement shall be deleted in its entirety and
replaced by the new Section 4.4.2 as follows:
4.4.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the first day of the
month following the Executive's Normal Retirement Age. The Company shall credit
interest at an annual rate of 7.5 percent, compounded monthly, on the remaining
account balance during any applicable installment period.
Section 5.1 of the Agreement shall be deleted in its entirety and replaced
by the new Section 5.1 as follows:
5.1 Death During Active Service or After Determination of
Disability. If the Executive dies while in the active service of the Company or
after meeting the definition of Disability found in Section 1.1.3, the Company
shall pay to the Executive's beneficiary the benefit described in this Section
5.1.
Article 8 of the Agreement shall be deleted in its entirety and replaced by
the new Article 8 as follows:
8.1 Claims Procedure. An Executive or beneficiary ("claimant") who
has not received benefits under the Agreement that he or she believes should be
paid shall make a claim for such benefits as follows:
8.1.1 Initiation - Written Claim. The claimant initiates a
claim by submitting to the Company a written claim for the benefits.
8.1.2 Timing of Company Response. The Company shall respond
to such claimant within 90 days after receiving the claim. If the
Company determines that special circumstances require additional time
for processing the claim, the Company can extend the response period by
an additional 90 days by notifying the claimant in writing, prior to
the end of the initial 90-day period, that an additional period is
required. The notice of extension must set forth the special
circumstances and the date by which the Company expects to render its
decision.
8.1.3 Notice of Decision. If the Company denies part or all
of the claim, the Company shall notify the claimant in writing of such
denial. The Company shall write the notification in a manner calculated
to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of
the Agreement on which the denial is based;
(c) A description of any additional information
or material necessary for the claimant to perfect the claim
and an explanation of why it is needed;
(d) An explanation of the Agreement's review
procedures and the time limits applicable to such procedures;
and
(e) A statement of the claimant's right to bring
a civil action under ERISA Section 502(a) following an adverse
benefit determination on review.
8.2 Review Procedure. If the Company denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review by the
Company of the denial, as follows:
8.2.1 Initiation - Written Request. To initiate the review,
the claimant, within 60 days after receiving the Company's notice of
denial, must file with the Company a written request for review.
8.2.2 Additional Submissions - Information Access. The
claimant shall then have the opportunity to submit written comments,
documents, records and other information relating to the claim. The
Company shall also provide the claimant, upon request and free of
charge, reasonable access to, and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations)
to the claimant's claim for benefits.
8.2.3 Considerations on Review. In considering the review,
the Company shall take into account all materials and information the
claimant submits relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit
determination.
8.2.4 Timing of Company Response. The Company shall respond
in writing to such claimant within 60 days after receiving the request
for review. If the Company determines that special circumstances
require additional time for processing the claim, the Company can
extend the response period by an additional 60 days by notifying the
claimant in writing, prior to the end of the initial 60-day period,
that an additional period is required. The notice of extension must set
forth the special circumstances and the date by which the Company
expects to render its decision.
8.2.5 Notice of Decision. The Company shall notify the
claimant in writing of its decision on review. The Company shall write
the notification in a manner calculated to be understood by the
claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of
the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access
to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA
regulations) to the claimant's claim for benefits; and
(d) A statement of the claimant's right to bring
a civil action under ERISA Section 502(a).
IN WITNESS OF THE ABOVE, the Executive and the Company have agreed to this
First Amendment.
EXECUTIVE: COMPANY:
HOME FEDERAL SAVINGS & LOAN
ASSOCIATION
By
------------------------------- ----------------------------------
Its
---------------------------------
