HOMEFEDERAL BANK DIRECTOR DEFERRED FEE AGREEMENT
EXHIBIT
10.3
HOMEFEDERAL
BANK
WHEREAS
THIS AGREEMENT AMENDS AND RESTATES the prior HomeFederal Bank Directors Deferred
Compensation Plan (the “Plan”) between the HomeFederal Bank and the Director
effective April 1, 1992, as amended by the First Amendment dated February
18,
1993, the Second Amendment effective June 1, 1992, and the Third Amendment
effective July 1, 1996 (collectively, the Plan, the First Amendment and the
Second Amendment are referred to as the “Prior Agreement”), this DIRECTOR
DEFERRED FEE AGREEMENT (the “Agreement”) is made this _______ day of
________________, 2005, by HOMEFEDERAL BANK (the “Bank”), a federally-chartered
bank located in Columbus, Indiana and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the “Director”). The
purpose of this Agreement is to encourage the Director to remain a member
of the
Bank’s Board of Directors.
Article
1
Definitions
Whenever
used in this Agreement, the following words and phrases shall have the meanings
specified:
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1.1
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“Beneficiary”
means each designated person, or the estate of a deceased Director,
entitled to benefits, if any, upon the death of the Director determined
pursuant to Article 6.
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1.2
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“Beneficiary
Designation Form”
means the form established from time to time by the Plan Administrator
that the Director completes, signs and returns to the Plan Administrator
to designate one or more
beneficiaries.
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1.3
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“Board”
means the Board of Directors of the Bank as from time to time
constituted.
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1.4
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“Code”
means the Internal Revenue Code of 1986, as
amended.
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1.5
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“Corporation”
means Home Federal Bancorp or its
successor.
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1.6
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“Deferral
Account”
means the balance of the Director’s accumulated fee deferrals, plus
accrued interest.
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1.7
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“Distribution
Period Crediting Rate”
means a rate equal to 2.00% over the average yield on the 10-year
Treasury
Bond for the month prior to commencement of benefit payments, provided
that such crediting rate shall not be more than 12.00%, nor less
than
8.00%.
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1.8
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“Early
Termination”
means Separation from Service before Normal Benefit Age for reasons
other
than death or Termination for
Cause.
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1.9
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“Effective
Date”
means January 1, 2006.
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1.10
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“Normal
Benefit Age”
means the Director attaining age sixty
(60).
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1.11
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“Plan
Administrator”
means the plan administrator described in Article
8.
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1.12
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“Plan
Year”
means the calendar year.
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1.13
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“Pre-Distribution
Period Crediting Rate”
means an annual rate equal to the trailing 3-year average ▇▇▇,
provided
such average ▇▇▇ shall not exceed 12.00%, nor be less than 8.00%.
For
example, the rate for 2006 will be the average ▇▇▇ for 2003, 2004,
and
2005.
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1.14
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“Prescribed
Form of Payment”
shall mean one hundred eighty (180) equal monthly installments.
Interest
shall be credited on the unpaid Deferral Account balance during
the
payment period at an annual rate equal to the Distribution Period
Crediting Rate, compounded monthly. The Distribution Period Crediting
Rate
shall be set at the inception of the payment period and shall not
be
adjusted thereafter.
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1.15
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“▇▇▇”
means the average return on equity, as reported in the published
financial
statements of the Corporation.
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1.16
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“Rollover
Balance”
means the balance of $283,661 from the Prior
Agreement.
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1.17
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“Secretary”
means the Secretary of the United States Department of the
Treasury.
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1.18
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“Separation
from Service”
means that the Director’s service, as a director and independent
contractor, to the Bank and any member of a controlled group as
defined in
Section 414 of the Code to which the Bank belongs, has terminated
for any
reason, other than by reason of a leave of absence approved by
the Bank or
the death of the Director.
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1.19
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“Termination
for Cause”
has that meaning set forth in Section
7.1.
