Exhibit 10.4
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1996, by and between
Heritage Bank (the "Company"), and Kevin Clark (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the Company
is willing to provide salary continuation benefits to the Executive. The Company
will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified.
1.1.1 "CHANGE OF CONTROL" means the transfer of 51% or more the
Company's outstanding voting common stock.
1.1.2 "CODE" means the Internal Revenue Code of 1986, as amended.
References to a Code section shall be deemed to be to that section as it now
exists or as may be replaced, amended or superseded by any successor
provision.
1.1.3 "DISABILITY" means, if the Executive is covered by a
Company-sponsored disability insurance policy, total disability as defined
in such policy without regard to any waiting period. If the Executive is not
covered by such a policy, Disability means the Executive suffering a
sickness or disease, accident or injury which, in the judgment of a
physician satisfactory to the Company, prevents the Executive from
performing substantially all of the Executive's normal duties for the
Company. As a condition to any benefits, the Company may require the
Executive to submit to such physical or mental evaluations and tests as the
Company's Board of Directors deems appropriate.
1.1.4 "EARLY RETIREMENT DATE" means a date prior to the normal
retirement age of 62.
1.1.5 "NORMAL RETIREMENT DATE" means the Executive attaining age 62.
1.1.6 "TERMINATION OF EMPLOYMENT" means the Executive's ceasing to be
employed by the Company for any reason whatsoever, voluntary or involuntary,
other than by reason of an approved leave of absence.
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL RETIREMENT BENEFIT. If the Executive terminates employment on or
after the Normal Retirement Date, the Company shall pay to the Executive the
benefit described in this Section 2.1.
2.1.1 AMOUNT OF BENEFIT. The benefit under this Section 2.1 is $67,476
per year or $5,623 per month.
2.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Retirement Date and until the Company has paid 180 monthly payments
pursuant to Sections 4.1 and 4.2 hereof.
2.2 EARLY RETIREMENT BENEFIT. If the Executive terminates employment after
the Early Retirement Date but before the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.2.
2.2.1 AMOUNT OF BENEFIT. The benefit under this Section 2.2 is the
benefit determined under Schedule A, column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment. Schedule A
is calculated using the interest method of accounting, an 8 1/2% discount
rate, and assuming monthly compounding and monthly benefit payments.
2.2.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Executive's Termination of Employment and continuing until the Company
has paid 180 months pursuant to Sections 4.1 and 4.2 hereof.
2.3 DISABILITY BENEFIT. If the Executive terminates employment for
Disability prior to the Normal Retirement Date, the Company shall pay to the
Executive the benefit described in this Section 2.3.
2.3.1 AMOUNT OF BENEFIT. The benefit under this Section 2.3 is the
benefit determined under Schedule A, Column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment.
2.3.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Executive's Termination of Employment, for 180 months to be paid
pursuant to Sections 4.1 and 4.2 hereof.
2.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control while the Executive
is in the active service of the Company, the Company shall pay to the Executive
the benefit described in this Section 2.4 in lieu of any other benefit under
this Agreement.
2.4.1 AMOUNT OF BENEFIT. The benefit under this Section 2.4 is the
benefit determined under Schedule A, Column D (Lump Sum) or E (Annual),
based on the date of the Executive's Termination of Employment.
2.4.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Executive on the first day of each month commencing with the month following
the Change of Control, for 180 months to be paid pursuant to Sections 4.1
and 4.2 hereof.
2.5 VESTING OF BENEFIT. The Executive is 100 percent vested in the amount
accrued to date in Schedule A.
ARTICLE 3
DEATH BENEFITS
3.1 DEATH DURING ACTIVE SERVICE. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1.
3.1.1 AMOUNT OF BENEFIT. The benefit under Section 3.1 is the lifetime
benefit that would have been paid to the Executive under Section 2.1
calculated as if the date of the Executive's death were the Normal
Retirement Date. The benefit under Section 3.1 is $5,623 per month for 180
months.
3.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the
Beneficiary within 60 days following the Executive's death.
3.2 DEATH DURING BENEFIT PERIOD. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived, subject to a total of 180 monthly
benefits following the Executive's death.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY DESIGNATIONS. The Executive shall designate a beneficiary by
filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and if none, the
Executive's surviving children and the descendants of any deceased child by
right of representation, and if no children or descendants survive, to the
Executive's estate.
4.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetency,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
ARTICLE 5
GENERAL LIMITATIONS
Upon the occurrence of any of the following events or circumstances, the
benefits to be paid hereunder shall be modified, decreased or denied as
indicated:
5.1 EXCESS PARACHUTE PAYMENT. To the extent the benefit would be an excess
parachute payment under Section 280G of the Code, then to that extent and that
extent only the benefit shall be disallowed.
5.2 TERMINATION FOR CAUSE. If the Company terminates the Executive's
employment for:
5.2.1 Gross negligence or gross neglect of duties;
5.2.2 Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in an adverse effect on the Company.
Then no benefits shall be payable for any period subsequent to such acts
of violations.
