Summary Compensation Table
The following table presents information regarding the compensation for the fiscal years ended June 30, 2015, 2014 and 2013, of our named executive officers: (1) Laurence J. Hueth, our President and Chief Executive Officer; (2) Regina M. Wood, our Chief Financial Officer; and (3) our next three most highly compensated executive officers, who are Jeffrey S. Davis, Christopher A. Donohue and Kelly A. Liske; and (4) Elaine T. Gentilo,Liske. As a former executive officer who would have been oneresult of the next three most highly compensated executive officers had she been employed onour change in fiscal year from June 30 to December 31, this table includes compensation information for the transition period from July 1, 2017 through December 31, 2017, as well as the fiscal years ended June 30, 2017, 2016 and 2015.
Name and Principal Position | | Period | | Salary ($) | | Bonus ($) | | Stock Awards ($)(1) | | Non- equity Incentive Plan Compen- sation ($)(2) | | All Other Compen- sation ($)(3) | | Total ($) |
| | | | | | | | | | | | | | |
Laurence J. Hueth President and Chief | | Six months ended December 31, 2017 | | 144,454 | | -- | | 240,000 | | -- | | 49,479 | | 433,933 |
Executive Officer | | Year ended June 30, 2017 | | 293,739 | | -- | | 952,500 | | 124,418 | | 65,790 | | 1,436,447 |
| | Year ended June 30, 2016 | | 260,785 | | -- | | -- | | 101,649 | | 40,295 | | 402,729 |
| | Year ended June 30, 2015 | | 230,154 | | 25,000 | | -- | | -- | | 46,684 | | 301,838 |
| | | | | | | | | | | | | | |
Regina M. Wood Executive Vice President, | | Six months ended December 31, 2017 | | 90,750 | | -- | | 80,000 | | 23,028 | | 22,933 | | 216,711 |
Chief Financial Officer | | Year ended June 30, 2017 | | 186,449 | | -- | | 317,500 | | 64,456 | | 26,562 | | 594,967 |
and Treasurer | | Year ended June 30, 2016 | | 164,252 | | -- | | -- | | 54,179 | | 9,886 | | 228,317 |
| | Year ended June 30, 2015 | | 143,852 | | 11,000 | | -- | | -- | | 9,315 | | 164,167 |
| | | | | | | | | | | | | | |
Jeffrey S. Davis (4) Executive Vice President | | Six months ended December 31, 2017 | | 88,500 | | -- | | 80,000 | | 22,458 | | 19,710 | | 210,668 |
and Chief Operating Officer | | Year ended June 30, 2017 | | 164,881 | | -- | | 317,500 | | 62,858 | | 22,861 | | 568,100 |
| | Year ended June 30, 2016 | | 133,731 | | -- | | -- | | 45,657 | | 2,147 | | 181,535 |
| | Year ended June 30, 2015 | | 92,231 | | 9,000 | | -- | | -- | | 103 | | 101,334 |
| | | | | | | | | | | | | | |
Christopher A. Donohue Executive Vice President | | Six months ended December 31, 2017 | | 90,750 | | -- | | 80,000 | | 24,390 | | 23,295 | | 218,435 |
and Chief Credit Officer | | Year ended June 30, 2017 | | 84,922 | | -- | | 317,500 | | 64,637 | | 26,222 | | 593,281 |
| | Year ended June 30, 2016 | | 170,833 | | -- | | -- | | 55,246 | | 10,614 | | 236,693 |
| | Year ended June 30, 2015 | | 164,756 | | 9,000 | | -- | | -- | | 10,496 | | 184,252 |
| | | | | | | | | | | | | | |
Kelly A. Liske Executive Vice President | | Six months ended December 31, 2017 | | 92,500 | | -- | | 80,000 | | 30,434 | | 28,674 | | 231,608 |
and Chief Banking Officer | | Year ended June 30, 2017 | | 177,820 | | -- | | 317,500 | | 75,188 | | 31,340 | | 601,848 |
| | Year ended June 30, 2016 | | 165,602 | | -- | | -- | | 51,615 | | 15,975 | | 233,192 |
| | Year ended June 30, 2015 | | 143,852 | | 9,000 | | -- | | -- | | 11,065 | | 163,917 |
Name and Principal Position | | | | | | Bonus | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) | | All Other Compensation | | |
| | | | | | | | | | | | |
Laurence J. Hueth | | 2015 | | 230,154 | | 25,000 | | -- | | 46,684 | | 301,838 |
President and Chief | | 2014 | | 206,154 | | -- | | -- | | 4,524 | | 210,768 |
Executive Officer | | 2013 | | 185,192 | | -- | | -- | | 2,404 | | 187,596 |
| | | | | | | | | | | | |
Regina M. Wood | | 2015 | | 143,852 | | 11,000 | | -- | | 9,315 | | 164,167 |
Executive Vice President, | | 2014 | | 128,846 | | -- | | -- | | 4,120 | | 132,966 |
Chief Financial Officer | 2013 | | 100,769 | | -- | | -- | | 3,088 | | 103,857 |
and Treasurer | | | | | | | | | | | | |
| | | | | | | | | | | | |
Jeffrey S. Davis (4) | | 2015 | | 92,231 | | 9,000 | | -- | | 103 | | 101,334 |
Executive Vice President | | | | | | | | | | | |
and Chief Operating Officer | | | | | | | | | | | |
| | | | | | | | | | | | |
Christopher A. Donohue (5) | | 2015 | | 164,756 | | 9,000 | | -- | | 10,496 | | 184,252 |
Executive Vice President | 2014 | | 157,385 | | -- | | -- | | 1,062 | | 158,446 |
and Chief Credit Officer | 2013 | | 28,615 | | -- | | -- | | 34 | | 28,649 |
| | | | | | | | | | | | |
Kelly A. Liske | | 2015 | | 143,852 | | 9,000 | | -- | | 11,065 | | 163,917 |
Executive Vice President | 2014 | | 128,858 | | -- | | -- | | 3,999 | | 132,859 |
and Chief Banking Officer | 2013 | | 85,274 | | -- | | -- | | 2,445 | | 87,719 |
| | | | | | | | | | | | |
Elaine T. Gentilo (6) | | 2015 | | 100,684 | | -- | | 8,000 | | 42,139 | | 150,823 |
Former Senior Vice | 2014 | | 115,000 | | -- | | 9,000 | | 3,677 | | 127,677 |
President and Chief | 2013 | | 105,769 | | -- | | (7) | | 3,318 | | 109,083 |
People Officer | | | | | | | | | | | |
____________ | | | | | | | | | | | | |
(1) | Consists of a one-time discretionary payment for the successful completion of the Board-directed conversion of First Federal from the mutual to the stock form of organization and accompanying stock offering to raise new capital. |
(2) | Consists of the aggregate change in the actuarial present value of the officer’s accumulated benefit under the pension plan from the pension plan measurement date used for financial statement reporting purchases with respect to First Northwest’s audited financial statements for the prior completed fiscal year to the pension plan measurement date used for financial statement reporting purposes with respect to First Northwest’s audited financial statements for the covered fiscal year. |
(3) | For Mr. Hueth, Ms. Wood, Mr. Donohue and Ms. Liske, consists of 401(k) matching contribution, ESOP contribution and payment of life insurance premiums. For Mr. Hueth, also includes a contribution to his deferred compensation plan account of $31,992. For Mr. Davis, consists of payment of life insurance premium. For Ms. Liske, also includes payment of auto allowance. For Ms. Gentilo, consists of severance pay of $38,333 and 401(k) matching contribution. |
(4) | Mr. Davis was hired in September 2014. |
(5) | Mr. Donohue was hired in March 2013. |
(6) | Ms. Gentilo resigned effective April 2, 2015. |
(7) | The value of Ms. Gentilo’s accumulated benefit under the pension plan decreased by $4,000. |
_____________ (1) | Represents the aggregate grant date fair value of awards, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, "Compensation – Stock Compensation" ("FASB ASC Topic 718"). For a discussion of valuation assumptions, see Note 10 of the Notes to Consolidated Financial Statements in First Federal's Annual Report on Form 10-KT for the transition period ended December 31, 2017. |
(2) | Reflects amounts earned under the Cash Incentive Plan. The material terms of the Cash Incentive Plan for 2017 are described in the Compensation Discussion and Analysis under "Short-term Incentive Compensation." |
(3) | For the transition period from July 1, 2017 through December 31, 2017, consists of 401(k) matching contribution, payment of life insurance premiums and ESOP contributions of $29,518 for Mr. Hueth, $20,740 for Ms. Wood, $18,388 for Mr. Davis, $20,474 for Mr. Donohue and $19,798 for Ms. Liske. For Mr. Hueth, also includes a contribution to his deferred compensation plan account of $16,853. For Ms. Liske, also includes payment of auto allowance. |
(4) | Mr. Davis was hired in September 2014. |
Employment Agreements for Named Executive Officers. On July 28, 2015, we entered into amended three-year employment agreements with Mr. Hueth, Ms. Wood, Mr. Donohue and Ms. Liske, and a new employment agreement with Mr. Davis. Under the employment agreements, the base salary levels for Mr. Hueth, Ms. Wood, Mr. Davis, Mr. Donohue and Ms. Liske will be $253,000, $158,142, $126,500, $169,270,have been updated and $158,142,reviewed and are, as of December 31, 2017, $288,907, $181,500, $177,000, $181,500 and $185,000, respectively, which amounts will be paid by First Northwest and First Federal and may be increased at the discretion of the Board of Directors or an authorized committee of the board. On each anniversary of the initial date of the employment agreements, the term of the agreements will be extended for an additional year upon review and approval by the board or an authorized committee, unless notice is given by First Northwest or First Federal to the executive, or by the executive to First Northwest or First Federal, at least 90 days prior to the anniversary date.
The agreements provide that the executives may participate, to the same extent as executive officers of First Northwest and First Federal generally, in all plans of First Northwest and First Federal relating to pension, retirement, thrift, profit-sharing, savings, group or other life insurance, hospitalization, medical and dental coverage, travel and accident insurance, education, cash bonuses, and other retirement or employee benefits or combinations thereof. In addition, the executives are entitled to participate in any other fringe benefit plans or perquisites which are generally available to executive officers of First Northwest Bancorp or First Federal, including supplemental retirement, deferred compensation programs, supplemental medical or life insurance plans, company cars, club dues, physical examinations, financial planning and tax preparation services. The executives also will receive an annual paid vacation, and voluntary leaves of absence, with or without pay, from time to time at such times and upon such conditions as the board or an authorized committee of the board may determine. The agreements also provide that compensation may be paid in the event of disability, death, involuntary termination (including a voluntary termination for good reason) or a change in control, as described below under “Potential"Potential Payments Upon Termination or Change in Control.”"