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Article
2
Relationship
of this Agreement to the Prior Agreement
Inasmuch
as all amounts payable to or on behalf of the Director under this Agreement
were
accrued and vested under the Prior Agreement prior to January 1, 2005, it
is the
express intent of this Agreement that:
(a) this
Agreement and the Prior Agreement shall not be subject to Section 409A of
the
Code;
(b) no
provision of this Agreement shall be enforceable with respect to the vested
accrued benefit of the Directors as of December 31, 2004, to the extent it
would
constitute a “material modification” under Treasury Regulation section
1.409A-6(a)(4);
(c) to
the
extent any benefit is deemed to have accrued or vested on or after January
1,2005, this Agreement shall be deemed to be amended to the extent minimally
necessary to comply with Section 409A of the Code; and
(d) except
for
the elimination of payment in the event of the Director’s disability, the timing
2
and
form of payment of benefits reflected in this Agreement are intended to be
the
same as provided in the Prior Agreement (and shall be so
interpreted).
Article
3
Deferral
Account
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3.1
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Crediting.
The Bank shall credit to the Director’s Deferral Account the following
amounts:
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3.1.1
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Rollover.
The Rollover Balance from the Prior
Agreement.
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3.1.2
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Interest.
On
the last day of each month and continuing until the commencement
of
benefit payments, interest shall be credited on the unpaid Deferral
Account balance at an annual rate equal to the Pre-Distribution
Period
Crediting Rate, compounded monthly.
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3.2
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Statement
of Accounts.
The Plan Administrator shall provide to the Director, within one
hundred
twenty (120) days after the end of each Plan Year, a statement
setting
forth the Deferral Account balance.
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3.3
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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 Director is a general unsecured creditor of the Bank
for the
distribution of benefits. The benefits represent the mere Bank
promise to
pay such benefits. The Director's rights are not subject in any
manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Director's
creditors.
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Article
4
Distributions
During Lifetime
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4.1
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Normal
Retirement Benefit.
Upon the Director reaching Normal Benefit Age, the Bank shall pay
to the
Director the benefit described in this Section 4.1 in lieu of any
other
benefit under this Article.
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4.1.1
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Amount
of Benefit.
The benefit under this Section 4.1 is the Deferral Account balance
at the
Director's Normal Benefit Age.
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4.1.2
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Distribution
of Benefit.
The Bank shall pay the benefit to the Director in the Prescribed
Form of
Payment commencing as of the first day of the month following the
Director’s Normal Benefit Age.
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4.2
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Early
Termination Benefit.
In the event of the Director’s Early Termination, the Bank shall pay to
the Director the benefit described in this Section 4.2 in lieu
of any
other benefit under this Article.
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4.2.1
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Amount
of Benefit.
The benefit under this Section 4.2 is the Deferral Account
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3
balance at the Director’s Normal Benefit Age.
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4.2.2
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Distribution
of Benefit.
The Bank shall pay the benefit to the Director in the Prescribed
Form of
Payment commencing on the first day of the month following the
Director’s
Normal Benefit Age.
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4.3
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Restriction
on Timing of Distribution.
Notwithstanding any provision of this Agreement to the contrary
and to the
extent this Agreement is subject to Section 409A of the Code, if
the
Director is considered a “specified employee” under Section
409A of the Code and regulations thereunder, benefit
distributions that qualify as a "separation from service" under
Section 409A of the Code and regulations thereunder may not commence
earlier than six (6) months after the date of such separation
from service. In the event this Section 4.3 applies, the Prescribed
Form of Payment shall be deemed to have commenced when it otherwise
would
have and any monthly payments that may not be made during the first
six
(6) months following separation from service shall be paid in a
lump sum
as of the first month payment is
permitted.
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Article
5
Distributions
at Death
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5.1
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Death
During Active Service.
If the Director dies while in active service to the Bank, the Bank
shall
pay to the Beneficiary the greater of the Deferral Account or $539,393.
