SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26556
OREGON TRAIL FINANCIAL CORP.
----------------------------
(Exact name of registrant as specified in its charter)
Oregon 91-1829481
------ ----------
(State or other jurisdiction of incorporation) (I.R.S. Employer or
organization)
Identification Number)
2055 First Street, Baker City, Oregon 97814
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 523-6327
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock.
Par value $.01 per share
------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
As of October 31, 1997, there were issued and outstanding 4,694,875
shares of the Registrant's Common Stock. The Registrant's voting common stock
is traded over-the-counter and is listed on the Nasdaq National Market under
the symbol "OTFC".
OREGON TRAIL FINANCIAL CORP.
TABLE OF CONTENTS
Part I. Financial Information
- ------- ---------------------
Item I. Financial Statements (Unaudited) Page
----
Consolidated Statements of Financial Condition 2
As of September 30, 1997 and March 31, 1997
Consolidated Statements of Income (For the three months 3
and six months ended September 30, 1997 and 1996)
Consolidated Statement of Shareholders' Equity
(For the nine months ended March 31, 1997 and for the six
months ended September 30, 1997) 4
Consolidated Statements of Cash Flows (For the six months
ended September 30, 1997 and 1996) 5-6
Notes to Consolidated Financial Statements 7-9
Item II Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
Part II. Other Information
- -------- -----------------
Item 1. Legal Proceedings 17
Item 2. Changes is Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
1
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1997 and MARCH 31, 1997
(UNAUDITED)
30-Sep-97 31-Mar-97
ASSETS --------- ---------
Cash and due from banks $1,595,328 $1,182,255
Interest-bearing deposits 70,240,660 3,793,206
--------- ---------
Total cash and cash equivalents 71,835,988 4,975,461
Securities available for sale, at fair value 101,627,052 35,651,533
(amortized cost: $100,675,831 and $35,850,256)
Securities held to maturity, at amortized cost 14,036,700 15,302,393
(fair value: $14,483,637 and $15,391,851)
Loans receivable, net of allowance for loan 143,992,161 138,880,914
losses of $779,839 and $725,089
Loans held for sale 0 428,200
Accrued interest receivable 1,820,802 1,324,637
Premises and equipment, net 5,089,768 4,640,848
Stock in Federal Home Loan Bank of Seattle, at cost 2,871,600 2,763,300
Other assets 713,759 245,380
--------- ---------
TOTAL ASSETS $341,987,830 $204,212,666
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Interest-bearing $72,608,040 $68,049,713
Noninterest-bearing 9,246,049 6,282,277
Time certificates 105,621,405 104,825,937
--------- ---------
Total deposits 187,475,494 179,157,927
Securities sold under agreements to repurchase 1,276,708 1,430,853
Stock Oversubscription 78,050,200 0
Accrued expenses and other liabilities 2,863,370 1,119,465
Advances from Federal Home Loan Bank of Seattle 5,100,000 800,000
Advances from borrowers for taxes and insurance 2,054,402 678,208
--------- ---------
Total Liabilities 276,820,174 183,186,453
SHAREHOLDERS' EQUITY:
Capital Stock 46,949 0
Paid-In Capital 45,761,801 0
Unearned ESOP Shares (3,755,900)
Retained earnings 22,525,252 21,148,510
Unrealized gain/(loss) on securities available
for sale, net of tax 589,554 (122,297)
--------- ---------
Total Shareholders' Equity 65,167,656 21,026,213
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $341,987,830 $204,212,666
=========== ===========
See notes to consolidated financial statements.
2
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
3 Mos Ended 3 Mos Ended 6 Mos Ended 6 Mos
Ended
30-Sep-97 30-Sep-96 30-Sep-97 30-Sep-96
INTEREST INCOME --------- --------- --------- ---------
Interest and fees on loans
receivable $3,170,010 $2,955,892 $6,227,090 $5,827,423
Securities:
Mortgage-backed and related
securities 663,897 710,814 1,306,656 1,456,256
U.S. government and government
agencies 458,387 316,903 804,439 654,943
Other interest and dividends 264,059 61,384 331,295 158,509
--------- --------- --------- ---------
Total interest income 4,556,353 4,044,992 8,669,480 8,097,130
INTEREST EXPENSE
Deposits 2,093,698 1,831,478 3,949,914 3,671,808
Securities sold under agree. to
repurchase 11,878 12,158 23,123 24,316
FHLB of Seattle advances 84,434 15,151 150,801 85,545
--------- --------- --------- ---------
Total interest expense 2,190,010 1,858,787 4,123,838 3,781,669
--------- --------- --------- ---------
Net interest income 2,366,343 2,186,205 4,545,642 4,315,461
PROVISION FOR LOAN LOSSES 43,001 26,044 73,869 35,652
--------- --------- --------- ---------
Net interest income after
provision for loan losses 2,323,342 2,160,161 4,471,773 4,279,809
NON-INTEREST INCOME
Service charges on deposit accounts 167,618 156,230 336,931 295,552
Loan servicing fees 88,021 67,805 139,830 116,241
Net gain(loss) on trading securities 0 18,374 0
(30,856)
Other Income(Expense) (4,353) 6,125 49,303
(16,202)
--------- --------- --------- ---------
Total non-interest income 251,286 248,533 526,064 364,734
NON-INTEREST EXPENSES
Employee compensation and benefits 788,276 724,093 1,592,144 1,402,891
Special SAIF assessment 0 1,146,387 0 1,146,387
Supplies, postage, and telephone 112,820 88,346 224,311 184,050
Depreciation 103,038 83,144 189,739 166,391
Occupancy and equipment 91,725 73,734 172,518 141,238
FDIC insurance premium 28,002 101,648 56,551 203,509
Customer accounts 67,876 62,334 136,207 159,867
Advertising 74,234 70,697 124,013 165,625
Professional fees 34,470 34,806 68,410 79,032
Other 101,619 92,292 197,414 207,360
--------- --------- --------- ---------
Total non-interest expenses 1,402,060 2,477,481 2,761,307 3,856,350
--------- --------- --------- ---------
Income(Loss) before income taxes 1,172,568 (68,787) 2,236,530 788,193
Income tax provision(benefit) 450,308 (25,487) 859,788 304,576
--------- --------- --------- ---------
NET INCOME(LOSS) $722,260 ($43,300) $1,376,742 $483,617
========= ========= ========= =========
Per share information not presented as the Company did not complete its stock
offering until October 3, 1997.
See also Note 2.
3
PAGE
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
Unrealized
Gain (loss)
Unearned on securities
Common Common ESOP shares available for Total
Stock Stock Addt'l paid Retained at sale, net
shareholders'
Shares Shares in Capital Earnings cost of tax Equity
------ ------ --------- ---------- -------- -------- ----------
Balance at June 30, 1996 (1) 0 0 0 20,050,916 0 (46,672) 20,004,244
Change in unrealized gain(loss)
on securities available 0 0 0 0 0 (75,625) (75,625)
for sale, net of tax
Net Earnings 0 0 0 1,097,594 0 0 1,097,594
Balance at March 31, 1997 0 0 0 21,148,510 0 (122,297) 21,026,213
Change in unrealized gain(loss)
on securities available 0 0 0 0 0 711,851 711,851
for sale, net of tax
Net earnings 0 0 0 1,376,742 0 0 1,376,742
Issuance of Common Stock
related to Conversion 4,694,875 46,949 45,761,801 0 (3,755,900) 0 42,052,850
See Note 2
------ ------ --------- ---------- -------- -------- ----------
Balance at September 30,
1997 4,694,875 46,949 45,761,801 22,525,252 (3,755,900) 589,554 65,167,655
========= ====== ========== ========== ========= ======= ==========
(1) At March 1997 the Company changed to a
March 31 fiscal year-end.