Pension BenefitsGrants of Plan-based Awards
The following table providesshows information regarding each plan that providesgrants of plan-based awards made to our named executive officers for payments or other benefits at,the transition period from July 1, 2017 through December 31, 2017.
| | Estimated possible payouts under non-equity incentive plan awards (1) |
Name | | Threshold ($) | | Target ($) | | Maximum ($) |
| | | | | | |
Laurence J. Hueth | | 21,668 | | 43,336 | | 65,004 |
Regina M. Wood | | 11,344 | | 22,688 | | 34,031 |
Jeffrey S. Davis | | 11,063 | | 22,125 | | 33,188 |
Christopher A. Donohue | | 11,344 | | 22,688 | | 34,031 |
Kelly A. Liske | | 12,950 | | 25,900 | | 38,850 |
______________
(1) | Represents the potential range of awards payable under our Cash Incentive Plan. The performance goals and measurements associated with this plan that generate the awards set forth above are provided in the "Short-term Incentive Compensation" section beginning on page 15. |
Outstanding Equity Awards
The following or in connectioninformation with retirement,respect to outstanding stock awards as of June 30, 2015.December 31, 2017, is presented for the named executive officers.
Name | | Grant date | | Stock Awards (1) |
Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) |
| | | | | | |
Laurence J. Hueth | | 07/07/16 | | 60,000 | | 978,000 |
Regina M. Wood | | 07/07/16 | | 20,000 | | 326,000 |
Jeffrey S. Davis | | 07/07/16 | | 20,000 | | 326,000 |
Christopher A. Donohue | | 07/07/16 | | 20,000 | | 326,000 |
Kelly A. Liske | | 07/07/16 | | 20,000 | | 326,000 |
_____________
(1) | Awards vest pro rata over a five-year period from the grant date, with the first 20 percent vesting one year after the grant date. |
Option Exercises and Stock Vested
| | | | Number of years of credited service (1) | | Present value of accumulated benefit ($)(2) | | Payments during last fiscal year ($) |
| | | | | | | | |
Laurence J. Hueth | | -- | | -- | | -- | | -- |
Regina M. Wood | | -- | | -- | | -- | | -- |
Jeffrey S. Davis | | -- | | -- | | -- | | -- |
Christopher A. Donohue | | -- | | -- | | -- | | -- |
Kelly A. Liske | | -- | | -- | | -- | | -- |
Elaine T. Gentilo | | Pension Plan | | 3.8 | | 100,000 | | -- |
____________ | | | | | | | | |
(1) | Represents the time from when the employee first became a participant in the plan until February 1, 2010, the date on which benefit accruals were frozen. |
(2) | Calculated using the accrued benefit multiplied by a present value factor based on an assumed age 65 retirement date, 50% of the benefit is valued using the RP-2014 mortality table for white collar workers (with mortality improvement scale MP-2014) and 50% of the benefit is valued using the RP-2000 static mortality table for lump sums projected to 2014 and a rate of interest of 4.44%. |
The following table shows the value realized upon the vesting of stock awards for the named executive officers for the transition period from July 1, 2017 through December 31, 2017. The named executive officers did not exercise any stock options during the transition period from July 1, 2017 through December 31, 2017.
First Federal participates in a multiple-employer defined benefit plan (the “Pension Plan”), which provides a benefit upon retirement to eligible employees of First Federal. Employees hired on or after February 1, 2006 are not eligible to participate in the Pension Plan. Ms. Gentilo was the only named executive officer who participated in the Pension Plan during the year ended June 30, 2015. The Pension Plan benefit is generally two percent times years of service times final average compensation (disregarding service and compensation after January 31, 2010). The Pension Plan also provides for a post-retirement benefit increase. Upon completion of three years of employment with First Federal or upon reaching age 65, the employee is 100 percent vested. Benefits are available under the Pension Plan upon retirement, death or termination of employment, if vested. Early retirement payments that commence prior to normal retirement date are subject to actuarial reduction. Ms. Gentilo is currently eligible for early retirement payments under the plan. Participants may elect to have their Pension Plan benefit paid as an
annuity, with various annuity forms being available, or as a lump sum or partial lump sums if certain requirements are met, all as provided under the terms of the Plan. | | Stock awards |
Name | | Number of shares acquired on vesting (#) | | Value realized on vesting ($) |
| | | | |
Laurence J. Hueth | | 15,000 | | 240,000 |
Regina M. Wood | | 5,000 | | 80,000 |
Jeffrey S. Davis | | 5,000 | | 80,000 |
Christopher A. Donohue | | 5,000 | | 80,000 |
Kelly A. Liske | | 5,000 | | 80,000 |
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The following table provides information regarding each defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified for the year ended June 30, 2015.transition period from July 1, 2017 through December 31, 2017.
| | Executive contributions in last FY ($) | | Registrant contributions in last FY ($) | | Aggregate earnings in last FY ($) | | Aggregate withdrawals/ distributions ($) | | Aggregate balance at FYE ($) | | Executive contributions ($) | | Registrant contributions ($) | | Aggregate earnings ($) | | Aggregate withdrawals/ distributions ($) | | Aggregate balance at December 31, 2017 ($) |
| | | | | | | | | | | | | | | | | | | | |
Laurence J. Hueth | | 14,300 | | 31,992 | | 1,754 | | -- | | 72,369 | | 16,000 | | -- | | 10,302 | | -- | | 119,247 |
Regina M. Wood | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
Jeffrey S. Davis | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
Christopher A. Donohue | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
Kelly A. Liske | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
Elaine T. Gentilo | | -- | | -- | | -- | | -- | | -- | |
In order to encourage the retention of qualified officers, we offer a deferred compensation plan whereby certain officers may defer all or a portion of their annual salary until a permitted distribution event occurs under the plan. Each officer may direct the investment of the deferred salary among investment options made available by First Federal. We have established a grantor trust to hold the plan investments. Grantor trust assets are considered part of our general assets, and the officers have the status of unsecured creditors of First Federal with respect to the trust
assets. The plan permits the payment of benefits upon a separation from service (whether on account of termination of employment, pre-retirement death, disability), a change in control, an unforeseeable emergency or upon a date specified by the officer, in an amount equal to the value of the officer's account balance (or the amount necessary to satisfy the unforeseeable emergency, in that case). An officer may elect, at the time of the deferral election, to receive the deferred amount and related earnings in a lump sum or in annual installments over a period not exceeding 15 years. An officer may subsequently elect to change when or how he or she receives his or her plan benefit, if certain required conditions are met. Currently, Mr. Hueth is the only named executive officer who participates in this plan. In 2014, the Board of Directors voted to begin making an annual contribution to Mr. Hueth’sHueth's deferred compensation plan account in an amount equal to ten percent of his base salary.
Potential Payments Upon Termination or Change in Control
We have entered into agreements with the named executive officers that provide for potential payments upon disability, termination and death. These agreements are discussed in further detail following the table below. The following table shows, as of June 30, 2015,December 31, 2017, the value of potential payments and benefits following a termination of employment under a variety of scenarios.
| | Without cause by employer or for good reason by employee ($) | | | | | | | | | | |
| | | | | | | | | | | | |
Laurence J. Hueth | | | | | | | | | | | | |
Employment Agreement | | 271,033 | | 526,652 | | -- | | -- | | 435,656 | | 11,677 |
Deferred Compensation Plan | | -- | | -- | | 72,369 | | 72,369 | | 72,369 | | 72,369 |
| | | | | | | | | | | | |
Regina M. Wood | | | | | | | | | | | | |
Employment Agreement | | 171,361 | | 242,177 | | -- | | -- | | 144,039 | | 7,299 |
| | | | | | | | | | | | |
(Table continues on following page) |
Name | | Without cause by employer or for good reason by employee ($) | | Involuntary termination in connection with change in control ($) | | | | ($) | | ($) | | Death ($) |
| | | | | | | | | | | | |
Laurence J. Hueth | | | | | | | | | | | | |
Employment Agreement | | 295,637 | | 713,077 | | -- | | -- | | 57,781 | | -- |
Deferred Compensation Plan | | 119,247 | | 119,247 | | 119,247 | | 119,247 | | 119,247 | | 119,247 |
Equity Incentive Plan | | -- | | 978,000 | | -- | | -- | | 978,000 | | 978,000 |
| | | | | | | | | | | | |
Regina M. Wood | | | | | | | | | | | | |
Employment Agreement | | 191,510 | | 326,290 | | -- | | -- | | 37,380 | | -- |
Equity Incentive Plan | | -- | | 326,000 | | -- | | -- | | 326,000 | | 326,000 |
| | | | | | | | | | | | |
Jeffrey S. Davis | | | | | | | | | | | | |
Employment Agreement | | 190,741 | | 292,167 | | -- | | -- | | 36,820 | | -- |
Equity Incentive Plan | | -- | | 326,000 | | -- | | -- | | 326,000 | | 326,000 |
| | | | | | | | | | | | |
Christopher A. Donohue | | | | | | | | | | | | |
Employment Agreement | | 196,088 | | 349,385 | | -- | | -- | | 37,760 | | -- |
Equity Incentive Plan | | -- | | 326,000 | | -- | | -- | | 326,000 | | 326,000 |
| | | | | | | | | | | | |
Kelly A. Liske | | | | | | | | | | | | |
Employment Agreement | | 204,212 | | 323,228 | | -- | | -- | | 38,480 | | -- |
Equity Incentive Plan | | -- | | 326,000 | | -- | | -- | | 326,000 | | 326,000 |
| | Without cause by employer or for good reason by employee ($) | | | | | | | | | | |
| | | | | | | | | | | | |
Jeffrey S. Davis | | | | | | | | | | | | |
Employment Agreement | | 143,923 | | 201,884 | | -- | | -- | | 54,938 | | 5,838 |
| | | | | | | | | | | | |
Christopher A. Donahue | | | | | | | | | | | | |
Employment Agreement | | 186,313 | | 354,382 | | -- | | -- | | 183,661 | | 7,812 |
| | | | | | | | | | | | |
Kelly A. Liske | | | | | | | | | | | | |
Employment Agreement | | 184,973 | | 228,936 | | -- | | -- | | 164,464 | | 7,576 |
| | | | | | | | | | | | |
Elaine T. Gentilo | | | | | | | | | | | | |
Pension Plan (1) | | -- | | -- | | 6,408 (2) | | (3) | | -- | | 46,138 |
____________ | | | | | | | | | | | | |
(1) | Assumes Ms. Gentilo was still employed by First Federal on June 30, 2015. |
(2) | Paid annually. |
(3) | Not yet eligible. |
Employment Agreements. We have entered into three-yearThe employment agreements with Mr. Hueth, Ms. Wood, Mr. Davis, Mr. Donohue and Ms. Liske. These agreementseach of the named executive officers provide for potential payments upon an executive’sexecutive's involuntary termination in certain situations, or upon death or disability. The agreements may be terminated by the Board of Directors at any time. If an executive’sexecutive's employment is terminated other than for cause, without the executive’sexecutive's consent or by the executive for good reason, then for one year after the date of termination First Northwest and First Federal would be required to pay the executive’sexecutive's salary at the rate in effect immediately prior to the date of termination and the pro rata portion of any incentive award or bonus, the amount of which will be determined by First Federal’sFederal's Board of Directors in its sole discretion, and continue the executive’sexecutive's and the executive’s dependents’executive's dependents' coverage under First Northwest’sNorthwest's and First Federal’sFederal's health, life and disability programs. “Good reason”"Good reason" generally means any of the following, unless consented to in writing by the executive: (1) a requirement that the executive be based at any place other than Port Angeles, Washington, or within a radius of 35 miles from the location of First Federal’sFederal's administrative offices; (2) a material demotion; (3) a material reduction in the number or seniority of personnel reporting to the executive; (4) a 20 percent or more reduction in the executive’sexecutive's base salary other than as part of an overall reduction in the salaries of senior management personnel; (5) a material
permanent increase in the required hours of work or workload; or (6) the failure of the First Federal Board of Directors to elect the executive to the position(s) specified in the executive’sexecutive's employment agreement.