This benefit shall be paid to the Beneficiary, in the Prescribed
Form of
Payment commencing on the first day of the month following receipt
by the
Bank of the Director’s death
certificate.
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5.2
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Death
During Distribution of a Benefit.
If the Director dies after any benefit distributions have commenced
under
this Agreement but before receiving all such distributions, the
Bank shall
pay to the Beneficiary the remaining benefits at the same time
and in the
same amounts as they would have been paid to the Director had the
Director
survived.
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5.3
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Death
After Separation from Service But Before Benefit Distributions
Commence.
If the Director is entitled to benefit distributions under this
Agreement,
but dies prior to the commencement of said benefit distributions,
the Bank
shall pay to the Beneficiary the same benefits that the Director
was
entitled to prior to death except that the benefit distributions
shall
commence on the first day of the month following receipt by the
Bank of
the Director’s death certificate.
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Article
6
Beneficiaries
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6.1
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Beneficiary.
Each Director shall have the right, at any time, to designate a
Beneficiary(ies) to receive any benefits payable under the Agreement
to a
Beneficiary upon the death of the Director. The Beneficiary designated
under this Agreement may be the same as or different from the beneficiary
designation under any other plan of the Bank in which the Director
participates.
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4
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6.2
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Beneficiary
Designation Change.
The Director shall designate a Beneficiary by completing and signing
the
Beneficiary Designation Form, and delivering it to the Plan Administrator
or its designated agent. 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. The Director shall have the right to change
a
Beneficiary by completing, signing and otherwise complying with
the terms
of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. Upon the acceptance
by the
Plan Administrator of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Plan Administrator
shall be entitled to rely on the last Beneficiary Designation Form
filed
by the Director and accepted by the Plan Administrator prior to
the
Director’s death.
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6.3
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Acknowledgment.
No designation or change in designation of a Beneficiary shall
be
effective until received, accepted and acknowledged in writing
by the Plan
Administrator or its designated
agent.
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6.4
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No
Beneficiary Designation.
If the Director dies without a valid Beneficiary designation, or
if all
designated Beneficiaries predecease the Director, then the Director’s
spouse shall be the designated Beneficiary. If the Director has
no
surviving spouse, the benefits shall be made to the personal
representative of the Director's
estate.
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6.5
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Facility
of Distribution.
If the Plan Administrator determines in its discretion that a benefit
is
to be paid to a minor, to a person declared incompetent, or to
a person
incapable of handling the disposition of that person’s property, the Plan
Administrator may direct distribution of such benefit to the guardian,
legal representative or person having the care or custody of such
minor,
incompetent person or incapable person. The Plan Administrator
may require
proof of incompetence, minority or guardianship as it may deem
appropriate
prior to distribution of the benefit. Any distribution of a benefit
shall
be a distribution for the account of the Director and the Beneficiary,
as
the case may be, and shall be a complete discharge of any liability
under
the Agreement for such distribution
amount.
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Article
7
General
Limitations
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7.1
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Termination
for Cause.
Notwithstanding any provision of this Agreement to the contrary,
the Bank
shall not pay any benefit under this Agreement that is in excess
of the
Director’s Deferrals (i.e. Deferral Account minus interest credited
thereon) if Director’s service is terminated by the Board or by the Bank's
shareholder(s) for:
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(a)
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Gross
negligence or gross neglect of duties to the Bank;
or
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(b)
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Conviction
of a felony or of a gross misdemeanor involving moral turpitude
in
connection with the Director’s service to the Bank;
or
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(c)
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Fraud,
disloyalty, dishonesty or willful violation of any law or significant
Bank
policy committed in connection with the Director's service and
resulting
in an adverse effect on the Bank;
or
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5
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(d)
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Issuance
of a final removal or prohibition order issued by a state or federal
banking agency with jurisdiction over the Bank.
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7.2
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No
Withdrawal Election.
Except as expressly provided herein, the Director may not elect,
at any
time, to withdraw any portion of the Deferral Account balance.