4
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
30-Sep-97 30-Sep-96
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,376,742 $483,617
--------- ---------
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation of properties and equipment 189,739 166,391
Amoritization/Accretion of Premium Discount on (17,229) 2,474
Amortization of deferred loan origination fees, net
of deferred loan origination fees (107,451) (102,325)
Provision for loan loss 73,869 35,652
Deferred taxes (438,093) 128,622
Amortization and accretion of discounts and pr (6,260) (4,915)
FHLB Dividends (108,300) (101,800)
Net loss on trading securities 0 30,856
Origination of real estate loans held for sale(1,399,113) (214,584)
Sale of real estate loans held for sale 1,827,313 214,584
Gain on sale of fixed assets (50,819) 0
Other 14,721 23,883
CHANGES IN ASSETS AND LIABILITIES
Trading account securities 0 125,295
Interest receivable (496,165) (62,341)
Prepaid and other assets (483,100) 66,378
Excess Stock Subscriptions 78,050,200 0
Other liabilities 1,743,905 932,921
--------- ---------
Total Adjustments 78,793,217 1,241,092
--------- ---------
Net cash provided by operating activities 80,169,959 1,724,709
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (72,293,205)(4,990,312)
Maturity of securities available for sale 6,000,000 6,985,270
Purchase of securities held to maturity (17,363) (2,625)
Principle reductions of securities held to mat 1,284,959 1,566,937
Principle reductions of securities available f 1,482,956 1,830,280
Purchase of loans (212,830) (272,040)
Loan Originations (23,404,274)(21,175,186
Principal Repayments on Loans 18,545,699 15,803,366
Sales of premises and equipment 249,102 0
Purchases of premises and equipment (836,942) (148,952)
--------- ---------
Net cash used by investing activities (69,201,898) (403,262)
--------- ---------
5
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
30-Sep-97 30-Sep-96
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits 8,317,567 (1,660,050)
Change in retail repurchase agreements (154,145) (39,324)
Change in advances from borrowers for taxes an 1,376,194 1,262,335
Change in borrowings from FHLB 4,300,000 (7,000,000)
Proceeds from issuance of Common Stock 42,052,850 0
--------- ---------
Net cash(used) provided by financing activities 55,892,466 (7,437,039)
--------- ---------
Net (decrease)increase in cash 66,860,527 (6,115,593)
Cash and cash equivalents at beginning of period 4,975,461 10,111,599
--------- ---------
Cash and cash equivalents at end of period $71,835,988 $3,996,006
========== ==========
Supplemental disclosures:
Cash paid during the year for :
Interest on deposits and other borrowings 4,041,089 3,890,788
Income taxes 895,000 350,677
Noncash activity:
Unrealized gain(loss) on securities available for (711,851) 206,715
6
OREGON TRAIL FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
statements contain all adjustments necessary for a fair presentation of Oregon
Trail Financial Corp. (the "Company") financial condition as of September 30,
1997 and March 31, 1997, the results of operations for the three months and six
months ended September 30, 1997 and 1996 and the cash flows for the six months
ended September 30, 1997 and 1996. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Prospectus dated August 12, 1997. The results of operations for the three
months and six months ended September 30, 1997 are not necessarily indicative
of the results which may be expected for the entire fiscal year.
2. REORGANIZATION
On October 3, 1997, the Bank completed a mutual-to-stock conversion. The
Company sold 4,694,875 shares of common stock at $10 per share, 8% of which or
375,590 shares were purchased by an Employee Stock Ownership Plan (the "ESOP").
Proceeds from the sale were recorded as $46,949 of Common Stock at $.01 par
value and $45,761,801 of Paid in Capital. The Common Stock and Paid in Capital
at September 30, 1997 are offset by the unissued ESOP shares amounting to
$3,755,900. The Company purchased all of the stock of the Bank for one-half of
the net investable proceeds of the offering. The retained earnings of the
Company represent all prior earnings of the Bank as a mutual savings bank. The
transaction which occurred for regulatory and statutory purposes on October 3,
1997 was recorded as if it occurred on September 30, 1997 for financial
statement presentation. Common stock issued in the mutual-to-stock conversion
were not outstanding during the periods presented in the financial statements,
and accordingly, earnings per share are not calculated.
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Earnings Per Share. SFAS No. 128 "Earnings Per Share" issued in February
1997, establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. It replaces the presentation of primary EPS with a presentation
of basic EPS and requires the dual presentation of basic and diluted EPS on the
face of the income statement. This statement is effective for financial
statements issued for periods after December 15, 1997 including interim
periods; earlier applications not permitted. This statement requires
7
restatement of all prior period EPS data presented.
Comprehensive Income. SFAS No. 130, "Reporting Comprehensive Income,"
issued in July 1997, establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements. SFAS No. 130
requires that companies (I) classify items of other comprehensive income by
their nature in a financial statement and (ii) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statement of financial condition.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comprehensive purposes are required.
4. ALLOWANCE FOR LOAN LOSSES
September 30, 1997 March 31, 1997
--------------------- ------------------
Balance, beginning of period $ 725,089 $ 540,986
Charge-offs (19,119) (31,960)
Additions 73,869 216,063
--------------------- ------------------
Balance, end of period $ 779,839 $ 725,089
===================== ==================
Amounts presented are for the nine months ended March 31, 1997 and for
the six months ended September 30, 1997. At March 31, 1997, the Company changed
to a March 31, fiscal year end. Additions to the allowance for loan losses were
increased during the six months ended September 30, 1997 in response to
increased agricultural and commercial lending.
5. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at September 30, 1997 consisted of two short term advances totaling
$5.1 million from the Federal Home Loan Bank of Seattle ("FHLB"). The advances
are collateralized in aggregate by certain mortgages or deeds of trust,
government agency securities and cash on deposit with the FHLB. Advances at
September 30, 1997 and March 31, 1997 were all due within one year.
September 30, 1997 March 31, 1997
---------------------------------------- ----------------------------------
Weighted Range of Weighted
Amount Range of Average Amount Interest Average
Interest Rates Interest Rates Interest
Rate Rate
------------ --------------- --------- ---------- ---------- ---------
$5,100,000 5.82% - 5.92% 5.92% $800,000 5.70% 5.70%
8
6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase totaled $1.3 million with an
interest rate of 3.50%. All agreements mature the following business day. The
Bank maintains control of the securities pledged as collateral.
7. REGULATORY CAPITAL
The following table illustrates the compliance by Pioneer Bank, A Federal
Savings Bank, (the "Bank") the Company's principal operating subsidiary with
currently applicable regulatory capital requirements at September 30, 1997:
Categorized as
"Well
Capitalized"
For Under Prompt
Capital Corrective
Action
Actual Adequacy Provision
--------------- --------------- ---------------
Amount Ratio Amount Ratio Amount Ratio
As of September 30,1997: -------- ----- -------- ----- -------- -----
Total Capital: $46,088,147 18.50% $19,920,687 8.0% $24,900,859 10.0%
(To Risk Weighted Assets)
Tier I Capital: 45,314,585 18.20% N/A N/A 14,940,515 6.0%
(To Risk Weighted Assets)
Tier I Capital: 45,314,585 12.28% 11,070,789 3.0% 18,451,316 5.0%
(To Total Assets)
Tangible Capital: 45,314,585 12.28% 5,535,395 1.5% N/A N/A
(To Total Assets)
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Safe Harbor Clause. This report contains certain "forward-looking statement's".
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
statement for the express purpose of availing itself of the protection of such
safe harbor with respect to all of such forward-looking statements. These
forward-looking statements, which are included in Management's Discussion and
Analysis, describe future plans or strategies and include the Company's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. The Company's ability to predict results or the
effect of future plans or strategies is inherently uncertain. Factors which
could affect actual results include interest rate trends, the general economic
climate in the Company's market area and the country as a whole, loan
delinquency rates, and changes in federal and state regulation. These factors
should be considered in evaluating the forward-looking statements, and undue
reliance should not be placed on such statements.
General
The Company, an Oregon corporation, became the unitary bank holding company for
the Bank upon the Bank's conversion from a federally chartered mutual to a
federally chartered stock savings Bank ("Conversion") on October 3, 1997.