The employment agreements also provide for severance payments and other benefits if an executive is involuntarily terminated not for cause (or terminates his or her employment for “good"good reason,”" as defined above) during the period that begins six months prior to the effective time of a change in control and ends on the second anniversary of the effective time of the change in control. The agreements define the term “change"change in control”control" as having occurred when, among other things: (1) an offeror other than First Northwest purchases shares of stock of First Northwest or First Federal pursuant to a tender or exchange offer for the shares; (2) certain events occur as specified by federal regulations in connection with a change in control of First Northwest or First Federal; (3) any person, as that term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act, is or becomes the beneficial owner of securities of First Northwest or First Federal representing 25% or more of the combined voting power of First Northwest’sNorthwest's or First Federal’sFederal's outstanding securities; (4) a majority of the membership of the Board of Directors of First Northwest or First Federal changes as the result of a contested election; or (5) upon the consummation of a plan of reorganization, merger, acquisition, consolidation, sale of all or substantially all of the assets of First Northwest or a similar transaction in which First Northwest is not the resulting entity.
In the event of a termination in connection with a change in control, the employment agreements provide that First Northwest and First Federal jointly shall: (1) pay to the executive in a lump sum within 25 business days after the date of termination an amount equal to a multiple of the average of executive’sexecutive's five prior years’years' annual
salary (the multiple being 2.75 for Mr. Hueth and 22.00 for Ms. Wood, Mr. Davis, Mr. Donohue and Ms. Liske)each of the other named executive officers); and (2) continue the executive’sexecutive's and the executive’s dependents’executive's dependents' coverage under First Northwest’sNorthwest's and First Federal’sFederal's health, life and disability programs for one year after the executive’sexecutive's termination of employment. Section 280G of the Internal Revenue Code provides that if payments made in connection with a change in control equal or exceed three times the individual’sindividual's base amount, then a portion of those payments are deemed to be “excess"excess parachute payments.”" An executive’s “base amount”executive's "base amount" is generally the average of the executive’sexecutive's taxable compensation for the last five years preceding the year in which a change in control occurs. Individuals are subject to a 20% excise tax on the amount of such excess parachute payments, and First Northwest and First Federal would not be entitled to deduct the amount of such excess parachute payments. The employment agreements provide that severance and other payments that are subject to a change in control will be reduced to the extent necessary to ensure that no amounts payable to the executives will be considered excess parachute payments.
If an executive becomes entitled to benefits under the terms of First Northwest’sNorthwest's or First Federal’sFederal's then-current disability plan, if any, or becomes otherwise unable to fulfill the duties required under the employment agreement, the executive shall be entitled to receive such group and other disability benefits as are then provided for executive employees. In the event of an executive’sexecutive's disability, the employment agreements will not be suspended, except that the obligation to pay the executive’sexecutive's salary will be reduced in accordance with the amount of any disability income benefits received such that, on an after-tax basis, the executive realizes from the sum of disability income benefits and salary the same amount as the executive would realize on an after-tax basis from the executive’sexecutive's salary if the executive had not become disabled. Upon a resolution adopted by a majority of the disinterested members of the Board of Directors or an authorized committee, First Northwest and First Federal may discontinue payment of an executive’sexecutive's salary beginning six months after a determination that the executive become entitled to benefits under the disability plan or is otherwise unable to fulfill his or her duties under the employment agreement.
In the event of an executive’sexecutive's death while employed under an employment agreement and prior to any termination of employment, First Northwest and First Federal will pay to the executive’sexecutive's estate, or such person as the executive may have previously designated, the salary which was not previously paid and which the executive would have earned if he or she had continued to be employed under the agreement through the last day of the month in which the executive died, together with the benefits provided under the employment agreement through that date.
Deferred Compensation Plan. First Federal offers a deferred compensation plan whereby certain officers may defer all or a portion of their annual salary until a permitted distribution event occurs under the plan. Currently, Mr. Hueth is the only named executive officer who participates in this plan. Payment will be made to Mr. Hueth of the then value of his account (adjusted for gains and losses) upon his separation from service from First Federal or at a later date selected by Mr. Hueth, in a cash lump sum. Payment is made from the general assets of First Federal, subject to claims of creditors in the event of First Federal’sFederal's bankruptcy or insolvency.
PensionEquity Incentive Plan. First Federal participates in a pension plan which provides a benefit upon retirement to eligible employeesThe 2015 Equity Incentive Plan provide for accelerated vesting of First Federal. Ms. Gentilo is the only named executive officer who participatedawards in the Pension Plan duringevent of a recipient's death or disability, or a change in control. The plan provides that unvested awards will become exercisable or vest upon the year ended June 30, 2015. The Pension Plan benefit is generally two percent times years of service times final average compensation (disregarding service and compensation after January 31, 2010). Benefits are available under the Pension Plan upon normal retirement, late retirement, early retirement and death. Early retirement payments that commence prior to normal retirement date are subject to actuarial reduction. Participants may elect to have their Pension Plan benefit paid as an annuity, with various annuity forms being available, with the annuity being paid over the life of the recipient's death or disability. With respect to a change in control, unvested awards will become exercisable or vest only if the participant experiences an involuntary termination within 365 days following the change in control event or the participant and a designated beneficiary, depending onacquiring company does not either assume the annuity selected,outstanding award or as a lump sum or partial lump sums if certain requirements are met. Payment will be made fromreplace the trust established under the Pension Plan.outstanding award with an equivalently-valued award.
Compensation and Awards Committee Interlocks and Insider Participation
The members of the Compensation Committee are Cindy H. Finnie (Chair), David T. Flodstrom, Stephen E. Oliver and Norman J. Tonina, Jr. No members of the Compensation Committee were officers or employees of First Northwest or any of its subsidiaries during the year ended June 30, 2015.transition period from July 1, 2017 through December 31, 2017. No member of the committee is a former officer of First Northwest or any of its subsidiaries, or had any relationships otherwise requiring disclosure.
PROPOSAL 2 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION |
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (“Dodd-Frank Act”), we are required to periodically include in this Proxy Statementour annual meeting proxy statement and present at the annual meeting of shareholders a non-binding shareholder resolution to approve the compensation of our named executive officers, as disclosed in this Proxy Statement.the proxy statement pursuant to the compensation disclosure rules of the SEC. This proposal, commonly known as a “say-on-pay”"say-on-pay" proposal, gives shareholders the opportunity to endorse or not endorse the compensation of First Northwest’sNorthwest's executives as disclosed in thisthe Proxy Statement. We currently hold our say-on-pay vote every year. The proposal will be presented at this year’syear's annual meeting in the form of the following resolution:
RESOLVED, that the shareholders approve the compensation of First Northwest Bancorp’sBancorp's named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and related material in First Northwest’sNorthwest's Proxy Statement for the 20152018 annual meeting of shareholders.
This vote will not be binding on our Board of Directors or Compensation Committee and may not be construed as overruling a decision by the Board or create or imply any additional fiduciary duty on the Board. It will also not affect any compensation paid or awarded to any executive. The Compensation Committee and the Board may, however, take into account the outcome of the vote when considering future executive compensation arrangements.
Our executive compensation policies are designed to establish an appropriate relationship between executive pay and the annual and long-term performance of First Northwest and First Federal, to reflect the attainment of short- and long-term financial performance goals, to enhance our ability to attract and retain qualified executive officers, and to align to the greatest extent possible the interests of management and shareholders. Our Board of Directors believes that our compensation policies and procedures achieve these objectives.
The Board of Directors unanimously recommends that you vote FOR approval of the compensation of our named executive officers as disclosed in this Proxy Statement.
PROPOSAL 3 – ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
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Under the Dodd-Frank Act, we are required to include in this Proxy Statement and present at the meeting a non-binding shareholder vote to determine the timing of future shareholder votes on executive compensation. This proposal gives shareholders the opportunity to vote on whether a resolution to approve the compensation of our named executive officers should be presented to shareholders every one, two or three years, or to abstain from voting.