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Article
8
Administration
of Agreement
8.1 Plan
Administrator Duties.
This
Agreement shall be administered by a Plan Administrator which shall consist
of
the Board, or such committee or person(s) as the Board shall appoint. The
Plan
Administrator shall also have the discretion and authority to (i) make, amend,
interpret and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and all
ques-tions including interpretations of this Agreement, as may arise in
connection with the Agreement.
8.2 Agents.
In the
administration of this Agreement, the Plan Administrator may employ agents
and
delegate to them such administrative duties as it sees fit (including acting
through a duly appointed representative), and may from time to time consult
with
counsel who may be counsel to the Bank.
8.3 Binding
Effect of Decisions.
The
decision or action of the Plan Administrator with respect to any question
arising out of or in connection with the administration, interpretation and
application of the Agreement and the rules and regulations promulgated
hereunder
shall be final and conclusive and binding upon all persons having any interest
in the Agreement.
8.4 Indemnity
of Plan Administrator.
The
Bank shall indemnify and hold harmless the members of the Plan Administrator
against any and all claims, losses, damages, expenses or liabilities arising
from any action or failure to act with respect to this Agreement, except
in
the case of willful misconduct by the Plan Administrator or any of its
members.
8.5 Bank
Information.
To
enable the Plan Administrator to perform its functions, the Bank shall supply
full and timely information to the Plan Administrator on all matters relating
to
the date and circumstances of the death or Separation from Service of the
Director, and such other pertinent information as the Plan Administrator
may
reasonably require.
Article
9
Claims
and Review Procedures
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9.1
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Claims
Procedure.
The Director 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:
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9.1.1
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Initiation
- Written Claim.
The claimant initiates a claim by submitting to the Bank a written
claim
for the benefits.
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6
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9.1.2
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Timing
of Bank Response.
The Bank shall respond to such claimant within 90 days after receiving
the
claim. If the Bank determines that special circumstances require
additional time for processing the claim, the Bank 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 Bank expects to render
its
decision.
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9.1.3
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Notice
of Decision.
If the Bank denies part or all of the claim, the Bank shall notify
the
claimant in writing of such denial. The Bank shall write the notification
in a manner calculated to be understood by the claimant. The notification
shall set forth:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Agreement on which
the denial
is based,
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(c)
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A
description of any additional information or material necessary
for the
claimant to perfect the claim and an explanation of why it is needed,
and
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(d)
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An
explanation of the Agreement’s review procedures and the time limits
applicable to such procedures.
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9.2
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Review
Procedure.
If the Bank denies part or all of the claim, the claimant shall
have the
opportunity for a full and fair review by the Bank of the denial,
as
follows:
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9.2.1
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Initiation
- Written Request.
To initiate the review, the claimant, within 60 days after receiving
the
Bank’s notice of denial, must file with the Bank a written request for
review.
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9.2.2
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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 Bank
shall also provide the claimant, upon request and free of charge,
reasonable access to, and copies of, all documents, records and
other
information relevant to the claimant’s claim for
benefits.
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9.2.3
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Considerations
on Review.
In considering the review, the Bank 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.
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9.2.4
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Timing
of Bank Response.
The Bank shall respond in writing to such claimant within 60 days
after
receiving the request for review. If the Bank determines that special
circumstances require additional time for processing the claim,
the Bank
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 Bank expects
to render
its decision.
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7
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9.2.5
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Notice
of Decision.
The Bank shall notify the claimant in writing of its decision on
review.
The Bank shall write the notification in a manner calculated to
be
understood by the claimant. The notification shall set
forth:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Agreement on which
the denial
is based, and
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(c)
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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 to the claimant’s claim for
benefits.
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Article
10
Amendments
and Termination
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10.1
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Amendment.
This Agreement may be amended only by a written agreement signed
by the
Bank and the Director. Provided, however, that the Bank may amend
this Agreement to conform with legislative requirements or written
directives to the Bank from its banking regulators.