Although the conversion was completed for statutory and regulatory purposes on
October 3, 1997, the financial statements presented herein include the results
of the transaction as if it had occurred on September 30, 1997. At September
30, 1997 the Company was still holding $78.0 million of over-subscription
proceeds which were refunded on October 6, 1997. At September 30, 1997,
including the over-subscription proceeds, the Company had total consolidated
assets of $342.0 million and total consolidated liabilities of $276.8 million.
Consolidated shareholders' equity amounted to $65.2 million and included all of
the retained earnings of the Bank purchased in the Conversion as well as
$46,949 of Common Stock and $45,761,801 of Paid in Capital. The Company is
currently not engaged in any business activity other than holding the issued
and outstanding capital stock of the Bank. Accordingly, the information set
forth in this report including financial statements and related data, relates
primarily to the Bank.
As a traditional, community-oriented savings bank, the Bank focuses on customer
service within its principal market area. The Bank's primary market activity is
attracting deposits from the general public and using those and other available
sources of funds to originate permanent residential one-to-four family real
estate loans within its market area and, to a lesser extent, loans on
commercial property and multi-family dwellings. At September 30, 1997,
one-to-four family residential mortgage loans totaled $101.7 million, or 70.6%
of total loans receivable. The Bank began supplementing its traditional lending
activities in 1996 with the development of commercial business loans,
agricultural loans and the purchase of dealer-originated automobile contracts.
The Bank has hired experienced commercial lending officers familiar with the
Bank's primary market area in an attempt to
10
develop commercial business and agricultural lending and to expand the purchase
of dealer-originated automobile contracts to include the purchase of
dealer-originated contracts secured by recreational vehicles, trailers,
motorcycles and other vehicles. As a result of these activities at September
30, 1997 the Bank had agricultural loans of $3.5 million, commercial business
loans of $4.7 million and automobile loans of $4.4 million (including $2.4
million of purchased dealer-originated contracts).
Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of income for the Company. Because the Company depends primarily on net
interest income for its earnings, the focus of the Company's management is to
create and implement strategies that will provide stable, positive spreads
between the yield on interest-earning assets and the cost of interest-bearing
liabilities. Such strategies include an increased focus on the origination of
adjustable rate mortgage loans. During the period April 1, 1997 through
September 30, 1997 the Bank originated $4.6 million in adjustable rate first
mortgage loans and $5.0 million in fixed rate first mortgage loans. Of the
fixed rate first mortgage loans originated $1.8 million were sold with
servicing released. None of the adjustable rate loans were sold. In addition to
the strategy of originating more adjustable rate mortgage loans, the Bank has
added commercial and agricultural loans with rates adjustable based upon the
Wall Street Journal prime rate and has increased origination of shorter term
consumer loans, increasing auto loans from $2.1 million at March 31, 1997 to
$4.4 million at September 30, 1997.
To a lesser degree, the net earnings of the Company rely on the level of its
non-interest income. The Company is aggressively pursuing strategies to improve
its service charge and fee income, and control its non-interest expense, which
includes employee compensation and benefits, occupancy and equipment expense,
deposit insurance premiums and miscellaneous other expenses, as well as federal
and state income tax expense. However, the Bank will recognize additional
material employee compensation and benefit expenses with the implementation of
the ESOP and other stock benefit programs in future periods. The actual
aggregate amount of this new expense cannot be currently predicted because
generally accepted accounting principals require that such expense be based on
the fair market value of the shares of Common Stock when the expenses are
recognized, which would occur when shares are committed to be released. The
first release of shares is planned for December 31, 1997. These expenses have
been reflected in the pro forma financial information presented in the
Company's prospectus dated August 12, 1997. The pro forma data assumed the
initial public offering purchase price of $10.00 per share as fair market
value. Actual expense, however, will be based on the fair market value of the
Common Stock at the time of recognition, which may be higher or lower than the
initial public offering purchase price.
The Bank is regulated by the Office of Thrift Supervision ("OTS") and its
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the Federal Home Loan Bank of Seattle, conducting its
business through seven office facilities, with the headquarters located in
Baker City, Oregon. The
11
primary market areas of the Bank are the counties of Wallowa, Union, Baker,
Malheur, Harney, Grant and Wheeler in Eastern Oregon.
Changes in Financial Condition
At September 30, 1997, the consolidated assets of the Company totaled to $342.0
million, an increase of $137.8 million, or 67.5%, from $204.2 million at March
31, 1997. The primary reason for the increase was the proceeds from the mutual-
to-stock conversion completed on October 3, 1997. Over-subscription amounted to
$78.0 million which was payable to subscribers at September 30, 1997 and was
invested in interest-bearing cash accounts and investment grade commercial
paper. The net proceeds from the purchase of the common stock, amounting to
$45.8 million were invested in investment grade commercial paper and government
agency securities. The investment of the proceeds increased interest-bearing
deposits by $66.4 million and increased the investment portfolio by $64.7
million. The Company's financial statements are presented as if the Conversion
occurred on September 30, 1997. Over-subscription amounts, together with
interest, were returned to subscribers as of October 6, 1997.
Net loans receivable increased by $5.1 million, or 3.7%, to $144.0 million at
September 30, 1997 compared to $138.9 million at March 31, 1997. The increase
was primarily the result of continued new loan demand exceeding loan repayments
and sales, augmented by increases in agricultural loans, auto loans and other
consumer loans. Such loans are inherently riskier than one to four family
mortgage loans.
Nonperforming assets, consisting of non-accruing loans and other repossessed
assets increased $54,000 from March 31, 1997 to September 30, 1997, to
$254,000. There was no real estate owned at either date. Nonperforming assets
were .07% of total assets at September 30, 1997, compared to .10% at March 31,
1997. The allowance for loan losses was 312% of nonperforming loans at
September 30, 1997, compared to 382% at March 31, 1997.
Investment securities increased $64.7 million, from $51.0 million at March 31,
1997 to $115.7 million at September 30, 1997. The increase included the
purchase of $41.8 million in investment rated commercial paper and $26.0
million in government agency securities offset by maturities or calls of $6.0
million of government agencies. The remaining increase was primarily due to the
purchase of $5.0 million in mortgage-backed securities, offset by principal
payments of $2.8 million on the mortgage-backed securities portfolio.
Savings deposits increased $8.3 million, or 4.6%, from $179.2 at March 31, 1997
to $187.5 million at September 30, 1997. The increase is primarily attributable
to funds on deposit for purchase of common stock in the Conversion, and
additionally to the growth of checking accounts (core deposits) due to
attracting new customers by securing total account relationships when marketing
loan products.
Advances from borrowers for taxes and insurance increased $1.4 million, or
206%, from $678,000 at March 31, 1997 to $1.4 million at September 30, 1997.
Taxes are paid annually in November and accordingly, the increase is attributed
to normally increasing
12
balances from December of one year to November of the following year.
Advances from the FHLB increased from $800,000 at March 31, 1997 to $5,100,000
at September 30, 1997. All advances were repaid on October 7, 1997 with net
proceeds from the Conversion. The increase was due to a fixed-term borrowing in
June of $5.0 million used to purchase government agency securities in
anticipation of funds to be received in September in the Conversion.
Total Shareholders' equity increased $44.1 million to $65.2 million at
September 30, 1997 from $21.0 million at March 31, 1997. $42.1 million of the
increase is attributable to the mutual-to-stock conversion, $1.4 million is due
to earnings for the six month period and the remainder is due to the tax
effected increase in market value of securities available for sale.
RESULTS OF OPERATIONS
Comparison of Six Months Ended September 30, 1997 and 1996
General. Net interest income increased $230,181, or 5.3%, comparing the six
month period ending September 30, 1997 to the same period ending September 30,
1996. Approximately $81,000 of net interest income is attributable to the
over-subscription proceeds of the Conversion, which were held in short-term
investments until the completion of the Conversion. Interest income increased
$572,000 while interest expense increased only $342,000 comparing the six month
period ended September 30, 1997 to the same period ended September 30, 1996.