The Board of Directors believes that a resolution to approve the compensation of our named executive officers should be presented to shareholders every year because the Board is committed to strong corporate governance and an annual cycle provides for the greatest accountability to our shareholders. This vote will not be binding on our Board of Directors or Compensation Committee and may not be construed as overruling a decision by the Board or create or imply any additional fiduciary duty on the Board. It also will not affect when the shareholders will be asked to vote on executive compensation in future years. The Compensation Committee and the Board may, however, take into account the outcome of the vote when considering when to present shareholders with a resolution to approve executive compensation.
The Board of Directors recommends that you vote for conducting an advisory vote on executive compensation EVERY YEAR.
PROPOSAL 4 – APPROVAL OF THE 2015 EQUITY INCENTIVE PLAN |
Overview
On July 28, 2015, our Board of Directors unanimously adopted, subject to shareholder approval, the First Northwest Bancorp 2015 Equity Incentive Plan. The purpose of the Plan is to promote the long-term growth and profitability of First Northwest, to provide plan participants with an incentive to achieve corporate objectives, to attract and retain individuals of outstanding competence and to provide plan participants with incentives that are closely linked to the interests of all shareholders of First Northwest.
The following summary is a brief description of the material features of the 2015 Equity Incentive Plan. This summary is qualified in its entirety by reference to the Plan, a copy of which is attached to this Proxy Statement as Appendix A.
Summary
Administration. The 2015 Equity Incentive Plan will be administered by a committee appointed by the Board of Directors, which will consist of at least two members, each of whom will be an “outside director,” a “non-employee director” and an “independent director,” as those terms are defined in the Plan. The First Northwest Compensation Committee will administer the Plan. Among other things, the Committee will select participants and grant awards, determine the number of shares and amount of cash subject to an award, establish the terms and conditions of awards, interpret the Plan and resolve all questions arising under the Plan, modify the terms of any outstanding award to the extent Committee discretion is permitted, adopt rules and regulations for the operation and administration of the Plan, and take any other action not inconsistent with the provision of the Plan that the Committee may deem necessary or appropriate.
Awards. The 2015 Equity Incentive Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, non-qualified stock options, which do not satisfy the requirements for treatment as incentive stock options, restricted stock and restricted stock units. Subject to adjustments described below under “Adjustments in the Event of Business Reorganization; Other Adjustments,” First Northwest has reserved 1,834,050 shares of its common stock for issuance under the Plan in connection with the granting of awards, which represents 14.0% of First Northwest’s common stock outstanding on the voting record date. The fair market value of these shares is $22.2 million, based on the closing price of First Northwest’s common stock as of the close of business on the voting record date. Only shares actually issued to participants, shares used to pay the exercise price of an option and shares used to satisfy tax withholding obligations for awards under the Plan count against this total number of shares available under the Plan.
Under the 2015 Equity Incentive Plan, the Committee may grant stock options that, upon exercise, result in the issuance of up to 1,310,036 shares of our common stock (all of which may be incentive stock options) and 524,014 shares of restricted stock. The Plan provides that the total number of option and restricted stock awards available for grant to non-employee directors in the aggregate may not exceed 30 percent (5 percent for any single non-employee director) of the total option or restricted stock awards that may be issued under the Plan. The Plan also provides that the total number of option and restricted stock awards available for grant to any employee may not exceed 25 percent of the total option or restricted stock awards that may be issued under the Plan. Each of the maximum amounts of shares described in this paragraph is subject to adjustments described below under “Adjustments in the Event of Business Reorganization; Other Adjustments.”
The 2015 Equity Incentive Plan provides for the use of authorized but unissued shares or shares that have been reacquired by First Northwest to fund share-based awards. Awards denominated in shares will have the effect of diluting the holdings of persons who own our common stock. Assuming all awards under the Plan are denominated in shares and satisfied through the use of treasury shares and authorized but unissued common stock, current shareholders would be diluted by approximately 12.3% based on the number of shares outstanding as of the close of business on the voting record date.
Eligibility to Receive Awards. The Committee may grant awards under the 2015 Equity Incentive Plan to directors, advisory directors, directors emeriti, officers and employees of First Northwest and its affiliates. However, incentive stock options may only be awarded to employees. The Committee will select persons to receive awards among the eligible individuals and determine the number of shares or amount of cash for each award granted. Currently, there are approximately 176 individuals who are eligible to receive awards under the Plan, consisting of nine directors and 167 employees.
Terms and Conditions of Stock Options. Stock options may be granted to participants at any time by the Committee. However, incentive stock options may only be granted to employees. Each option grant will be evidenced by an award agreement that specifies the exercise price, the exercise period, the number of shares to which the option pertains, the option exercise schedule, and such other provisions as the Committee determines. In addition, the award agreement will specify whether the option is intended to be an incentive stock option or a nonqualified stock option. The exercise price must not be less than the fair market value of a share on the date of grant, provided that the exercise price of an incentive stock option granted to a holder of more than 10% of the outstanding shares must not be less than 110% of the fair market value of a share on the date of grant. The fair market value is the closing sale price of a share on the NASDAQ Stock Market on the applicable date, or if the applicable date is not a trading day, on the trading day immediately preceding the applicable date. The exercise period of a nonqualified stock option may not exceed 10 years from the grant date. The exercise period of an incentive stock option may not exceed 10 years from the grant date, provided that the exercise period of an incentive stock option granted to a holder of more than 10% of the outstanding shares may not exceed five years from the grant date.
A participant may pay the exercise price of his or her option: (a) in cash, (b) if and to the extent permitted by the Committee, by delivering shares that he or she already owns having an aggregate fair market value equal to the aggregate exercise price, (c) if and to the extent permitted by the Committee, by First Northwest withholding shares otherwise issuable upon the exercise having an aggregate fair market value on the date the option is exercised equal to the aggregate exercise price to be paid, or (d) by a combination of the foregoing methods. The participant also will be permitted to pay the exercise price through a cashless exercise facilitated through a broker.
The termination of a participant’s service with First Northwest and its affiliates will affect his or her ability to exercise options granted under the Plan. Upon termination of service of a participant, unless otherwise determined by the Committee or specified in the award agreement, all outstanding unvested options granted to the participant will be forfeited and all outstanding vested options granted to the participant will remain exercisable for three months following the termination date, but in no event beyond the expiration date of the option. However, upon termination of service of a participant due to death or disability, unless otherwise determined by the Committee and specified in the award agreement, all outstanding unvested options granted to the participant will vest in full and will remain exercisable for one year from the date of separation of the participant. Upon a participant’s retirement, the options will remain exercisable for one year after separation, unless otherwise determined by the Committee and set forth in the award agreement. Also, upon the occurrence of a change in control of First Northwest, as defined in the Plan, and the participant’s involuntary separation from service, other than for cause, within 365 days following the change in control event, all outstanding unvested options granted to the participant will vest in full. Upon termination of service of a participant for cause, all outstanding vested and unvested options granted to the participant will immediately be forfeited.
Terms and Conditions of Restricted Stock Awards. Restricted stock awards may be granted to participants at any time and from time to time as determined by the Committee. Restricted stock awards may be in the form of shares that are subject to forfeiture and limits on transfer until the shares vest (restricted stock) or in the form of restricted stock units. Restricted stock units are rights to receive shares (or an equivalent amount of cash, or a combination of shares and cash, as provided for in the award) at a specified future date that are subject to forfeiture and limits on transfer until the restricted stock units vest. Each restricted stock award will be evidenced by an award agreement that specifies the terms of the award, including the number of shares or units covered by the award, the amount (if any) that the participant must pay to First Northwest in consideration for the issuance of such shares or units, the vesting conditions, and, in the case of restricted stock units, when payment will be made and the circumstances pursuant to which the units will be converted to shares (or cash or a combination of shares and cash).
During the vesting period, unless specified otherwise in the applicable award agreement, a holder of shares of restricted stock will have all the rights of a shareholder, including the right to vote and the right to receive dividends paid with respect to those shares. A holder of restricted stock units will not have voting rights with respect to the underlying shares until those shares are issued and, unless otherwise provided in the applicable award agreement, will not have the right to receive dividend equivalents in the case of any dividends paid on the shares. Shares of restricted stock and restricted stock units generally may not be sold, assigned, transferred, pledged or otherwise encumbered by the participant during the restricted period.
Unless otherwise determined by the Committee and specified in the award agreement: (1) if a participant terminates service with First Northwest and its affiliates for any reason other than death, disability, or prior to a change in control of First Northwest as defined in the Plan, any unvested shares of restricted stock and any unvested restricted stock units held by the participant will be forfeited; and (2) if a participant terminates service with First Northwest and its affiliates due to death or disability, or if a participant experiences an involuntary separation from service in connection with a change in control, other than for cause, within 365 days following the change in control event, any unvested shares of restricted stock and any unvested restricted stock units held by the participant will vest in full.
Prohibition on Repricing of Options. Except as provided under “Adjustments in the Event of Business Reorganization; Other Adjustments” below, neither the Committee nor the Board may amend or modify the exercise price of a stock option, or cancel the stock option at a time when the exercise price is greater than the fair market value of First Northwest’s common stock in exchange for another award.
Forfeiture of Awards. If the holder of an unvested award terminates service other than due to death, disability or a change in control of First Northwest as defined in the Plan, the unexercisable or unvested portion of the award will be forfeited by the holder. Upon any termination of service for cause, all awards not previously exercised or paid shall be forfeited immediately by the holder.
Transferability of Awards. Stock options, restricted stock and restricted stock units may be transferred upon the death of the holder to whom it was awarded, by will or the laws of inheritance, or pursuant to a domestic relations order. Furthermore, the Committee may approve the transfer of non-qualified stock options and restricted stock awards to certain family members.
Amendment and Termination of the Plan; Clawback; Section 409A. The 2015 Equity Incentive Plan has a term of ten years, after which no further awards may be granted. The Board of Directors may at any time amend, suspend or terminate the Plan or any portion thereof, except to the extent shareholder approval is necessary or required for purposes of any applicable federal or state law or regulation or the rules of any stock exchange or automated quotation system on which our common stock may then be listed or quoted. All awards are subject to “clawback” provisions as required by law, rule, regulation or stock exchange listing, or a policy related thereto. All awards shall either be exempt from Section 409A of the Internal Revenue Code, or if not exempt, include terms that comply therewith.
