HOME FEDERAL SAVINGS & LOAN ASSOCIATION
DIRECTOR INDEXED RETIREMENT AGREEMENT
THIS AGREEMENT is made this _________ day of _________________ 200_, by
and between HOME FEDERAL SAVINGS & LOAN ASSOCIATION, a federal mutual savings
and loan located in Nampa, Idaho (the "Company"), and ______________________
(the "Director").
INTRODUCTION
To attract, retain and reward quality directors and to provide a
potentially higher level of retirement income, the Company is willing to provide
the Director with this Director Indexed Retirement Agreement. The Company will
pay the benefits from its general assets.
AGREEMENT
The Director and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Adjustment Rate" shall mean the figure equal to one minus the
Company's highest marginal tax rate for the current calendar year.
1.2 "Change of Control" means 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 members of the Company's Board
of Directors.
1.3 "Normal Retirement Age" means the Director's 72nd birthday.
1.4 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Service.
1.5 "Plan Year" means each fiscal year from October 1 through
September 30. In the year of implementation, it shall commence with the
effective date of this Agreement and end September 30, 2001.
1.6 "Retirement Account" means the account maintained on the books
of the Company as described in Section 2.2.
1.7 "Simulated Investments" mean investments specified by the
Company for use in measuring the Retirement Benefit. Subject to Article 2, the
Company can change the Simulated
Investments only with the Director's written agreement. The Simulated
Investments shall be of equal initial amounts.
1.8 "Simulated Investment Earnings" means the after-tax rate of
return on a Simulated Investment. If the Simulated Investment is a life
insurance policy, the Simulated Investment Earnings shall track cash surrender
value and not include receipt of the policy's death benefit.
1.9 "Termination of Service" means the Director ceases to be a
member of the Company's Board of Directors for any reason whatsoever other than
death.
1.10 "Years of Service" means the number of years the Director has
served as a member of the Company's Board of Directors.
Article 2
Retirement Account
2.1 Simulated Investments. The Company shall establish two
Simulated Investments in the amount of $_________ as of ________, 200__, as
follows:
2.1.1 Simulated Investment Number One shall track the cash
surrender value of a specified life insurance policy(s) as described in
Appendix A.
2.1.2 Simulated Investment Number Two shall track the value
of a simulated investment account comprised of both principal and
accumulated net after-tax interest earnings. Pre-tax interest earnings
shall be based on the lowest yield on the one-year constant maturity
for Treasuries (referred to as the CMT Index) as of September 1 during
each Plan Year. This rate may be adjusted periodically as determined by
the Board. Simulated Investment Number Two assumes the income tax rate
to be the Company's highest marginal tax rate for the current fiscal
year, and assumes that interest (net of tax) shall be compounded on an
annual basis at the end of each Plan Year.
2.2 Retirement Account. The Company shall establish a Retirement
Account on its books for the Director. The Retirement Account balance during the
pre-termination period is determined by subtracting the value of Simulated
Investment Number Two from the value of Simulated Investment Number One and
dividing the difference by the Adjustment Rate. The Retirement Account
subsequent to the Termination Date is reduced by payments of the Primary Normal
Retirement Benefit under Section 3.1.1.
2.3 Statement of Accounts. The Company shall provide to the
Director, within 60 days after each Plan Year, a statement setting forth the
Retirement Account balance.
2.4 Accounting Device Only. The Retirement Account and Simulated
Investments are solely devices for measuring amounts to be paid under this
Agreement. They are not a trust fund of any kind. The Director 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 Director's rights
are not
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subject in any manner to anticipation, alienation, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by the Director's creditors.
Article 3
Normal Retirement
3.1 Normal Retirement Benefit. Subject to the general limitations
of Article 8, upon reaching the Normal Retirement Date while a member of the
Company's Board of Directors, the Director shall be entitled to both the primary
and secondary benefits described in Sections 3.1.1 and 3.1.2.
