EXECUTIVE SUPPLEMENTAL
RETIREMENT AGREEMENT
BETWEEN
FIRST FEDERAL SAVINGS BANK OF MARION
AND
LARRY G. PHILLIPS
-1-
EXECUTIVE SUPPLEMENTAL
RETIREMENT INCOME AGREEMENT
This Executive Supplemental Retirement Income Agreement (the
"Agreement"), effective as of the 1st day of December 1996, formalizes the
understanding by and between FIRST FEDERAL SAVINGS BANK OF MARION (the "Bank"),
a federally chartered savings bank, and certain key employees, hereinafter
referred to as "Executive" or "Employee," who shall be approved, or who has
previously been approved, by the Bank to participate and who shall elect to
become a party to this Executive Supplemental Retirement Income Agreement.
W I T N E S S E T H:
WHEREAS, the Employee has been employed by the Bank and is currently
employed in an executive capacity;
WHEREAS, the Bank desires to retain the valuable services and business
counsel of the Employee and to induce the Employee to remain in an executive
capacity with the Bank;
WHEREAS, the Employee is considered a highly compensated Employee or
member of a select management group of the Bank;
NOW, THEREFORE, the Bank promises to pay the benefits provided herein,
subject to the terms and conditions of this Agreement, in consideration for the
Employee's promise to remain in the continuous employment of the Bank until
retirement. The parties hereto agree that the following shall constitute the
terms of this Agreement.
SECTION 1. Definitions
For the purposes of this Agreement, whenever the context so indicates,
the singular or plural number and the masculine, feminine, or neuter gender
shall be deemed to include the other. The definitions below shall apply only to
this Agreement and shall not be construed as applying to a qualified employee
benefit plan under Section 401(a) of the Internal Revenue Code of 1954, as
amended.
-1-
1.1 Beneficiary
Beneficiary shall mean the person or persons the Employee has
designated in writing to the Bank, if none, the Employee's Spouse,
Children, or Estate (in that order).
1.2 Deferred Compensation Benefit
Deferred Compensation Benefit shall mean the benefit provided to the
Employee at his Retirement Age, provided he has satisfied the
conditions and terms of this Agreement.
1.3 Discount Rate
The Discount Rate shall mean 7.89%.
1.4 Estate
Estate shall mean the estate of the Employee.
1.5 Retirement Age
Retirement Age shall mean age 65, or later if permitted by the Bank's
Board of Directors.
1.6 Spouse
Spouse shall mean the person to whom the Employee is legally married at
the time of the Employee's death.
SECTION 2. Establishment of Rabbi Trust
The Bank shall establish a rabbi trust into which the Bank shall
contribute assets which shall be held, managed and invested, pursuant to the
agreement which establishes such rabbi trust (the "rabbi trust agreement"). The
Bank intends to make a contribution or contributions to the rabbi trust to
provide the Bank with a source of funds to assist it in meeting obligations
under this Agreement. The trust assets shall be subject to the claims of the
Bank's creditors in the event of the Bank's "Insolvency" as defined in the rabbi
trust agreement, until the trust assets are paid to the Executive
-2-
and his Beneficiary in such manner and at such times as specified in this
Agreement. Contribution(s) to the rabbi trust shall be made in accordance with
the rabbi trust agreement.
SECTION 3. Conditions
(a) Normal Employment: The payment of benefits under this
Agreement to the Employee or Beneficiary are conditioned upon
the continuous employment (including periods of disability and
authorized leaves of absence as described by this Agreement)
of the Employee to the Bank from date of execution of this
Agreement until attaining Retirement Age.
(b) Noncompetition: Payment of benefits is further conditioned
upon the Employee not acting in any similar employment
capacity for any business enterprise which competes to a
substantial degree with the Bank, nor engaging in any activity
involving substantial competition with the Bank during
employment or after retirement, while receiving benefits under
this Agreement without the prior written consent of the Bank.
In the event of violation of these provisions, all future
payments shall be canceled and discontinued.