Adjustments in the Event of Business Reorganization; Other Adjustments. In the event any recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, exchange of shares or other securities, stock dividend or other special and nonrecurring dividend or distribution, liquidation, dissolution or other similar corporate transaction or event, affects the shares of First Northwest common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants, the Committee must, in an equitable manner, adjust the number of shares as to which future awards may be made and the number of shares subject to and exercise prices of outstanding awards. The Committee also is authorized to make adjustments in the terms and conditions of and the criteria included in, awards in recognition of unusual or nonrecurring events affecting First Northwest or any affiliate, or the financial statements of First Northwest or any affiliate, or in response to changes in applicable laws, regulations, or accounting principles.
Important Considerations
The 2015 Equity Incentive Plan contains a number of provisions that we believe are consistent with, and protective of, the interests of shareholders, our compensation philosophy, recent developments in compensation practices and sound corporate governance practices, including:
• | No liberal share counting. The Plan prohibits the reuse of shares withheld or delivered to satisfy the exercise price of an option or to satisfy tax withholding requirements.
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• | No repricing of stock options. The Plan prohibits the repricing of stock options, or the exchange of a stock option at a time when the exercise price exceeds the fair market value of the shares (i.e., when the shares are “underwater”).
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• | No discounted stock options. All stock options must have an exercise price equal to or greater than the fair market value of the underlying common stock on the date of grant.
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• | Double trigger for accelerated vesting. Unvested awards will become exercisable or vest in connection with a change in control only if the participant experiences an involuntary termination within 365 days following the change in control event or the acquiring company does not either assume the outstanding award or replace the outstanding award with an equivalently-valued award.
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• | Limit on awards to any one individual. The Plan imposes a maximum number of shares that may be granted to any one individual.
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Federal Income Tax Consequences
The following discussion provides a general overview of the federal tax consequences that apply to non-qualified stock options, incentive stock options and restricted stock awards, as of the date of this Proxy Statement.
Non-qualified Stock Options. Under current federal tax law, the non-qualified stock options granted under the 2015 Equity Incentive Plan will not result in any taxable income to the optionee or any tax deduction to First Northwest at the time of grant. Upon the exercise of a non-qualified stock option, the excess of the market value of the shares acquired over their exercise price is taxable to the optionee as compensation income and is generally deductible by First Northwest. The optionee’s tax basis for the shares is the market value of the shares at the time of exercise. Upon a sale of the shares, the optionee will recognize a capital gain (or loss) to the extent of any appreciation (or loss) in value of the shares from the date of exercise to the date of sale, and any such gain (or loss) will qualify as long-term capital gain (or loss) if the applicable capital gain holding period is satisfied.
Incentive Stock Options. Neither the grant nor the exercise of an incentive stock option under the 2015 Equity Incentive Plan will result in any federal tax consequences to either the optionee or First Northwest, except that the difference between the market price on the date of exercise and the exercise price is an item of adjustment included for purposes of calculating the optionee’s alternative minimum tax. Except as described below, at the time the optionee sells shares acquired pursuant to the exercise of an incentive stock option, the excess of the sale price over the exercise price will qualify as a long-term capital gain if the applicable holding period is satisfied. If the optionee disposes of the shares within two years of the date of grant or within one year of the date of exercise, an amount equal to the lesser of (a) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (b) the difference between the exercise price and the sale price will be taxed as ordinary income and First Northwest will be entitled to a deduction in the same amount. The excess, if any, of the sale price over the sum of the exercise price and the amount taxed as ordinary income will qualify as long-term capital gain if the applicable capital gains holding period is satisfied. If the optionee exercises an incentive stock option more than three months after his or her termination of employment, the optionee generally is deemed to have exercised a non-qualified stock option.
Restricted Stock Awards. Recipients of restricted shares granted under the 2015 Equity Incentive Plan will recognize ordinary (compensation) income on the date that the shares are no longer subject to a substantial risk
of forfeiture, or in the case of restricted share units, at the time shares of First Northwest common stock are transferred to the awardee in an amount equal to the fair market value of the shares on that date. In certain circumstances, a holder of restricted stock (but not restricted share units) may elect to recognize ordinary (compensation) income on the date of the grant of the restricted stock in an amount equal to the fair market value of the shares on the grant date. Upon a subsequent sale of the shares, the holder of restricted stock will recognize capital gain or loss based on the difference between the amount received and the amount previously recognized as ordinary income. If an award agreement provides that an owner of restricted stock is entitled to receive dividends, then recipients of shares granted under the Plan will also recognize ordinary income equal to their dividend payments when these payments are received.
Proposed Awards Under the Plan
No awards have been proposed under the 2015 Equity Incentive Plan as of the date of this Proxy Statement.
Equity Compensation Plan Information
As of June 30, 2015, we did not have any compensation plans under which shares of First Northwest common stock were issued.
Voting Recommendation
The Board of Directors recommends that shareholders vote FOR the adoption of the First Northwest Bancorp 2015 Equity Incentive Plan.
The Audit Committee of the First Northwest Board of Directors reports as follows with respect to First Northwest’sNorthwest's audited financial statements for the fiscal year ended June 30, 2015:transition period from July 1, 2017 through December 31, 2017:
· | the Audit Committee has completed its review and discussion with management of the 2015 audited financial statements with management;for the transition period from July 1, 2017 through December 31, 2017; |
· | the Audit Committee has discussed with the independent auditor, Moss Adams LLP, the matters required to be discussed by Auditing Standard No. 16, 1301, Communications with Audit Committees,, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T; amended; |
· | the Audit Committee has received written disclosures and the letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’sauditor's communications with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditor’sauditor's independence; and |
· | the Audit Committee has, based on its review and discussions with management of the 2015 audited financial statements and discussions with the independent auditor, recommended to the Board of Directors that First Northwest’sNorthwest's audited financial statements for the year ended June 30, 2015,transition period from July 1, 2017 through December 31, 2017, be included in its Annual Report on Form 10-K.10-KT. |
The foregoing report is provided by the following directors, who constitute the Audit Committee:
Audit Committee:
Jennifer Zaccardo (Chair)
Dana D. Behar
David A. Blake
Lloyd J. EisenmanStephen E. Oliver
Richard G. Kott
Norman J. Tonina, Jr.
This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not otherwise be deemed filed under such acts.
PROPOSAL 53 – RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR |
TheAs previously announced, we have changed our fiscal year end from June 30 to December 31. Accordingly, the Audit Committee of the Board of Directors has appointed Moss Adams LLP as First Northwest’sNorthwest's independent auditor for the year ending June 30, 2016.December 31, 2018. You are asked to ratify the appointment of Moss Adams LLP at the annual meeting. Although shareholder ratification of the appointment of Moss Adams LLP is not required by our bylaws or otherwise, our Board of Directors is submitting this appointment to shareholders for their ratification at the annual meeting as a matter of good corporate practice. If the appointment of Moss Adams LLP is not ratified by our shareholders, the Audit Committee may appoint another independent auditor or it may decide to maintain its appointment of Moss Adams LLP. Even if the appointment of Moss Adams LLP is ratified by the shareholders at the annual meeting, the Audit Committee, in its discretion, may select a different independent auditor at any time during the year. Moss Adams LLP served as our independent auditor for the year ended June 30, 2015,2017 and for the transition period from July 1, 2017 through December 31, 2017, and a representative of the firm is expected to attend the annual meeting to respond to appropriate questions and will have an opportunity to make a statement if he or she so desires.
The Board of Directors unanimously recommends that you vote FOR ratification of the appointment of Moss Adams LLP as our independent auditor.
The following table sets forth the aggregate fees billed to First Northwest and First Federal for professional services rendered by Moss Adams LLP for the transition period from July 1, 2017 through December 31, 2017 and the fiscal years ended June 30, 2015,2017 and 2014.2016.
| Year Ended June 30, | | | | | Year ended June 30, | |
| 2015 | | 2014 | |
Name | | | July 1, 2017 – December 31, 2017 | | | 2017 | | | 2016 | |
| | | | | | | | | | | | |
Audit Fees | $211,000 | | $184,000 | | $ | 312,839 | | | $ | 340,381 | | | $ | 320,300 | |
Audit-Related Fees | 218,000 | | 197,000 | | | 10,500 | | | | 36,500 | | | | 41,500 | |
Tax Fees | 24,000 | | 35,000 | | | 21,340 | | | | 25,020 | | | | 26,270 | |
All Other Fees | -- | | -- | | | -- | | | | -- | | | | -- | |
The Audit Committee pre-approves all audit and permissible non-audit services to be provided by the independent auditor and the estimated fees for these services in connection with its annual review of its charter. In considering non-audit services, the Audit Committee will consider various factors, including but not limited to, whether it would be beneficial to have the service provided by the independent auditor and whether the service could compromise the independence of the independent auditor. All of the services provided by Moss Adams LLP in the year ended June 30, 2015,transition period from July 1, 2017 through December 31, 2017, were approved by the Audit Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act requires our directors and executive officers, and persons who own more than 10 percent of First Northwest’sNorthwest's common stock to report their initial ownership of the common stock and any subsequent changes in that ownership to the SEC. Directors, executive officers and greater than 10 percent shareholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. The SEC has established filing deadlines for these reports and we are required to disclose in this Proxy Statement any late filings or failures to file. Based solely on our review of the copies of such forms we have received and written representations provided to us by the above referenced persons, we believe that, during the fiscal year ended June 30, 2015,transition period from July 1, 2017 through December 31, 2017, all filing requirements applicable to our reporting officers, directors and greater than 10 percent shareholders were properly and timely complied with.
Proposals of shareholders intended to be presented at next year’sthe 2019 annual meeting of shareholders must be received at the executive office at 105 W. Eighth Street, Port Angeles, Washington 98362, no later than May 28, 2016,November 16, 2018, in order to be eligible for inclusion in our printed proxy materials. Any such proposals shall be subject to the requirements of the proxy rules adopted under the Securities Exchange Act, and as with any shareholder proposal (regardless of whether included in our proxy materials), our Articles of Incorporation and Bylaws.
Our Articles of Incorporation provide that in order for a shareholder to make nominations for the election of directors or proposals for business to be brought before a meeting, a shareholder must deliver notice of such nominations and/or proposals to the Secretary not less than 90 nor more than 120 days prior to the date of the meeting; provided that if less than 100 days’days' notice of the meeting is given to shareholders, such written notice must be delivered not later than the close of business on the tenth day following the day on which notice of the meeting was mailedprovided to shareholders. As specified in the Articles of Incorporation, the notice with respect to nominations for election of directors must set forth certain information regarding each nominee for election as a director, including the person’sperson's name, age, business address and number of shares of common stock held, a written consent to being named in the Proxy Statement as a nominee and to serving as a director, if elected, and certain other information regarding the shareholder giving such notice. The notice with respect to business proposals to be brought before the annual meeting must state the shareholder’sshareholder's name, address and number of shares of common stock held, a brief discussion of the business to be brought before the annual meeting, the reasons for conducting such business at the meeting, and any interest of the shareholder in the proposal.