3.1.1 Primary Normal Retirement Benefit. Commencing on the
Director's Normal Retirement Date, the Company shall pay a Primary
Normal Retirement Benefit to the Director which is equal to the
Director's Retirement Account balance as of the Plan Year ending
immediately preceding the Director's Normal Retirement Date. The
Primary Normal Retirement Benefit shall be paid over 10 years in 120
equal monthly installments (without adjustment for interest earnings
during the payment period), commencing on the first day of the month
following the Director's Termination of Service.
3.1.2 Secondary Normal Retirement Benefit. Within 60 days
following the end of the Plan Year following the Director's Normal
Retirement Date, and continuing until the Director's death, the Company
shall pay a Secondary Normal Retirement Benefit to the Director. The
Secondary Normal Retirement Benefit shall be paid annually in an amount
calculated as follows:
After-tax earnings for the Plan Year on Simulated Investment Number One
minus the
After-tax interest earnings for the Plan Year on Simulated Investment Number
two divided by the
Adjustment Rate.
Earnings on Simulated Investment Number One will be equal to the
increase in the cash surrender value of the life insurance policy
described in Appendix A increased by any loans or withdrawals from the
policy during the Plan Year and reduced by any premium payments during
the Plan Year. For purposes of calculating the after-tax earnings on
Simulated Investment Number One, the income tax rate is assumed to be
0% and that earnings are compounded on an annual basis at the end of
each Plan Year. Interest earnings on Simulated Investment Number Two
shall be determined pursuant to the method set forth in Section 2.1
hereof.
Article 4
Early Termination of Service
Upon Termination of Service which does not result from Early
Retirement, Disability or Change of Control, and is prior to the Normal
Retirement Age, the Company shall pay to the Director the amount currently
accrued for the Primary Normal Retirement Benefit described in
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Section 3.1.1 at Termination of Service. Payment of the Primary Normal
Retirement Benefit shall be based on the Director's Retirement Account balance
as of the end of the Plan Year immediately preceding the Director's Termination
of Service. The benefit shall be paid over 10 years in 120 equal monthly
installments (without adjustment for interest earnings during the payout
period), commencing on the first day of the month following the Director's
Termination of Service. If the Director has completed 10 Years of Service, the
Director shall also receive the amount of the Secondary Normal Retirement
Benefit described in 3.1.2. Payment of the Secondary Normal Retirement Benefit
shall be calculated in accordance with Section 3.1.2 and shall be paid annually,
continuing for 10 years (without adjustment for interest earnings during the
payout period). The Secondary Normal Retirement Benefit shall commence on the
first day of the month following the Director's Normal Retirement Age.
Article 5
Early Retirement
Upon retirement after completing 10 Years of Service, the Company shall
pay to the Director the amount currently accrued for the Primary Normal
Retirement Benefit described in Section 3.1.1, and the amount of the Secondary
Normal Retirement Benefit described in 3.1.2. Payment of the Primary Normal
Retirement Benefit shall be based on the Director's Retirement Account balance
as of the end of the Plan Year immediately preceding the Director's Termination
of Service. The benefit shall be paid over 10 years in 120 equal monthly
installments (without adjustment for interest earnings during the payout
period), commencing on the first day of the month following the Director's
Normal Retirement Age. Payment of the Secondary Normal Retirement Benefit shall
be calculated in accordance with Section 3.1.2 and shall be paid annually,
continuing for 10 years (without adjustment for interest earnings during the
payout period). The Secondary Normal Retirement Benefit shall commence on the
first day of the month following the Director's Normal Retirement Age.
Article 6
Disability
If the Director terminates service due to Disability prior to Normal
Retirement Age, the Company shall pay to the Director the amount currently
accrued for the Primary Normal Retirement Benefit described in Section 3.1.1,
and the amount of the Secondary Normal Retirement Benefit described in 3.1.2.