5.3 SUICIDE. No benefits shall be payable if the Executive commits suicide
within two years after the date of this Agreement, or if the Executive has made
any material misstatement of fact on any application for life insurance
purchased by the Company.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 CLAIMS PROCEDURE. The Company shall notify the Executive's beneficiary
in writing, within ninety (90) days of his or her written application for
benefits, of his or her eligibility or non eligibility for benefits under the
Agreement. If the Company determines that the beneficiary is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific reasons
for such denial, (2) a specific reference to the provisions of the Agreement on
which the denial is based, (3) a description of any additional information or
material necessary for the claimant to perfect his or her claim, and a
description of why it is needed, and (4) an explanation of the Agreement's
claims review procedure and other appropriate information as to the steps to be
taken if the beneficiary wishes to have the claim reviewed. If the Company
determines that there are special circumstances requiring additional time to
make a decision, the Company shall notify the beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period. Payments shall be
retroactive to the date of the claim in the event the procedures of this section
or any other section of this agreement are implemented which delay the
initiation of payments.
6.2 REVIEW PROCEDURE. If the beneficiary is determined by the Company not to
be eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
beneficiary believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the beneficiary (and counsel, if any) an opportunity to
present his or her position to the company orally or in writing, and the
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the beneficiary of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the beneficiary and the specific
provisions of the Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the beneficiary.
ARTICLE 7
AMENDMENTS AND TERMINATION
The Company may amend or terminate this Agreement at any time if, pursuant
to legislative, judicial or regulatory action, continuation of the Agreement
would (i) cause benefits to be taxable to the Executive prior to actual receipt,
or (ii) result in significant financial penalties or other significantly
detrimental ramifications to the Company (other than the financial impact of
paying the benefits). In the event of any such amendment or termination, the
Executive shall be 100% vested in the portion of the Normal Retirement Benefit
accrued to the Executive's benefit under Section 2.1 as of the date of the
amendment or termination.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING EFFECT. This Agreement shall bind the Executive and the Company,
and their beneficiaries, survivors, executors, administrators and transferees.
8.2 NO GUARANTY OF EMPLOYMENT. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of the
Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not
require the Executive to remain an employee nor interfere with the Executive's
right to terminate employment at any time.
8.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 TAX WITHHOLDING. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
8.5 APPLICABLE LAW. The Agreement and all rights hereunder shall be governed
by the laws of Montana, except to the extent preempted by the laws of the United
States of America.
8.6 UNFUNDED ARRANGEMENT. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have
signed this Agreement.
EXECUTIVE: COMPANY:
HERITAGE BANK FSB
/s/ Kevin P. Clark By: /s/ Steve Feurt
- ------------------------- --------------------
Kevin P. Clark Steve Feurt, Sr. Vice President
ACCRUAL & VESTING SCHEDULE
MANAGEMENT SUPPLEMENTAL RETIREMENT
SALARY CONTINUATION PLAN
PARTICIPANT: Kevin Clark
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BEGINNING AGE: 40
RETIREMENT AGE: 62
LENGTH OF BENEFIT: 15 Years
BENEFIT AMOUNT: $24,220
PRE-RETIREMENT INFLATOR: 5%
RETIREMENT BENEFIT AT AGE 62 $67,476
PRE-RETIREMENT BENEFIT ACCRUAL/ VESTING SCHEDULE
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
A B C D E F G
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END OF PLAN VESTING CURRENT YEAR IMMEDIATE LUMP IMMEDIATE LUMP SUM ANNUAL BENEFIT
YEAR PERCENTAGE ACCRUAL SUM BENEFIT ANNUAL BENEFIT BENEFIT AGE62 AGE 62
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
1 100 3,327 3,327 393 19,702 2,328
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2 100 3,805 7,132 843 38,805 4,586
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3 100 4,355 11,487 1,357 57,428 6,786
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4 100 4,990 16,477 1,947 75,685 8,944
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5 100 5,723 22,200 2,623 93,691 11,071
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6 100 6,571 28,771 3,400 111,561 13,183
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7 100 7,553 36,324 4,292 129,410 15,292
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8 100 8,695 45,019 5,320 147,361 17,413
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9 100 10,024 55,043 6,504 165,540 19,562
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10 100 11,577 66,619 7,872 184,085 21,753
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11 100 13,397 80,016 9,455 203,147 24,006
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12 100 15,540 95,556 11,292 222,897 26,340
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13 100 18,076 113,631 13,428 243,536 28,778
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
14 100 21,097 134,728 15,921 265,300 31,350
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15 100 24,724 159,452 18,842 288,485 34,090
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16 100 29,125 188,577 22,284 313,472 37,043
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17 100 34,543 223,120 26,366 340,772 40,269
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18 100 41,346 264,467 31,252 371,117 43,854
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19 100 50,150 314,616 37,178 405,636 47,933
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20 100 62,118 376,734 44,518 446,277 52,736
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
21 100 80,008 456,742 53,973 497,114 58,743
-------------- ----------------- ---------------- ----------------- ---------------- ----------------- ----------------
22 100 114,272 571,014 67,476 571,014 67,476
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