The Board of Directors is not aware of any business to come before the annual meeting other than those matters described in this Proxy Statement. However, if any other matters should properly come before the meeting, it is intended that proxies in the accompanying form will be voted in respect thereof in accordance with the judgment of the person or persons voting the proxies.
We will paybear the cost of soliciting proxies. We have engaged Regan & Associates, Inc. to assist in the distribution and solicitation of proxies and will reimburse brokerage firms and other custodians, nominees and fiduciaries for a fee of $12,500 (including out-of-pocket expenses). Regan & Associates, Inc. will assist with fulfillment of the broker-dealer search notification requirement, ensure actual delivery ofreasonable expenses incurred by them in sending proxy materials to the beneficial owners of First Northwest's common stock. In addition to solicitations via the Internet and solicit proxies from both street name and registered shareholders. Ourby mail, our directors, officers and regular employees may also supplement the proxy solicitor’s solicitation ofsolicit proxies personally or electronically or by telephone without additional compensation. We will also reimburse brokers and other nominees for their expenses in sending these materials to you and obtaining your voting instructions.
Our Annual Report to Shareholders, including the Annual Report on Form 10-K, has been mailedmade available to all shareholders of record as of the close of business on the voting record date. Any shareholder who has not receivedmay obtain a copy of the Annual Report may obtain a copy by writing to the Secretary, First Northwest Bancorp, 105 W. Eighth Street, Port Angeles, Washington 98362. The Annual Report is not to be treated as part of the proxy solicitation material or as having been incorporated herein by reference.
| BY ORDER OF THE BOARD OF DIRECTORS |
| |
| /s/ CHRISTOPHER J. RIFFLE |
| /s/JOYCE RUIZ |
| CHRISTOPHER J. RIFFLE |
| JOYCE RUIZ |
| CORPORATE SECRETARY AND SENIOR VICE PRESIDENT AND CORPORATE SECRETARY |
Port Angeles, Washington
September 25, 2015March 16, 2018
Appendix A
First Northwest Bancorp
2015 Equity Incentive Plan
ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
Section 1.1 Establishment of the Plan.
First Northwest Bancorp (the “Company”) hereby establishes an incentive compensation plan to be known as the “First Northwest Bancorp 2015 Equity Incentive Plan” (the “Plan”), as set forth in this document. The Plan permits the granting of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock and Restricted Stock Units.
The Plan was originally adopted effective as of July 28, 2015 by the Board, and became effective on ___________________, 2015 (the “Effective Date”), the date the Plan was approved by the Company’s shareholders.
Section 1.2 Purpose of the Plan.
The purpose of the Plan is to promote the long-term growth and profitability of First Northwest Bancorp, to provide Plan Participants with an incentive to achieve corporate objectives, to attract and retain individuals of outstanding competence and to provide Plan Participants with incentives that are closely linked to the interests of all shareholders of First Northwest Bancorp. The Plan is not intended to expose the Company to imprudent risks.
Section 1.3 Duration of the Plan.
Subject to approval by the shareholders of the Company, the Plan shall commence on the Effective Date, and shall remain in effect, subject to the right of the Board to terminate the Plan at any time pursuant to Article VIII herein. However, in no event may an Award be granted under the Plan on or after the tenth anniversary of the Effective Date. Nor may an Incentive Stock Option be granted under the Plan on or after the tenth anniversary of the date the Plan was adopted by the Board.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan, unless a different meaning is plainly indicated by the context:
Affiliate means any “parent corporation” or “subsidiary corporation” of the Company, as those terms are defined in Section 424(e) and (f), respectively, of the Code.
Award means the grant by the Committee of an Incentive Stock Option, a Non-Qualified Stock Option, or a Restricted Stock Award.
Award Agreement means a written instrument evidencing an Award under the Plan and establishing the terms and conditions thereof.
Beneficiary means the Person designated by a Participant to receive any Shares subject to a Restricted Stock Award made to such Participant that become distributable, or to have the right to exercise any Incentive Stock Option or Non-Qualified Stock Option (the “Option”) granted to such Participant that are exercisable, following the Participant’s death.
Board means the Board of Directors of First Northwest Bancorp and any successor thereto.
Change in Control means any of the following events:
(a) any third Person, including a "group" as defined in Section 13(d)(3) of the Exchange Act, that becomes the beneficial owner of Shares with respect to which 25 percent or more of the total number of votes that may be cast for the election of the Board (other than a tax-qualified plan of the Company or its Affiliate);
(b) consummation of a plan of reorganization, merger, acquisition, consolidation, sale of all or substantially all of the assets of the Company or a similar transaction in which the Company is not the resulting entity;
(c) as a result of, or in connection with, any cash tender offer, merger or other business combination, sale of assets or contested election(s), or combination of the foregoing, the individuals who were members of the Board of Directors on the date of adoption of this Plan (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date of adoption of this Plan whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s shareholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; or
(d) a tender offer or exchange offer for 25 percent or more of the total outstanding Shares is completed (other than such an offer by the Company).
Code means the Internal Revenue Code of 1986, as amended from time to time.
Committee means the Committee described in Article IV.
Company means First Northwest Bancorp, a Washington corporation, and any successor thereto.
Director means any individual who is a member of the Board or the board of directors of an Affiliate or an advisory or emeritus director of the Company or an Affiliate who is not currently an Employee.
Disability means a total and permanent disability, within the meaning of Section 22(e)(3) of the Code, as determined by the Committee in good faith, upon receipt of sufficient competent medical advice from one or more individuals, selected by the Committee, who are qualified to give professional medical advice.
Domestic Relations Order means a domestic relations order that satisfies the requirements of Section 414(p)(1)(B) of the Code, or any successor provision, as if such section applied to the applicable Award.
Employee means a full-time or part-time employee of the Company or an Affiliate. Directors who are not otherwise employed by the Company or an Affiliate shall not be considered Employees under the Plan.
Effective Date means the date on which the Plan is approved by the shareholders of First Northwest Bancorp.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Exercise Period means the period during which an Option may be exercised.
Exercise Price means the price per Share at which Shares subject to an Option may be purchased upon exercise of the Option. If the Fair Market Value (as defined below) for Exercise Price purposes is determined to be less than fair market value of the underlying Shares as determined under Section 409A (the “Section 409A Fair Market Value”), then the Exercise Price shall automatically adjust to be the Section 409A Fair Market Value. The Committee may take such actions as it determines necessary to carry out the preceding sentence.
Fair Market Value means, with respect to a Share on a specified date:
(a)If the Shares are listed on any U.S. national securities exchange registered under the Exchange Act (“National Exchange”), the closing sales price for such stock (or the closing bid, if no sales were reported) as
reported on that exchange on the applicable date, or if the applicable date is not a trading day, on the trading day immediately preceding the applicable date;(b)If the Shares are not listed on a National Exchange but are traded on the over-the-counter market or other similar system, the mean between the closing bid and the asked price for the Shares at the close of trading in the over-the-counter market or other similar system on the applicable date, or if the applicable date is not a trading day, on the trading day immediately preceding the applicable date; and
(c) In the absence of such markets for the Shares, the Fair Market Value shall be determined in good faith by the Committee.
In no event shall the Fair Market Value for Exercise Price purposes be less than Fair Market Value of the underlying Shares as determined under Section 409A.
Family Member means with respect to any Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, registered domestic partner (as determined under state law), sibling, niece, nephew, mother-in-law, father in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests.
Federal Reserve Board means the Board of Governors of the Federal Reserve System.
Incentive Stock Option means a right to purchase Shares that is granted to an Employee that is designated by the Committee to be an Incentive Stock Option and that satisfies the requirements of Section 422 of the Code.
Incumbent Board means the members of the Board on the date of adoption of this Plan.
Involuntary Separation from Service means an “involuntary separation from service” within the meaning of United States Treasury Regulations Section 1.409A-1(n), which shall include a voluntary separation from service for good reason as defined therein.
Non-Qualified Stock Option means a right to purchase Shares that is not an Incentive Stock Option.
Option means either an Incentive Stock Option or a Non-Qualified Stock Option.
Option Holder means, at any relevant time with respect to an Option, the person having the right to exercise the Option.
Participant means any Employee or Director who is selected by the Committee to receive an Award.
Period of Restriction means the period during which the entitlement of a Participant under a Restricted Stock Award is limited in some way or subject to forfeiture, in whole or in part, based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion.
Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint-stock company, a trust, an estate, an unincorporated organization and any other business organization or institution.
Plan means this First Northwest Bancorp 2015 Equity Incentive Plan, as amended from time to time.
Restricted Stock means an award of Shares granted subject to a Period of Restriction pursuant to Article VI.
Restricted Stock Award means an award of Restricted Stock or Restricted Stock Units pursuant to Article VI.
Restricted Stock Units means an Award denominated in units subject to a Period of Restriction granted pursuant to Article VI.
Retirement means, subject to the terms of an Award, (i) in the case of an Employee, the termination of a Participant’s employment with the Company and its Affiliates, other than a Termination for Cause, after the Participant has attained age 65, and (ii) with respect to non-employee Directors, the termination of Service as a Director of the Company and its Affiliates or any successors thereto after reaching normal retirement age as established by the Company, other than a Termination for Cause.
Section 409A means Section 409A of the Code and any regulations or guidance of general applicability thereunder.
Service means, unless the Committee provides otherwise in an Award Agreement, service in any capacity as a Director or Employee of the Company or any Affiliate.
Share means a share of common stock, par value $.01 per share, of First Northwest Bancorp.
Termination for Cause means termination upon an intentional failure to perform stated duties, a breach of a fiduciary duty involving personal dishonesty which results in material loss to the Company or one of its Affiliates or a willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or a final cease-and-desist order which results in material loss to the Company or one of its Affiliates. No act or failure to act on a Participant’s part shall be considered willful unless done, or omitted to be done, not in good faith and without reasonable belief that the action or omission was in the best interest of the Company. Notwithstanding the above, if a Participant is subject to a different definition of termination for cause in an employment or severance or similar agreement with the Company or any Affiliate, such other definition shall control.