Non-interest income increased $161,000, while the provision for loan losses
increased $38,000, non-interest expense decreased $1.1 million, and income
taxes increased $555,000 comparing the same two periods. This resulted in net
income increasing by $893,000, or 184.67%, from $484,000 for the six months
ended September 30, 1996 to $1.4 million for the six months ended September 30,
1997. The increase is primarily due to the inclusion of the special SAIF
assessment of $707,000 after tax in the six months ended September 30, 1996.
Interest Income. The increase of $572,000 in interest income was generated by
an additional $22.2 million in average interest earning assets for the six
months ended September 30, 1997 compared to the same period in 1996. The
investment of over-subscription proceeds in short-term investments earned
$160,000 of interest income on an average balance of $9.3 million for the six
month period. Subscription proceeds were substantially all received in
September 1997. The additional increase in average interest earning assets and
accompanying interest income was due to increases in the loan portfolio and the
investment portfolio.
The average yield on interest earning assets decreased from 8.17% for the six
months ending September 30, 1996 to 7.87% for the same period in the current
year. The decrease is primarily attributable to the average balance of $9.3
million in over-subscription proceeds which were invested in short-term lower
yielding investments.
13
Interest Expense. Interest expense on savings deposits increased only $342,000
for the six months ended September 30, 1997 as compared to the same period in
1996. Interest expense related to over-subscription proceeds amounted to
$79,000. Interest was paid on the proceeds at the passbook rate which was
2.75%. Although average deposits increased by $17.7 million comparing September
30, 1996 to 1997, the average interest paid on deposits declined ten basis
points from 4.17% for the six months ended September 30, 1996 to 4.07% for the
same period ended September 30, 1997.
Provision for Loan Losses. The provision for loan losses was $36,000 and net
charge-offs amounted to $22,000 during the six months ended September 30, 1996
compared to a provision for loan losses of $74,000 and net charge-offs of
$19,000 for the six month period ended September 30, 1997. The provision was
increased during the quarter ended September 30, 1997 primarily in response to
portfolio growth especially in commercial and agricultural loans and
additionally due to net charge-offs. At September 30, 1997, the allowance for
loan losses was equal to 311.97% of non-performing loans compared to 381.58% at
March 31, 1997. The decrease in the coverage ratio at September 30, 1997 was
the result of an increase in non-performing loans from $190,000 at March 31,
1997 to $250,000 at September 30, 1997.
Non-Interest Income. Non-interest income increased $161,000, or 44.1%, to
$526,000 for the six months ended September 30, 1997 from $364,734 for the six
months ended September 30, 1997. The increase was attributable to increased fee
income as well as a $51,000 gain on the sale of a branch building located in La
Grande, Oregon. The six months ended September 30, 1996 also included
unrealized losses of $31,000 on trading securities. All trading securities were
transferred to the available for sale category at March 31, 1997, since the
Company no longer wishes to engage in trading activities. Additional fee income
in the six months ended September 30, 1997 resulted from aggressive efforts to
improve fee income schedules related to checking accounts and ATM's.
Non-Interest Expense. Non-interest expense decreased $1.1 million, or 28.2%, to
$2.8 million for the six months ended September 30, 1997, from $3.9 million for
the comparable period in 1996. The decrease is primarily attributable to the
special SAIF assessment that was accrued in the prior year six month period to
recapitalize the deposit insurance fund. Without the special assessment,
non-interest expense would have increased by $51,000 or, 1.9% from the
comparable period in 1996. Employee compensation expense increases of $189,000
were substantially offset by a reduction of $150,000 in deposit insurance
premiums resulting from reduced assessment rates beginning January 1, 1997. The
ratio of non-interest expense to average total assets was 2.4% and 3.8% for the
six months ended September 30, 1997 and 1996, respectively.
Income Taxes. The provision for income taxes increased $893,000 for the six
months ended September 30, 1997 compared with the same period ended September
30, 1996, primarily due to increased net income before taxes.
14
Comparison of Three Months Ended September 30, 1997 and 1996
General. Net income increased $765,000, from a loss of $43,000 for the three
months ended September 30, 1997 to $722,000 for the three months ended
September 30, 1997. This increase was attributable to the special SAIF
assessment of $707,000 after tax that was accrued in September 1996. Without
the assessment the Company would have reported net income of $664,000 for the
three months ended September 30, 1996. The increase of $58,000 after the SAIF
assessment is primarily attributable to an increase in net interest income.
Interest Income. Additional interest income generated by the $36.7 million
increase in average interest earning assets contributed to an increase of
$180,000 in interest income for the three months ended September 30, 1997
compared to 1996. Of this increase $160,000 of interest income was attributable
to an average balance of $18.5 million in over-subscription proceeds from the
Conversion which were invested in short-term lower yielding investments. The
average yield on interest earning assets decreased from 8.22% for the three
months ended September 30, 1996 to 7.79% for the three months ended September
30, 1997. The decrease is primarily due to the over-subscription proceeds which
were invested in lower yielding short-term investments.
Interest Expense. Interest expense on savings deposits increased $262,000 for
the three months ended September 30, 1997 as compared to the same period of
1996. $79,000 of the increase related to over-subscription proceeds. Average
deposits increased by $31.9 million comparing September 30, 1996 to 1997, while
average interest paid on deposits decreased 14 basis points from 4.16% for the
three months ended September 30, 1996 to 4.02% for the same period ended
September 30, 1997.
Provision for Loan Losses. The provision for loan losses was $43,000 and net
charge-offs amounted to $16,000 during the three months ended September 30,
1997 compared to a $26,000 provision and $7,000 of net charge-offs during the
three months ended September 30, 1996. The provision was increased during the
quarter ended September 30, 1997 primarily in response to portfolio growth
especially in commercial and agricultural loans and additionally due to net
charge-offs.
Non-Interest Income. Non-interest income increased $3,000, or 1.2%, to $251,000
for the three months ended September 30, 1997 from $248,000 for the three
months ended September 30, 1996. The increase was primarily attributable to
$32,000 of increased fee income. The quarter ended September 30, 1996 included
unrealized gains on trading securities of $18,000. All trading securities were
transferred to the available for sale category at March 31, 1997, and
accordingly no gains were recognized in quarter ending September 30, 1997.
Additional fee income in the six months ended September 30, 1997 resulted from
aggressive efforts to improve fee income schedules related to checking accounts
and ATM's.
Non-Interest Expense. Non-interest expense decreased $1.1 million, or 44.0% to
$1.4 million for the three months ended September 30, 1997 from $2.5 million in
the comparable period in 1996. The decrease is primarily attributable to the
special SAIF assessment that was accrued in the prior three month period to
recapitalize the deposit
15
insurance fund. Without the special assessment, non-interest expense would have
increased $71,000, or 5.3%, from the comparable period in 1996. Increases of
$64,000 in compensation expenses, $24,000 in supplies, postage and telephone
expense, $20,000 in depreciation expense and $20,000 in occupancy expense were
offset by a $74,000 decrease in deposit insurance expense. The ratio of
non-interest expense to average total assets was 2.3% and 4.9% for the three
months ended September 30, 1997 and 1996, respectively.
Income Taxes. The provision for income taxes increased $476,000 for the three
months ended September 30, 1997 compared with the prior period as a result of a
higher level of net income before taxes.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and legal actions
arising in the normal course of business. Management believes that
these proceedings will not result in a material loss to the
Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
10 (a) Employment Agreement with Dan L. Webber
10 (b) Employment Agreement with Jerry F. Aldape
10 (c) Severance Agreement with Nadine J. Johnson
10 (d) Severance Agreement with Don S. Reay
10 (e) Severance Agreement with William H. Winegar
10 (f) Employee Severance Compensation Plan
10 (g) Employee Stock Ownership Plan
27 Financial Data Schedule
17
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OREGON TRAIL FINANCIAL CORP.