SECTION 4. Deferred Compensation
(a) Retirement Benefit: At Retirement Age, if the Employee is
still covered by this Agreement, the Bank shall commence
payments as provided in this section. The Bank shall pay to
the Employee a monthly benefit which shall commence the first
day of the month next following the Employee's Retirement Date
and shall be payable monthly thereafter until 180 payments
have been made. The amount of such benefit will be determined
as of the Employee's date of retirement as follows:
Once the Employee reaches Retirement Age and has maintained
continuous Years of Service with the Bank from the date of
execution of this Agreement to the Retirement Age (including
periods of disability and authorized leaves
-3-
of absence as described in this Agreement), he shall receive
compensation at the annualized rate of $106,782 per year. This
compensation is to be paid on a monthly basis as set forth
above.
(b) Early Retirement Benefit: Employee shall have the right to
receive early retirement benefits, provided he shall have
attained the age of fifty-five (55) and remained in continuous
service from the date of execution of this Agreement. Approval
of the Board of Directors of the Bank is required as a
condition for receiving a reduced early retirement benefit.
Upon Employee's election to receive such benefit and obtaining
the requisite Board approval, the Employee shall be entitled
to receive the Accrued Benefit. The Accrued Benefit shall
represent that portion of the Deferred Compensation Benefit
which is required to be expensed and accrued under generally
accepted accounting principles by any appropriate methodology
which the Board of Directors may require in the exercise of
its sole discretion. Such Accrued Benefit shall be paid to
Employee in one hundred eighty (180) equal monthly
installments. The interest factor used to annuitize the
Accrued Benefit shall be the Discount Rate as defined in
Section 1.3. Payment of this early retirement benefit shall
commence on the first day of the month next following the
Employee's early retirement date.
(c) Termination: In the event the Employee is involuntarily
terminated for any reason other than willful misconduct prior
to reaching Retirement Age, then the Employee will immediately
become eligible to receive benefits set forth hereunder upon
reaching age fifty-five (55), that being annualized
compensation of $106,782 a year for a period of 15 years.
Payments are to be made monthly for a total of 180 payments.
SECTION 5. Death Benefit
(a) In the event of the death of the Employee prior to retirement
and the conditions of Section 3 of this Agreement being
effective up to the time of death, the Beneficiary
-4-
shall receive 180 monthly payments which will represent an
annualized payment equal to $106,782 beginning no later that
the latest of: (i) January 1 of the year after the death of
the Employee, or (ii) The first day of the third month after
the death of the Employee.
(b) In the event of the death of the Employee after retirement,
the Beneficiary shall receive the balance of the payments to
which the Employee would have been entitled had he survived.
The payments shall be made in the same manner and form as
provided for in Section 4.
SECTION 6. Disability Benefit
In case of disability, the Employee shall be entitled to receive the
benefit specified in Subsection 4(a), reduced by three per cent (3%) per year
for each year that the disability precedes Retirement Age, 65 years of age. Such
benefit shall be further reduced by any disability benefit payments received by
Employee from any policy whose premiums were paid by the Bank. Such payments
shall cease on the earliest occurrence of:
(i) reaching Normal Retirement Age, or
(ii) return to active employment, or
(iii) a determination by a Physician of the Bank's choice
that the Employee is no longer Disabled as defined by
Section 11(b) of this Agreement.
SECTION 7. Named Fiduciary and Claims Procedure
(a) The Bank is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this
Agreement, and it shall be responsible for establishing and
carrying out a funding policy and method consistent with the
objectives of this Agreement.
-5-
(b) Any decision by the Bank denying a claim by the Employee or a
Beneficiary for benefits under this Agreement shall be in
writing and delivered or mailed to the Employee or
Beneficiary. Such statement shall set forth the specific
reasons for the denial. In addition the Bank shall afford a
reasonable opportunity to the Employee or Beneficiary for a
full and fair review of the decision denying such claim.
SECTION 8. Funding
This Bank's obligations under this Agreement shall be an unfunded and
unsecured promise to pay. The Bank shall not be obligated under any
circumstances to fund its obligations under this Agreement. The Bank may,
however, at its sole and exclusive option, elect to fund this Agreement in whole
or in part.
SECTION 9. Employee Right to Assets
The rights of the Employee or his Beneficiaries shall be solely those
of an unsecured general creditor of the Bank. The Employee or his Beneficiaries
shall only have the right to receive from the Bank those payments as specified
under this Agreement. The Employee agrees that neither he nor his Beneficiaries
shall have any rights or interests whatsoever in any assets of the Bank. Any
asset used or acquired by the Bank in connection with the liabilities the Bank
has assumed under this Agreement, except as expressly provided, shall not be
deemed to be held under any Trust for the benefit of the Employee or his
Beneficiaries, nor shall it be considered security for the performance of the
obligations of the Bank. It shall be, and remain, a general, unpledged, and
unrestricted asset of the Bank.