Vesting Date means the date or dates on which the grant of an Option is eligible to be exercised or the date or dates on which a Restricted Stock Award ceases to be forfeitable (i.e., at the end of a Period of Restriction).
ARTICLE III
AVAILABLE SHARES
Section 3.1 Shares Available Under the Plan.
Subject to adjustment under Article VIII, the aggregate number of Shares representing Awards shall not exceed 1,834,050 Shares.
Section 3.2 Shares Available for Options.
Subject to adjustment under Article VIII, the maximum aggregate number of Shares with respect to which Options may be granted under the Plan shall be 1,310,036 Shares. Subject to adjustment under Article VIII, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be 1,310,036 Shares. The maximum aggregate number of Shares which may be issued upon exercise of Options to any one individual shall be limited as follows:
(a) the total number of Options available for grant to non-Employee Directors in the aggregate shall be limited to 30 percent of the number of Shares indicated above;
(b) the total number of Options available for grant to any one non-Employee Director shall be limited to five percent of the number of Shares indicated above; and
(c) the total number of Options available for grant to any Employee shall be limited to 25 percent of the number of Shares indicated above.
Section 3.3 Shares Available for Restricted Stock Awards.
Subject to adjustment under Article VIII, the maximum aggregate number of Shares with respect to which Restricted Stock Awards may be granted under the Plan shall be 524,014 Shares. The Shares with respect to which Restricted Stock Awards may be made under the Plan may be either authorized and unissued Shares, or previously issued Shares that have been reacquired by the Company (subject to any required regulatory approvals). The maximum aggregate number of Shares which may be issued upon Award or vesting of Restricted Stock Awards shall be limited as follows:
(a) the total number of Restricted Stock Awards available for grant to non-Employee Directors as a group shall be limited to 30 percent of the number of Shares indicated above;
(b) the total number of Restricted Stock Awards available for grant to any one non-Employee Director shall be limited to five percent of the number of Shares indicated above; and
(c) the total number of Restricted Stock Awards available for grant to any Employee shall be limited to 25 percent of the number of Shares indicated above.
Section 3.4 Additional Regulatory Restrictions.
As of the Effective Date, the following additional regulatory restrictions shall apply:
(a)No Award may vest (or restrictions with respect to such Award lapse) beginning earlier than one year from the Effective Date of the Plan and all Awards shall vest no more rapidly than in annual installments of 20 percent of the total Award.
(b) The accelerated vesting of Awards shall not be permitted except upon the Participant’s death or Disability, or upon a Change in Control.
(c) Executive officers and Directors must exercise or forfeit any Options awarded to them in the event the Company becomes critically undercapitalized under the applicable regulatory capital requirements, is subject to an enforcement action, or receives a capital directive under Federal Reserve Board regulation section 263.83 (12 C.F.R. 263.83), or if directed to so do by the Federal Reserve Board, the Company’s primary regulator.
Section 3.5 Computation of Shares Issued.
For purposes of this Article III, Shares shall be considered issued pursuant to this Plan only if actually issued upon the exercise of an Option or in connection with the vesting of Restricted Stock Award. Any Award subsequently forfeited, in whole or in part, shall not be considered issued. If any Award granted under this Plan terminates, expires, or lapses for any reason, any Shares subject to such Award again shall be available for the grant of an Award under the Plan. Shares used to pay the Exercise Price of an Option and Shares used to satisfy tax withholding obligations shall not be available for future Awards under this Plan. To the extent that Shares are delivered pursuant to the exercise of an Option, the number of underlying Shares as to which the exercise related shall be counted against the number of Shares available for Awards, as opposed to only counting the Shares issued.
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.
(a) This Plan shall be administered by a Committee appointed by the Board for that purpose and consisting of not less than two (2) members of the Board. Each member of the Committee shall be an “Outside Director” within the meaning of Section 162(m) of the Code or a successor rule or regulation, a “Non-Employee Director” within the meaning of Rule 16b-3(b)(3)(i) under the Exchange Act or a successor rule or regulation and an “Independent Director,” and shall satisfy any other membership requirements, under the corporate governance rules and regulations imposing independence and other membership standards on committees performing similar functions promulgated by any National Exchange or quotation system on which the Shares are listed.
(b) The act of a majority of the members present at a meeting duly called and held shall be the act of the Committee. Any decision or determination reduced to writing and signed by all members shall be as fully effective as if made by unanimous vote at a meeting duly called and held.
(c) The Committee’s decisions and determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated.
Section 4.2 Committee Powers.
Subject to the terms and conditions of this Plan and such limitations as may be imposed by the Board, the Committee shall be responsible for the overall management and administration of the Plan. The Committee shall have full power except as limited by law or by the charter or by-laws of the Company or by resolutions adopted by the Board, and subject to the provisions herein, to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article VIII herein) to amend or otherwise modify the Plan or the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan and, if the Award is subject to Section 409A, does not cause the Plan or the Award to violate Section 409A. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, rule, or regulation, the Committee may delegate its authorities as identified hereunder. All decisions, determinations and other actions of the Committee made or taken in accordance with the terms of the Plan shall be final and conclusive and binding upon all parties having an interest therein.
ARTICLE V
STOCK OPTIONS
Section 5.1 Grant of Options.
(a) Subject to the limitations of this Plan, the Committee may, in its discretion, grant to a Participant an Option to purchase Shares. An Option must be designated as either an Incentive Stock Option or a Non-Qualified Stock Option at the time of grant and, if not designated as either, shall be a Non-Qualified Stock Option. Only employees of the Company or its Affiliates may receive Incentive Stock Options.
(b) Any Option granted shall be evidenced by an Award Agreement which shall:
(i) specify the number of Shares covered by the Option;
(ii) specify the Exercise Price;
(iii) specify the Exercise Period;
(iv) specify the Vesting Date; and
(v) contain such other terms and conditions not inconsistent with the Plan as the Committee may, in its discretion, prescribe. No Option terms shall be permitted that would cause the Option to be subject to Section 409A.
Section 5.2 Size of Option.
Subject to the restrictions of this Plan, the number of Shares as to which a Participant may be granted Options shall be determined by the Committee, in its discretion.
Section 5.3 Exercise Price.
The price per Share at which an Option may be exercised shall be determined by the Committee, in its discretion; provided, however, that the Exercise Price shall not be less than the Fair Market Value of a Share on the date on which the Option is granted.
Section 5.4 Exercise Period.
The Exercise Period during which an Option may be exercised shall commence on the Vesting Date. It shall expire on the earliest of:
(a)the date specified by the Committee in the Award Agreement;
(b) unless otherwise determined by the Committee and set forth in the Award Agreement, the last day of the three-month period commencing on the date of the Participant’s termination of Service, other than on account of death, Disability, Retirement or a Termination for Cause;
(c)unless otherwise determined by the Committee and set forth in the Award Agreement, the last day of the one-year period commencing on the date of the Participant’s termination of Service due to death, Disability or Retirement;
(d)as of the time and on the date of the Participant’s termination of Service due to a Termination for Cause; or
(e)the last day of the ten-year period commencing on the date on which the Option was granted.
An Option that remains unexercised at the close of business on the last day of the Exercise Period shall be canceled without consideration at the close of business on that date.
Section 5.5 Vesting Date.
(a) Subject to any restrictions set forth in this Plan, the Vesting Date for each Option Award shall be determined by the Committee and specified in the Award Agreement.
(b) Unless otherwise determined by the Committee and specified in the Award Agreement:
(i) if the Participant of an Option Award terminates Service prior to the Vesting Date for any reason other than death, Disability or a Change in Control, any unvested Option shall be forfeited without consideration;
(ii) if the Participant of an Option Award terminates Service prior to the Vesting Date on account of death or Disability, the Vesting Date shall be accelerated to the date of the Participant’s termination of Service; and
(iii) if a Change in Control occurs prior to the Vesting Date of an Option Award that is outstanding on the date of the Change in Control, and the Participant experiences an Involuntary Separation from Service other than a Termination for Cause during the 365-day period following the date of such Change in Control, then the Vesting Date for any non-vested Option Award shall be accelerated to the date of the Participant’s Involuntary Separation from Service. Notwithstanding the preceding sentence, if at the effective time of the Change in Control the successor to the Company’s business and/or assets does not either assume the outstanding Option Award or replace the outstanding Option Award with an award that is determined by the Committee to be at least equivalent in value to such outstanding Option Award on the date of the Change in Control, then the Vesting Date of such outstanding Option Award shall be accelerated to the earliest date of the Change in Control.
Section 5.6 Additional Restrictions on Incentive Stock Options.
An Option designated by the Committee to be an Incentive Stock Option shall be subject to the following provisions:
(a) Notwithstanding any other provision of this Plan to the contrary, no Participant may receive an Incentive Stock Option under the Plan if such Participant, at the time the Option is granted, owns (after application of the rules contained in Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its Affiliates, unless (i) the option price for such Incentive Stock Option is at least 110 percent of the Fair Market Value of the Shares subject to such Incentive Stock Option on the date of grant and (ii) such Option is not exercisable after the date five years from the date such Incentive Stock Option is granted.
(b) Each Participant who receives Shares upon exercise of an Option that is an Incentive Stock Option shall give the Company prompt notice of any sale of Shares prior to a date which is two years from the date the Option was granted or one year from the date the Option was exercised. Such sale shall disqualify the Option as an Incentive Stock Option.
(c)The aggregate Fair Market Value (determined with respect to each Incentive Stock Option at the time such Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan of the Company or an Affiliate) shall not exceed $100,000 and the term of the Incentive Stock Option shall not be more than ten years.
(d) Any Option under this Plan which is designated by the Committee as an Incentive Stock Option but fails, for any reason, to meet the foregoing requirements shall be treated as a Non-Qualified Stock Option.
Section 5.7 Method of Exercise.
(a) Subject to the limitations of this Plan and the Award Agreement, an Option Holder may, at any time on or after the Vesting Date and during the Exercise Period, exercise his or her right to purchase all or any part of the Shares to which the Option relates; provided, however, that the minimum number of Shares which may be purchased at any time shall be 100, or, if less, the total number of Shares relating to the Option which remain un-purchased. An Option Holder shall exercise an Option to purchase Shares by:
(i) giving written notice to the Committee, in such form and manner as the Committee may prescribe, of his or her intent to exercise the Option;
(ii) delivering to the Committee full payment for the Shares as to which the Option is to be exercised; and
(iii) satisfying such other conditions as may be prescribed in the Award Agreement.