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10.2
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Termination.
This Agreement may be terminated only by a written agreement signed
by the
Bank and the Director. Upon such termination, the Deferral Account
balance shall be paid to the Director in the form and at the earliest
possible time as specified in this Agreement and permitted under
Section
409A of the Code and any applicable subsequent
authority.
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Article
11
Miscellaneous
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11.1
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Binding
Effect.
This Agreement shall bind the Director and the Bank and their
beneficiaries, survivors, executors, administrators and
transferees.
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11.2
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No
Guarantee of Service.
This Agreement is not a contract for services. It does not give
the
Director the right to remain a director of the Bank, nor does it
interfere
with the Bank's or Bank shareholder(s)' right to discharge the
Director.
It also does not require the Director to remain a director nor
interfere
with the Director's right to separate from service at any
time.
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11.3
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Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned,
pledged, attached or encumbered in any
manner.
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11.4
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Tax
Withholding.
The Bank shall withhold any taxes that are required to be withheld
from
the benefits provided under this Agreement. The Director acknowledges
that
the Bank’s sole liability regarding taxes is to forward any amounts
withheld to the appropriate taxing
authority(ies).
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11.5
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Applicable
Law.
The Agreement and all rights hereunder shall be governed by the
laws of
the State of Indiana, except to the extent preempted by the laws
of the
United States of America.
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8
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11.6
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Unfunded
Arrangement.
The Director and the Beneficiary are general unsecured creditors
of the
Bank for the distribution of benefits under this Agreement. The
benefits
represent the mere promise by the Bank 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 other informal
funding
asset is a general asset of the Bank to which the Director and
the
Beneficiary have no preferred or secured
claim.
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11.7
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Reorganization.
The Bank shall not merge or consolidate into or with another Bank,
or
reorganize, or sell substantially all of its assets to another
bank, firm,
or person unless such succeeding or continuing bank, firm, or person
agrees to assume and discharge the obligations of the Bank under
this
Agreement. Upon the occurrence of such event, the term “Bank” as used in
this Agreement shall be deemed to refer to the successor or survivor
bank.
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11.8
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Entire
Agreement. This
Agreement constitutes the entire agreement between the Bank 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.
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11.9
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Interpretation.
Wherever the fulfillment of the intent and purpose of this Agreement
requires, and the context will permit, the use of the masculine
gender
includes the feminine and use of the singular includes the plural
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11.10
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Alternative
Action.
In the event it shall become impossible for the Bank or the Plan
Administrator to perform any act required by this Agreement, the
Bank or
Plan Administrator may in its discretion perform such alternative
act as
most nearly carries out the intent and purpose of this Agreement
and is in
the best interests of the Bank.
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11.11
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Headings.
Article and section headings are for convenient reference only
and shall
not control or affect the meaning or construction of any of its
provisions.
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11.12
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Validity.
In case any provision of this Agreement shall be illegal or invalid
for
any reason, said illegality or invalidity shall not affect the
remaining
parts hereof, but this Agreement shall be construed and enforced
as if
such illegal and invalid provision has never been inserted
herein.
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11.13
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Notice.
Any notice or filing required or permitted to be given to the Plan
Administrator under this Agreement shall be sufficient if in writing
and
hand-delivered, or sent by registered or certified mail, to the
address
below:
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9
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HomeFederal
Bank
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▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇.
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▇.▇.
▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
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Such
notice shall be deemed given as of the date of delivery or, if delivery is
made
by mail, as of the date shown on the postmark or the receipt for registration
or
certification.
Any
notice or filing required or permitted to be given to the Director under
this
Agreement shall be sufficient if in writing and hand-delivered, or sent by
mail,
to the last known address of the Director.
IN
WITNESS WHEREOF, the Director and the Bank have signed this Agreement as
of
__________________________, 2005.
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DIRECTOR:
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BANK:
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HOMEFEDERAL
BANK
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By:
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▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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Title:
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10