Payment of the Primary Normal Retirement Benefit shall be based on the
Director's Retirement Account balance as of the end of the Plan Year immediately
preceding the Director's Termination of Service. The benefit shall be paid over
10 years in 120 equal monthly installments (without adjustment for interest
earnings during the payout period), commencing on the first day of the month
following the Director's Termination of Service. Payment of the Secondary Normal
Retirement Benefit shall be calculated in accordance with Section 3.1.2 and
shall be paid annually, continuing for 10 years (without adjustment for interest
earnings during the payout period). The Secondary Normal Retirement Benefit
shall commence on the first day of the month following the Director's Normal
Retirement Age.
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Article 7
Change of Control
If the Director is a member of the Board of Directors of the Company at
the date of a Change of Control, the Company shall pay to the Director the
Primary and Secondary benefits described in Section 3.1.1 and 3.1.2 whether or
not the Director has reached Normal Retirement Age with the Company. The benefit
shall be paid over 10 years in 120 equal monthly installments (without
adjustment for interest earnings during the payout period), commencing on the
first day of the month following the Director's Termination of Service.
Article 8
Death Benefits
Upon the Director's death prior to termination of this Agreement, the
Company shall pay to the Director's beneficiary a benefit equal to the
Retirement Account balance as of the Plan Year immediately preceding the
Director's death. The Company shall pay the benefit to the beneficiary in a lump
sum within 60 days following the Director's death.
Article 9
Beneficiaries
9.1 Beneficiary Designations. The Director shall designate a
beneficiary by filing a written designation with the Company. The Director may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Director and
accepted by the Company during the Director's lifetime. The Director's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Director or if the Director names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Director dies without a valid
beneficiary designation, all payments shall be made to the Director's estate.
9.2 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 10
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement if the Director commits
suicide within two years after the date of this Agreement, or if the Director
has made any material misstatement of fact on any application for life insurance
purchased by the Company.
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Article 11
Claims and Review Procedures
11.1 Claims Procedure. The Company shall notify any person or
entity who claims a right to an interest under this Agreement (the "Claimant")
in writing, within 90 days of Claimant's written application for benefits, of
his or her eligibility or ineligibility for benefits under this 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 this 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 this 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
90 days.
11.2 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 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 60 days after receipt by 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 verbally 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 60-day period, stating
specifically the basis of its decision, written in a manner 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 60-day period is not
sufficient, the decision may be deferred for up to another 60 days at the
election of the Company, but notice of this deferral shall be given to the
Claimant.
Article 12
Amendments and Termination
Except for rate adjustments by the Board of Directors pursuant to
Section 2.1.2 above, this Agreement may be amended or terminated only by a
written agreement signed by the Company and the Director.
Article 13
Miscellaneous
13.1 Binding Effect. This Agreement shall bind the Director and the
Company and their beneficiaries, survivors, executors, administrators and
transferees.
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13.2 No Guarantee of Service. This Agreement is not a contract for
services. It does not give the Director the right to remain in the service of
the Company, nor does it interfere with the shareholder's right to replace the
Director. It also does not require the Director to remain in the service of the
Company nor interfere with the Director's right to terminate service at any
time.
13.3 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.
13.4 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.
13.5 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.
13.6 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
13.7 Unfunded Arrangement. The Director is a general unsecured
creditor 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 Director's life or any other asset held in
connection with this Agreement is a general asset of the Company to which the
Director has no preferred or secured claim.
13.8 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Director as to the subject matter hereof.
No rights are granted to the Director by virtue of this Agreement other than
those specifically set forth herein.
13.9 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting
for the Agreement;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
13.10 Actions of the Company. All determinations, interpretations,
rules, and decisions of the Company shall be conclusive and binding upon all
persons having or claiming to have any interest or right under this Agreement.
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13.11 Named Fiduciary. The Company shall be the named fiduciary and
plan administrator under this Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
IN WITNESS WHEREOF, the Director and a duly authorized Company officer
have signed this Agreement.
COMPANY:
HOME FEDERAL SAVINGS & LOAN
ASSOCIATION
By _________________________________
Title ______________________________
DIRECTOR:
____________________________________
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