(b) The Exercise Price of the Shares to be purchased upon exercise of any Option shall be paid in full:
(i) in cash (by certified or bank check or such other instrument as the Company may accept); or
(ii) if and to the extent permitted by the Committee, in the form of Shares already owned by the Option Holder as of the exercise date and having an aggregate Fair Market Value on the date the Option is exercised equal to the aggregate Exercise Price to be paid; or
(iii) if and to the extent permitted by the Committee, by the Company withholding Shares otherwise issuable upon the exercise having an aggregate Fair Market Value on the date the Option is exercised equal to the aggregate Exercise Price to be paid; or
(iv) by any combination thereof.
Payment for any Shares to be purchased upon exercise of an Option may also be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price and applicable tax withholding amounts (if any), in which event the Shares acquired shall be delivered to the broker promptly following receipt of payment.
(c) When the requirements of this Section have been satisfied, the Committee shall take such action as is necessary to cause the issuance of a stock certificate or cause the Shares to be issued by book-entry procedures, in either event evidencing the Option Holder's ownership of such Shares. The Person exercising the Option shall have no right to vote or to receive dividends, nor have any other rights with respect to the Shares, prior to the date the Shares are transferred to such Person on the stock transfer records of the Company, and no adjustments shall be made for any dividends or other rights for which the record date is prior to the date as of which the transfer is effected.
Section 5.8 Limitations on Options.
(a) An Option by its terms shall not be transferable by the Option Holder other than by will or the laws of descent and distribution, or pursuant to the terms of a Domestic Relations Order, and shall be exercisable, during the life of the Option Holder, only by the Option Holder or an alternate payee designated pursuant to such a Domestic Relations Order; provided, however, that a Participant may, at any time at or after the grant of a Non-Qualified Stock Option under this Plan, apply to the Committee for approval to transfer all or any portion of such Non-Qualified Stock Option which is then unexercised to such Participant’s Family Member; and provided further, than an Incentive Stock Option may be transferred to a trust if, under Section 671 of the Code and applicable state law, the Participant is considered the sole beneficial owner of the Incentive Stock Option while it is held by the trust. The Committee may approve or withhold approval of such transfer in its sole and absolute discretion. If such transfer is approved, it shall be effected by written notice to the Company given in such form and manner as the Committee may prescribe and actually received by the Company prior to the death of the person giving it. Thereafter, the transferee shall have all of the rights, privileges and obligations which would attach thereunder to the Participant. If a privilege of the Option depends on the life, Service or other status of the Participant, such privilege of the Option for the transferee shall continue to depend upon the life, Service or other status of the Participant. The Committee shall have full and exclusive authority to interpret and apply the provisions of the Plan to transferees to the extent not specifically addressed herein.
(b) The Company's obligation to deliver Shares with respect to an Option shall, if the Committee so requests, be conditioned upon the receipt of a representation as to the investment intention of the Option Holder to whom such Shares are to be delivered, in such form as the Committee shall determine to be necessary or advisable to comply with the provisions of applicable federal, state or local law. It may be provided that any such representation shall become inoperative upon a registration of the Shares or upon the occurrence of any other event eliminating the necessity of such representation. The Company shall not be required to deliver any Shares under this Plan prior to:
(i) the admission of such Shares to listing on any stock exchange or trading on any automated quotation system on which the Shares may then be listed or traded; or
(ii)the completion of such registration or other qualification under any state or federal law, rule or regulation as the Committee shall determine to be necessary or advisable.
(c) An Option Holder may designate a Beneficiary to receive any Options that may be exercised after his or her death. Such designation and any change or revocation of such designation shall be made in writing in the form and manner prescribed by the Committee. In the event that the designated Beneficiary dies prior to the Option Holder, or in the event that no Beneficiary has been designated, any Options that may be exercised following the Option Holder's death shall be transferred to the Option Holder's estate. If the Option Holder and his or her Beneficiary shall die in circumstances that cause the Committee, in its discretion, to be uncertain which shall have been the first to die, the Option Holder shall be deemed to have survived the Beneficiary.
(d) No Option may be held in a margin account of the Option Holder.
Section 5.9 Prohibition Against Option Repricing.
Except as provided in Section 8.3 of this Plan and notwithstanding any other provision of this Plan, neither the Committee nor the Board shall have the right or authority following the grant of an Option pursuant to this Plan to amend or modify the Exercise Price of any such Option(including by cash buyouts, option exchanges, and certain voluntary surrender of underwater options where Shares surrendered may subsequently be re-granted), or to cancel the Option at a time when the Exercise Price is greater than the Fair Market Value of the Shares in exchange for another Option or Award.
ARTICLE VI
RESTRICTED STOCK AWARDS
Section 6.1 In General.
(a) Each Restricted Stock Award shall be evidenced by an Award Agreement which shall specify:
(i) the number of Shares of Restricted Stock or Restricted Stock Units covered by the Restricted Stock Award;
(ii) the amount, if any, which the Participant shall be required to pay to the Company in consideration for the issuance of such Restricted Stock or Restricted Stock Units;
(iii) the date of grant of the Restricted Stock Award;
(iv) the Period of Restriction for the Restricted Stock Award and the performance conditions, if any, which must be satisfied in order for the Period of Restriction to end and the Vesting Date to occur;
(v) as to Awards of Restricted Stock, the rights of the Participant with respect to dividends, voting rights and other rights and preferences associated with such Shares; and
(vi) as to Awards of Restricted Stock Units, the rights of the Participant with respect to attributes of the Restricted Stock Units which are the equivalent of dividends and other rights and preferences associated with such Shares and the circumstances pursuant to which Restricted Stock Units shall be converted to Shares.
Restricted Stock Awards may contain such other terms and conditions not inconsistent with this Plan as the Committee may, in its discretion, prescribe.
Restricted Stock Units shall be settled (paid) at such time as is specified in the Restricted Stock Unit Award. Unless otherwise specified in the Award, when and if Restricted Stock Units become payable, a Participant having received the grant of such units shall be entitled to receive payment from the Company in cash, Shares or a combination thereof, as determined by the Committee in its sole discretion.
As to Awards awarding Restricted Stock Units, the terms of the Award shall either result in the Restricted Stock Units not being subject to Section 409A or, if the Restricted Stock Units are subject to Section 409A, include terms that cause the Restricted Stock Units to comply with Section 409A.
(b) All Awards of Restricted Stock shall be in the form of issued and outstanding Shares that shall be registered in the name of the Participant, subject to written transfer restriction instructions issued to the Company’s stock transfer agent, together with an irrevocable stock power executed by the Participant in favor of and held by the Committee or its designee, pending the vesting or forfeiture of the Restricted Stock Award. The Shares shall at all times prior to the applicable Vesting Date be subject to the following restriction, communicated in writing to the Company’s stock transfer agent:
These shares of common stock are subject to the terms of an Award Agreement between First Northwest Bancorp and [Name of Participant] dated [Award Date] made pursuant to the terms of the First Northwest Bancorp 2015 Equity Incentive Plan, copies of which are
on file at the executive offices of First Northwest Bancorp and may not be sold, encumbered, hypothecated or otherwise transferred, except in accordance with the terms of such Plan and Award Agreement.
or such other restrictive communication or legend as the Committee, in its discretion, may specify.
(c) Unless otherwise set forth in the Award Agreement, a Restricted Stock Award by its terms shall not be transferable by the Participant other than by will or by the laws of descent and distribution, or pursuant to the terms of a Domestic Relations Order; provided, however, that a Participant may, at any time at or after the grant of a Restricted Stock Award under the Plan, apply to the Committee for approval to transfer all or any portion of such Restricted Stock Award which is then unvested to such Participant’s Family Member. The Committee may approve or withhold approval of such transfer in its sole and absolute discretion. If such transfer is approved, it shall be effected by written notice to the Company given in such form and manner as the Committee may prescribe and actually received by the Company prior to the death of the person giving it. Thereafter, the transferee shall have, with respect to such Restricted Stock Award, all of the rights, privileges and obligations which would attach thereunder to the Participant. If a privilege of the Restricted Stock Award depends on the life, Service or other status of the Participant, such privilege of the Restricted Stock Award for the transferee shall continue to depend upon the life, Service or other status of the Participant. The Committee shall have full and exclusive authority to interpret and apply the provisions of this Plan to transferees to the extent not specifically addressed herein.
Section 6.2 Vesting Date.
(a) The Period of Restriction and Vesting Date for each Restricted Stock Award shall be determined by the Committee and specified in the Award Agreement.
(b) Unless otherwise determined by the Committee and specified in the Award Agreement:
(i)if the Participant terminates Service prior to the Vesting Date for any reason other than death, Disability or a Change in Control, any unvested Shares shall be forfeited without consideration;
(ii) if the Participant terminates Service prior to the Vesting Date on account of death or Disability, the Vesting Date shall be accelerated to the date of termination of the Participant’s Service with the Company; and
(iii) if a Change in Control occurs prior to the Vesting Date of a Restricted Stock Award that is outstanding on the date of the Change in Control, and the Participant experiences an Involuntary Separation from Service other than a Termination for Cause during the 365-day period following the date of such Change in Control, then the Vesting Date for any non-vested Restricted Stock Award shall be accelerated to the date of the Participant’s Involuntary Separation from Service. Notwithstanding the preceding sentence, if at the effective time of the Change in Control the successor to the Company’s business and/or assets does not either assume the outstanding Restricted Stock Award or replace the outstanding Restricted Stock Award with an award that is determined by the Committee to be at least equivalent in value to such outstanding Restricted Stock Award on the date of the Change in Control, then the Vesting Date of such outstanding Restricted Stock Award shall be accelerated to the earliest date of the Change in Control.
Section 6.3 Dividend Rights.
Unless otherwise specified in the Award Agreement:
(a) During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(b) Participants shall have no rights to dividends or other distributions paid on the Shares underlying Restricted Stock Units other than dividends and distributions with a record date on or after the date on which the25
Shares are issued to the Participant. The Committee may provide for dividend equivalent units in the Participant’s Restricted Stock Unit Award agreement.