Date: November 14, 1997 By: /s/Dan L. Webber
----------------- ----------------
Dan L. Webber, President and
Chief Executive Officer
Date: November 14, 1997 By: /s/Jerry F. Aldape
----------------- ------------------
Jerry F. Aldape, Senior Vice
President and Chief Financial
Officer
18
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1997, by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. (the "COMPANY"),
an Oregon corporation; and DAN L. WEBBER ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve
as President and Chief Executive Officer of the BANK. During said period,
EXECUTIVE also agrees to serve, if elected, as an officer and director of the
COMPANY or any subsidiary or affiliate of the COMPANY or the BANK. Executive
shall render administrative and management duties to the BANK such as are
customarily performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of eighteen (18)
full calendar months thereafter. Commencing on the first anniversary date, and
continuing at each anniversary date thereafter, the Board of Directors of the
BANK (the "Board") may extend the Agreement for an additional year. Prior to
the extension of the Agreement as provided herein, the Board of Directors of
the BANK will conduct a formal performance evaluation of EXECUTIVE for purposes
of determining whether to extend the Agreement, and the results thereof shall
be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the
approval of the Board, as evidenced by a resolution of such Board, from time to
time, EXECUTIVE may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which,
in such Board's judgment, will not
present any conflict of interest with the BANK, or materially affect the
performance of EXECUTIVE's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $101,460 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the BANK will not,
without EXECUTIVE's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect EXECUTIVE's rights or
benefits thereunder. Without limiting the generality of the foregoing
provisions of this Subsection (b), EXECUTIVE will be entitled to participate in
or receive benefits under any employee benefit plans including, but not limited
to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plan, medical coverage or any other
employee benefit plan or arrangement made available by the BANK in the future
to its senior executives and key management employees, subject to, and on a
basis consistent with, the terms, conditions and overall administration of such
plans and arrangements. EXECUTIVE will be entitled to incentive compensation
and bonuses as provided in any plan, or pursuant to any arrangement of the
BANK, in which EXECUTIVE is eligible to participate. Nothing paid to EXECUTIVE
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which EXECUTIVE is entitled under this Agreement, except as
provided under Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time
2
employment hereunder for any reason other than a Change in Control, as defined
in Section 5(a) hereof; death; retirement, as defined in Section 6 hereof; or
Termination for Cause, as defined in Section 7 hereof; (ii) EXECUTIVE's
resignation from the BANK's employ, upon (A) unless consented to by EXECUTIVE,
a material change in EXECUTIVE's function, duties, or responsibilities, which
change would cause EXECUTIVE's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Sections 1 and 2, above (any such material change shall be deemed a continuing
breach of this Agreement), (B) a relocation of EXECUTIVE's principal place of
employment by more than 45 miles from its location at the effective date of
this Agreement, or a material reduction in the benefits and perquisites to
EXECUTIVE from those being provided as of the effective date of this Agreement,
(C) the liquidation or dissolution of the BANK, or (D) any breach of this
Agreement by the BANK. Upon the occurrence of any event described in clauses
(A), (B), (C) or (D), above, EXECUTIVE shall have the right to elect to
terminate his employment under this Agreement by resignation upon not less than
sixty (60) days prior written notice given within a reasonable period of time
not to exceed, except in case of a continuing breach, four (4) calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the payments due to EXECUTIVE for
the remaining term of the Agreement, including Base Salary, bonuses, and any
other cash or deferred compensation paid or to be paid (including the value of
employer contributions that would have been made on EXECUTIVE's behalf over the
remaining term of the agreement to any tax-qualified retirement plan sponsored
by the BANK as of the Date of Termination), to EXECUTIVE for the term of the
Agreement provided, however, that if the BANK is not in compliance with its
minimum capital requirements or if such payments would cause the BANK's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the BANK is in capital compliance. All payments
made pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror
3
other than the Corporation purchases shares of the stock of the Corporation or
the Bank pursuant to a tender or exchange offer for such shares, (b) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of the
Corporation or the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's or the Bank's then outstanding
securities, (c) the membership of the board of directors of the Corporation or
the Bank changes as the result of a contested election, such that individuals
who were directors at the beginning of any twenty-four (24) month period
(whether commencing before or after the date of adoption of this Agreement) do
not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Corporation or the Bank approve a merger, consolidation,
sale or disposition of all or substantially all of the Corporation's or the
Bank's assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control has occurred, EXECUTIVE shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this
Section 5 upon his subsequent involuntary termination following the effective
date of a Change in Control (or voluntary termination within twelve (12) months
of the effective date of a Change in Control following any demotion, loss of
title, office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the BANK's personnel generally), or
relocation of his principal place of employment by more than 35 miles from its
location immediately prior to the Change in Control), unless such termination
is because of his death, retirement as provided in Section 6, termination for
Cause.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, EXECUTIVE shall be
entitled to receive benefits due him under, or contributed by the COMPANY or
the BANK on his behalf, pursuant to any retirement, incentive, profit sharing,
bonus, performance, disability or other employee benefit plan maintained by the
BANK or the COMPANY on EXECUTIVE's behalf to the extent that such benefits are
not otherwise paid to EXECUTIVE upon a Change in Control.
4
(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under ss.280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall
be payable or provided to EXECUTIVE over the minimum period necessary to reduce
the present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under ss.280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section
5 shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
6. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to
him. Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled
to all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the
term of this Agreement, the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred. Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
7. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on EXECUTIVE's
part shall be "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 BANK or its affiliates. Notwithstanding the foregoing,
EXECUTIVE shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths (3/4) of the
members of the Board at a meeting of the Board called and held for that purpose
(after reasonable notice to EXECUTIVE and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, EXECUTIVE was guilty of conduct justifying termination for Cause
and specifying the reasons
5
thereof. EXECUTIVE shall not have the right to receive compensation or other
benefits for any period after termination for Cause. Any stock options granted
to EXECUTIVE under any stock option plan or any unvested awards granted under
any other stock benefit plan of the BANK, the COMPANY, or any subsidiary or
affiliate thereof, shall become null and void effective upon EXECUTIVE's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by EXECUTIVE at any time subsequent to such
Termination for Cause.
8. REQUIRED PROVISIONS.
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 7 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA
or (ii) by the Director, or his designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to operation
of the BANK or when the BANK is determined by the Director to be in an unsafe
or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
6
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
9. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision
so indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination . In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal there from having expired and no appeal
having been perfected) and provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
BANK will continue to pay EXECUTIVE his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
Base Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
10. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not
to compete with the BANK and/or the COMPANY for a period of one (1) year
following such termination in any
7
city, town or county in which the BANK and/or the COMPANY has an office or has
filed an application for regulatory approval to establish an office, determined
as of the effective date of such termination. EXECUTIVE agrees that during such
period and within said cities, towns and counties, EXECUTIVE shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the BANK and/or the COMPANY. The parties hereto,
recognizing that irreparable injury will result to the BANK and/or the COMPANY,
its business and property in the event of EXECUTIVE's breach of this Subsection
10(a) agree that in the event of any such breach by EXECUTIVE, the BANK and/or
the COMPANY will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by EXECUTIVE,
EXECUTIVE's partners, agents, servants, employers, employees and all persons
acting for or with EXECUTIVE. EXECUTIVE represents and admits that in the event
of the termination of his employment pursuant to Section 4 hereof, EXECUTIVE's
experience and capabilities are such that EXECUTIVE can obtain employment in a
business engaged in other lines and/or of a different nature than the BANK
and/or the COMPANY, and that the enforcement of a remedy by way of injunction
will not prevent EXECUTIVE from earning a livelihood. Nothing herein will be
construed as prohibiting the BANK and/or the COMPANY from pursuing any other
remedies available to the BANK and/or the COMPANY for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the BANK. EXECUTIVE will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the BANK or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of
the BANK. In the event of a breach or threatened breach by EXECUTIVE of the
provisions of this Section, the BANK will be entitled to an injunction
restraining EXECUTIVE from disclosing, in whole or in part, the knowledge of
the past, present, planned or considered business activities of the BANK or
affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the BANK from pursuing any other remedies available to the BANK for
such breach or threatened breach, including the recovery of damages from
EXECUTIVE.
11. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
8
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
9
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Oregon,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within one
hundred (100) miles from the location of the BANK, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that EXECUTIVE shall be entitled to seek specific performance of his right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if successful pursuant to a legal judgment,
arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under law against all expenses and liabilities reasonably incurred by
him in connection with or arising out of any action, suit or proceeding in
which he may be involved by reason of his having been a director or officer of
the BANK (whether or not he continues to be a directors or officer at the time
of incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such succession
or assignment had taken place.
10
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 29th day of
October, 1997.
ATTEST: PIONEER BANK, FSB
/s/Jerry F. Aldape BY:/s/John Gentry
- ------------------ --------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/Jerry F. Aldape BY:/s/John Gentry
- ------------------ --------------
[SEAL]
WITNESS:
/s/Chad Holt /s/Dan L. Webber
- ------------ ----------------
Dan L. Webber
11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1997, by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. (the "COMPANY"),
an Oregon corporation; and JERRY F. ALDAPE ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve
as a Senior Vice President of the BANK. During said period, EXECUTIVE also
agrees to serve, if elected, as an officer of the COMPANY or any subsidiary or
affiliate of the COMPANY or the BANK. Executive shall render administrative and
management duties to the BANK such as are customarily performed by persons
situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of eighteen (18)
full calendar months thereafter. Commencing on the first anniversary date, and
continuing at each anniversary date thereafter, the Board of Directors of the
BANK (the "Board") may extend the Agreement for an additional year. Prior to
the extension of the Agreement as provided herein, the Board of Directors of
the BANK will conduct a formal performance evaluation of EXECUTIVE for purposes
of determining whether to extend the Agreement, and the results thereof shall
be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the
approval of the Board, as evidenced by a resolution of such Board, from time to
time, EXECUTIVE may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which,
in such Board's judgment, will not
present any conflict of interest with the BANK, or materially affect the
performance of EXECUTIVE's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $70,176 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this
Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all
such other benefits as are provided uniformly to permanent full-time employees
of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the BANK will not,
without EXECUTIVE's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect EXECUTIVE's rights or
benefits thereunder. Without limiting the generality of the foregoing
provisions of this Subsection (b), EXECUTIVE will be entitled to participate in
or receive benefits under any employee benefit plans including, but not limited
to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plan, medical coverage or any other
employee benefit plan or arrangement made available by the BANK in the future
to its senior executives and key management employees, subject to, and on a
basis consistent with, the terms, conditions and overall administration of such
plans and arrangements. EXECUTIVE will be entitled to incentive compensation
and bonuses as provided in any plan, or pursuant to any arrangement of the
BANK, in which EXECUTIVE is eligible to participate. Nothing paid to EXECUTIVE
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which EXECUTIVE is entitled under this Agreement, except as
provided under Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time
2
employment hereunder for any reason other than a Change in Control, as defined
in Section 5(a) hereof; death; retirement, as defined in Section 6 hereof; or
Termination for Cause, as defined in Section 7 hereof; (ii) EXECUTIVE's
resignation from the BANK's employ, upon (A) unless consented to by EXECUTIVE,
a material change in EXECUTIVE's function, duties, or responsibilities, which
change would cause EXECUTIVE's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Sections 1 and 2, above (any such material change shall be deemed a continuing
breach of this Agreement), (B) a relocation of EXECUTIVE's principal place of
employment by more than 45 miles from its location at the effective date of
this Agreement, or a material reduction in the benefits and perquisites to
EXECUTIVE from those being provided as of the effective date of this Agreement,
(C) the liquidation or dissolution of the BANK, or (D) any breach of this
Agreement by the BANK. Upon the occurrence of any event described in clauses
(A), (B), (C) or (D), above, EXECUTIVE shall have the right to elect to
terminate his employment under this Agreement by resignation upon not less than
sixty (60) days prior written notice given within a reasonable period of time
not to exceed, except in case of a continuing breach, four (4) calendar months
after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the payments due to EXECUTIVE for
the remaining term of the Agreement, including Base Salary, bonuses, and any
other cash or deferred compensation paid or to be paid (including the value of
employer contributions that would have been made on EXECUTIVE's behalf over the
remaining term of the agreement to any tax-qualified retirement plan sponsored
by the BANK as of the Date of Termination), to EXECUTIVE for the term of the
Agreement provided, however, that if the BANK is not in compliance with its
minimum capital requirements or if such payments would cause the BANK's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the BANK is in capital compliance. All payments
made pursuant to this Section 4(b) shall be paid in substantially equal monthly
installments over the remaining term of this Agreement following EXECUTIVE's
termination; provided, however, that if the remaining term of the Agreement is
less than one (1) year (determined as of EXECUTIVE's Date of Termination), such
payments and benefits shall be paid to EXECUTIVE in a lump sum within thirty
(30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror
3
other than the Corporation purchases shares of the stock of the Corporation or
the Bank pursuant to a tender or exchange offer for such shares, (b) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of the
Corporation or the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's or the Bank's then outstanding
securities, (c) the membership of the board of directors of the Corporation or
the Bank changes as the result of a contested election, such that individuals
who were directors at the beginning of any twenty-four (24) month period
(whether commencing before or after the date of adoption of this Agreement) do
not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Corporation or the Bank approve a merger, consolidation,
sale or disposition of all or substantially all of the Corporation's or the
Bank's assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control has occurred, EXECUTIVE shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this
Section 5 upon his subsequent involuntary termination following the effective
date of a Change in Control (or voluntary termination within twelve (12) months
of the effective date of a Change in Control following any demotion, loss of
title, office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the BANK's personnel generally), or
relocation of his principal place of employment by more than 35 miles from its
location immediately prior to the Change in Control), unless such termination
is because of his death, retirement as provided in Section 6, termination for
Cause.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, EXECUTIVE shall be
entitled to receive benefits due him under, or contributed by the COMPANY or
the BANK on his behalf, pursuant to any retirement, incentive, profit sharing,
bonus, performance, disability or other employee
4
benefit plan maintained by the BANK or the COMPANY on EXECUTIVE's behalf to the
extent that such benefits are not otherwise paid to EXECUTIVE upon a Change in
Control.
(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under ss.280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall
be payable or provided to EXECUTIVE over the minimum period necessary to reduce
the present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under ss.280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section
5 shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
6. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to
him. Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled
to all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the
term of this Agreement, the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred. Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
7. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on EXECUTIVE's
part shall be "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 BANK or its affiliates. Notwithstanding the foregoing,
EXECUTIVE shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths (3/4) of the
members of the Board at a meeting of the Board called and held for that purpose
(after reasonable notice to EXECUTIVE and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, EXECUTIVE was guilty of conduct justifying termination for Cause
and specifying the reasons
5
thereof. EXECUTIVE shall not have the right to receive compensation or other
benefits for any period after termination for Cause. Any stock options granted
to EXECUTIVE under any stock option plan or any unvested awards granted under
any other stock benefit plan of the BANK, the COMPANY, or any subsidiary or
affiliate thereof, shall become null and void effective upon EXECUTIVE's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by EXECUTIVE at any time subsequent to such
Termination for Cause.