SECTION 10. Acceleration of Payment
The Bank may at its option, accelerate the payment of any benefits
payable under this Agreement with the consent of the Employee or his
Beneficiaries. In the event it is agreed to accelerate these payments, the
present value of all future payments shall be paid to the Employee or his
Beneficiaries. The Discount Rate set forth in Section 1.3 shall be used in
discounting any payments as determined by the Bank.
-6-
SECTION 11. Leaves of Absence and Disability
(a) The Bank may, in its sole discretion, permit the Employee to
take a leave of absence for a period not to exceed one year.
During such leave, the Employee shall be considered to be in
the continuous employment of the Bank for the purposes of this
Agreement.
(b) For the purposes of this Agreement, disabled shall mean a
physical or mental condition of the Employee resulting from
bodily injury, disease, or mental disorder which renders him
incapable of continuing his usual and customary employment
with the Bank. The status of disability of the Employee shall
be determined by an independent licensed physician chosen by
the Bank. During such disability, the Employee shall be
considered to be in the continuous employment of the Bank for
the purposes of the Deferred Compensation Benefit at Normal
Retirement and shall be entitled to Disability Benefits under
Section 6 of this Agreement.
SECTION 12. Assignability
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, or assignment, pledge, collateralization,
or attachment of any benefits under this Agreement shall be valid or
recognized by the Bank.
SECTION 13. Amendment
This Agreement shall be amended only by the mutual written Agreement of
both parties.
SECTION 14. Enforcement
This Agreement shall be governed by the laws of the State of Indiana.
This Agreement is solely between the Bank and the Employee. Furthermore, the
Employee or his Beneficiaries shall only have recourse against the Bank for
enforcement of the Agreement. However, it shall be binding upon the
Beneficiaries, heirs, executors, and administrators of the Employee, and upon
any and all successors and assigns of the Bank.
-7-
SECTION 15. Severability
In the event that any of the provisions of this Agreement or portion
thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.
SECTION 16. Payments to Beneficiaries
For the purposes of this Agreement, Beneficiaries shall mean the person
or persons designated by the Employee in writing on forms furnished by the Bank.
Such Employee may then from time to time change the designated Beneficiaries by
written notice to the Bank, and upon such change the rights of all previously
designated Beneficiaries to receive any benefits under this Agreement shall
cease. If, at the date of death of the Employee, no properly designated
Beneficiary exists, then for the purposes of this Agreement, the legally
recognized Spouse of the Employee living at his death, shall be the Beneficiary;
if none, then the Children, natural and adopted, then living of the Employee; if
none, then the Employee's Estate.
SECTION 17. Incompetency
If the Bank shall find that any person to whom any payment is payable
under this Agreement is unable to care for their affairs due to illness or
accident, or is a minor, any payment due (unless a prior claim therefore shall
have been made by a duly appointed guardian, committee, or other legal
representative) may be paid to the Spouse, a child, a parent, a brother or
sister, or a custodian determined pursuant to the Uniform Gift to Minors Act, or
to any person deemed by the Bank to have incurred expense for such person
otherwise entitled to payment, in such manner and proportions as the Bank may
determine. Any such payments made under this Section in good faith shall be a
complete discharge of the liabilities of the Bank under this Agreement.
SECTION 18. Right of Employment
Nothing contained in this Agreement shall be construed to be a contract
of employment for any term of years, nor as conferring upon the Employee the
right to continue in the employment of
-8-
the Bank in the employee's present capacity, or in any other capacity. It is
expressly understood by the parties hereto that this Agreement relates
exclusively to additional compensation for the Employee's services, which
compensation is payable after the end of active employment service and is not
intended to be an employment contract.
SECTION 19. Execution
IN WITNESS WHEREOF, the parties have, caused this Agreement to be
executed this 18th day of March, 1997.
/s/ Larry G. Phillips
Larry G. Phillips - Executive
FIRST FEDERAL SAVINGS BANK OF MARION
By /s/ John Dalton
Title
-9-