8. REQUIRED PROVISIONS.
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA
or (ii) by the Director, or his designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to operation
of the BANK or when the BANK is determined by the Director to be in an unsafe
or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
6
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
9. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision
so indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination . In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same as
the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal there from having expired and no appeal
having been perfected) and provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
BANK will continue to pay EXECUTIVE his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
Base Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
10. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not
to compete with the BANK and/or the COMPANY for a period of one (1) year
following such termination in any
7
city, town or county in which the BANK and/or the COMPANY has an office or has
filed an application for regulatory approval to establish an office, determined
as of the effective date of such termination. EXECUTIVE agrees that during such
period and within said cities, towns and counties, EXECUTIVE shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the BANK and/or the COMPANY. The parties hereto,
recognizing that irreparable injury will result to the BANK and/or the COMPANY,
its business and property in the event of EXECUTIVE's breach of this Subsection
10(a) agree that in the event of any such breach by EXECUTIVE, the BANK and/or
the COMPANY will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by EXECUTIVE,
EXECUTIVE's partners, agents, servants, employers, employees and all persons
acting for or with EXECUTIVE. EXECUTIVE represents and admits that in the event
of the termination of his employment pursuant to Section 4 hereof, EXECUTIVE's
experience and capabilities are such that EXECUTIVE can obtain employment in a
business engaged in other lines and/or of a different nature than the BANK
and/or the COMPANY, and that the enforcement of a remedy by way of injunction
will not prevent EXECUTIVE from earning a livelihood. Nothing herein will be
construed as prohibiting the BANK and/or the COMPANY from pursuing any other
remedies available to the BANK and/or the COMPANY for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the BANK. EXECUTIVE will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the BANK or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of
the BANK. In the event of a breach or threatened breach by EXECUTIVE of the
provisions of this Section, the BANK will be entitled to an injunction
restraining EXECUTIVE from disclosing, in whole or in part, the knowledge of
the past, present, planned or considered business activities of the BANK or
affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the BANK from pursuing any other remedies available to the BANK for
such breach or threatened breach, including the recovery of damages from
EXECUTIVE.
11. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
8
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
9
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Oregon,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within one
hundred (100) miles from the location of the BANK, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that EXECUTIVE shall be entitled to seek specific performance of his right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if successful pursuant to a legal judgment,
arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under law against all expenses and liabilities reasonably incurred by
him in connection with or arising out of any action, suit or proceeding in
which he may be involved by reason of his having been a director or officer of
the BANK (whether or not he continues to be a directors or officer at the time
of incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such succession
or assignment had taken place.
10
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 29th day of
October, 1997.
ATTEST: PIONEER BANK, FSB
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
WITNESS:
/s/Chad Holt /s/Jerry F. Aldape
- ------------- ------------------
Jerry F. Aldape
11
AGREEMENT
This AGREEMENT is made effective as of October 6, 1997 by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. ("COMPANY"); and
NADINE J. JOHNSON ("EXECUTIVE").
WHEREAS, the BANK recognizes the substantial contribution EXECUTIVE has
made to the BANK and wishes to protect her position therewith for the period
provided in this Agreement in the event of a Change in Control (as defined
herein); and
WHEREAS, EXECUTIVE serves in the position of Vice President and
Treasurer of the Bank, positions of substantial responsibility;
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms and conditions hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of eighteen (18) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional
year. The Board will conduct a performance evaluation of EXECUTIVE for purposes
of determining whether to extend the Agreement, and the results thereof shall
be included in the minutes of the Board's meeting.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a Change in Control (as herein defined)
followed within twelve (12) months of the effective date of the Change in
Control by the voluntary or involuntary termination of EXECUTIVE's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. For purposes of this Agreement, "voluntary termination"
shall be limited to the circumstances in which EXECUTIVE elects to voluntarily
terminate her employment within twelve (12) months of the effective date of a
Change in Control following any demotion, loss of title, office or significant
authority, reduction in her annual compensation or benefits (other than a
reduction affecting the Bank's personnel generally), or relocation of her
principal place of employment by more than 35 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares of
the stock of the Corporation or the Bank pursuant to a tender or exchange offer
for such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the
Corporation or the Bank changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of EXECUTIVE's intentional failure to
perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of
any law, rule, regulation (other than traffic violations or similar offenses)
or final cease and desist order, or any material breach of any material
provision of this Agreement. In determining incompetence, the acts or omissions
shall be measured against standards generally prevailing in the savings
institution industry. Notwithstanding the foregoing, EXECUTIVE shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to her a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Board at a meeting of the
Board called and held for that purpose (after reasonable notice to EXECUTIVE
and an opportunity for her, together with counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, EXECUTIVE was
guilty of conduct justifying Termination for Cause and specifying the
particulars thereof in detail. EXECUTIVE shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of her
subsequent death, her beneficiary or beneficiaries, or her estate, as the case
may be, as severance pay, a sum equal to one and one-half (1 1/2) times
EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the Internal
Revenue Code of 1986 ("Code"), as amended. Such payment shall be made in a lump
sum paid within ten (10) days of EXECUTIVE's date of termination.
(b) Upon the occurrence of a Change in Control of the BANK followed
within twelve (12) months of the effective date of a Change in Control by
EXECUTIVE's voluntary or involuntary termination of employment, other than
Termination for Cause, the BANK shall cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to her severance. Such coverage and
payments shall cease upon expiration of eighteen (18) months from the date of
EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section,
2
together with any other payments or benefits received or to be received by
EXECUTIVE in connection with a Change in Control, would be deemed to include an
"excess parachute payment" under ss.280G of the Code, then, at the election of
EXECUTIVE, (i) such payments or benefits shall be payable or provided to
EXECUTIVE over the minimum period necessary to reduce the present value of such
payments or benefits to an amount which is one dollar ($1.00) less than three
(3) times EXECUTIVE's "base amount" under ss.280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 3 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with the
allocation of the reduction among such payments and benefits to be determined
by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
4. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the BANK and EXECUTIVE,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to EXECUTIVE of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that EXECUTIVE is subject to
receiving fewer benefits than those available to her without reference to this
Agreement.
5. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall
3
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
7. REQUIRED PROVISIONS
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the BANK under the authority contained in Section 13(c) of the
FDIA and (ii) by the Director, or his or her designee at the time the Director
or such designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
8. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
4
9. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
10. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within
fifty (50) miles from the location of the BANK, in accordance with the rules of
the American Arbitration Association then in effect.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to
a legal judgment, arbitration or settlement.
13. SUCCESSOR TO THE BANK OR THE COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such succession
or assignment had taken place.
5
14. SIGNATURES
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 29th day of October, 1997.
ATTEST: PIONEER BANK, FSB
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ --------------------
[SEAL]
WITNESS:
/s/Chad Holt /s/Nadine J. Johnson
- ------------- ---------------------
Nadine J. Johnson
6
AGREEMENT
This AGREEMENT is made effective as of October 6, 1997 by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. ("COMPANY"); and
DON S. REAY ("EXECUTIVE").
WHEREAS, the BANK recognizes the substantial contribution EXECUTIVE has
made to the BANK and wishes to protect his position therewith for the period
provided in this Agreement in the event of a Change in Control (as defined
herein); and
WHEREAS, EXECUTIVE serves in the position of Vice President/Chief Lending
Officer of the Bank, a position of substantial responsibility;
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms
and conditions hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of eighteen (18) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional
year. The Board will conduct a performance evaluation of EXECUTIVE for purposes
of determining whether to extend the Agreement, and the results thereof shall
be included in the minutes of the Board's meeting.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a Change in Control (as herein defined)
followed within twelve (12) months of the effective date of the Change in
Control by the voluntary or involuntary termination of EXECUTIVE's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. For purposes of this Agreement, "voluntary termination"
shall be limited to the circumstances in which EXECUTIVE elects to voluntarily
terminate his employment within twelve (12) months of the effective date of a
Change in Control following any demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits (other than a
reduction affecting the Bank's personnel generally), or relocation of his
principal place of employment by more than 35 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares of
the stock of the Corporation or the Bank pursuant to a tender or exchange offer
for such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the
Corporation or the Bank changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of EXECUTIVE's intentional failure to
perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of
any law, rule, regulation (other than traffic violations or similar offenses)
or final cease and desist order, or any material breach of any material
provision of this Agreement. In determining incompetence, the acts or omissions
shall be measured against standards generally prevailing in the savings
institution industry. Notwithstanding the foregoing, EXECUTIVE shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Board at a meeting of the
Board called and held for that purpose (after reasonable notice to EXECUTIVE
and an opportunity for him, together with counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, EXECUTIVE was
guilty of conduct justifying Termination for Cause and specifying the
particulars thereof in detail. EXECUTIVE shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay, a sum equal to one and one-half (1 1/2) times
EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the Internal
Revenue Code of 1986 ("Code"), as amended. Such payment shall be made in a lump
sum paid within ten (10) days of EXECUTIVE's date of termination.
(b) Upon the occurrence of a Change in Control of the BANK followed
within twelve (12) months of the effective date of a Change in Control by
EXECUTIVE's voluntary or involuntary termination of employment, other than
Termination for Cause, the BANK shall cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage and
payments shall cease upon expiration of eighteen (18) months from the date of
EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section,
2
together with any other payments or benefits received or to be received by
EXECUTIVE in connection with a Change in Control, would be deemed to include an
"excess parachute payment" under ss.280G of the Code, then, at the election of
EXECUTIVE, (i) such payments or benefits shall be payable or provided to
EXECUTIVE over the minimum period necessary to reduce the present value of such
payments or benefits to an amount which is one dollar ($1.00) less than three
(3) times EXECUTIVE's "base amount" under ss.280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 3 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with the
allocation of the reduction among such payments and benefits to be determined
by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
4. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the BANK and EXECUTIVE,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to EXECUTIVE of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that EXECUTIVE is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
5. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall
3
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
7. REQUIRED PROVISIONS
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for
any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the BANK under the authority contained in Section 13(c) of the
FDIA and (ii) by the Director, or his or her designee at the time the Director
or such designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
8. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
4
9. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
10. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within
fifty (50) miles from the location of the BANK, in accordance with the rules of
the American Arbitration Association then in effect.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to
a legal judgment, arbitration or settlement.
13. SUCCESSOR TO THE BANK OR THE COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such succession
or assignment had taken place.
5
14. SIGNATURES
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 29th day of
October, 1997.
ATTEST: PIONEER BANK, FSB
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
WITNESS:
/s/Chad Holt /s/Don S. Reay
- ------------------ -------------------
Don S. Reay
6
AGREEMENT
This AGREEMENT is made effective as of October 6, 1997 by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. ("COMPANY"); and
WILLIAM H. WINEGAR ("EXECUTIVE").
WHEREAS, the BANK recognizes the substantial contribution EXECUTIVE has
made to the BANK and wishes to protect his position therewith for the period
provided in this Agreement in the event of a Change in Control (as defined
herein); and
WHEREAS, EXECUTIVE serves in the position of Vice President/Systems
Engineer of the Bank, a position of substantial responsibility;
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms and conditions hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of eighteen (18) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional
year. The Board will conduct a performance evaluation of EXECUTIVE for purposes
of determining whether to extend the Agreement, and the results thereof shall
be included in the minutes of the Board's meeting.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a Change in Control (as herein defined)
followed within twelve (12) months of the effective date of the Change in
Control by the voluntary or involuntary termination of EXECUTIVE's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. For purposes of this Agreement, "voluntary termination"
shall be limited to the circumstances in which EXECUTIVE elects to voluntarily
terminate his employment within twelve (12) months of the effective date of a
Change in Control following any demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits (other than a
reduction affecting the Bank's personnel generally), or relocation of his
principal place of employment by more than 35 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares of
the stock of the Corporation or the Bank pursuant to a tender or exchange offer
for such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the
Corporation or the Bank changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of EXECUTIVE's intentional failure to
perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of
any law, rule, regulation (other than traffic violations or similar offenses)
or final cease and desist order, or any material breach of any material
provision of this Agreement. In determining incompetence, the acts or omissions
shall be measured against standards generally prevailing in the savings
institution industry. Notwithstanding the foregoing, EXECUTIVE shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Board at a meeting of the
Board called and held for that purpose (after reasonable notice to EXECUTIVE
and an opportunity for him, together with counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, EXECUTIVE was
guilty of conduct justifying Termination for Cause and specifying the
particulars thereof in detail. EXECUTIVE shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay, a sum equal to one and one-half (1 1/2) times
EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the Internal
Revenue Code of 1986 ("Code"), as amended. Such payment shall be made in a lump
sum paid within ten (10) days of EXECUTIVE's date of termination.
(b) Upon the occurrence of a Change in Control of the BANK followed
within twelve (12) months of the effective date of a Change in Control by
EXECUTIVE's voluntary or involuntary termination of employment, other than
Termination for Cause, the BANK shall cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage and
payments shall cease upon expiration of eighteen (18) months from the date of
EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section,
2
together with any other payments or benefits received or to be received by
EXECUTIVE in connection with a Change in Control, would be deemed to include an
"excess parachute payment" under ss.280G of the Code, then, at the election of
EXECUTIVE, (i) such payments or benefits shall be payable or provided to
EXECUTIVE over the minimum period necessary to reduce the present value of such
payments or benefits to an amount which is one dollar ($1.00) less than three
(3) times EXECUTIVE's "base amount" under ss.280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 3 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with the
allocation of the reduction among such payments and benefits to be determined
by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
4. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the BANK and EXECUTIVE,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to EXECUTIVE of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that EXECUTIVE is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
5. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall
3
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
7. REQUIRED PROVISIONS
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the BANK under the authority contained in Section 13(c) of the
FDIA and (ii) by the Director, or his or her designee at the time the Director
or such designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
8. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
4
9. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
10. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within
fifty (50) miles from the location of the BANK, in accordance with the rules of
the American Arbitration Association then in effect.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to
a legal judgment, arbitration or settlement.
13. SUCCESSOR TO THE BANK OR THE COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such succession
or assignment had taken place.
5
14. SIGNATURES
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 29th day of
October, 1997.
ATTEST: PIONEER BANK, FSB
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/Jerry F. Aldape BY:/s/Dan L. Webber
- ------------------ -------------------
[SEAL]
WITNESS:
/s/Chad Holt /s/William H. Winegar
- ------------------ -------------------
William H. Winegar
6
PIONEER BANK, FSB
EMPLOYEE SEVERANCE COMPENSATION PLAN
PLAN PURPOSE
The purpose of this Pioneer Bank, FSB Employee Severance Compensation
Plan is to assure the services of employees of the Bank in the event of a
Change in Control. The benefits contemplated by the Plan recognize the value to
the Bank of the services and contributions of the employees of the Bank and the
effect upon the Bank resulting from the uncertainties of continued employment,
reduced employee benefits, management changes and relocations that may arise in
the event of a Change in Control. The Board believes that the Plan will also
aid the Bank in attracting and retaining the highly qualified individuals who
are essential to its success and that the Plan's assurance of fair treatment of
the Bank's employees will reduce the distractions and other adverse effects on
employees' performance in the event of a Change in Control.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1 Establishment of Plan
As of the Effective Date of the Plan as defined herein, the Bank hereby
establishes an employee severance compensation plan to be known as the Pioneer
Bank, FSB Employee Severance Compensation Plan." The purposes of the Plan are
as set forth above.
1.2 Application of Plan
The benefits provided by this Plan shall be available to all employees of
the Bank, who, at or after the Effective Date, meet the eligibility
requirements of Article III, except for those officers of the Bank who have
entered into, or who enter into in the future, and continue to be subject to,
an employment or change in control agreement with the Employer.
1.3 Contractual Right to Benefits
This plan establishes and vests in each Participant a contractual right
to the benefits to which each Participant is entitled hereunder in the event of
a Change in Control, enforceable by the Participant against the Employer, the
Bank, or both. The Plan does not provide, and should not be construed as
providing, benefits of any kind to any employee except in the event of a Change
in Control and, in the event of a Change in Control, only upon the involuntary
or voluntary termination of an employee in the manner contemplated herein.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below.
"Annual Compensation" of a Participant means and includes all wages,
salary, bonus, and cash compensation, if any, paid (including accrued amounts)
by an Employer as consideration for the Participant's service during the
12-month period ending on the last day of the month preceding the date of a
Participant's termination pursuant to Section 4.2. For purposes of this Plan, a
Participant's "Monthly Compensation" shall equal one-twelfth of a Participant's
Annual Compensation as determined in accordance with this paragraph.
"Bank" means Pioneer Bank, FSB or any successor as provided for in
Article VII hereof.
"Board" means the Board of Directors of the Bank.
"Change in Control" shall mean an event deemed to occur if and when (a)
an offeror other than the Corporation purchases shares of the stock of the
Corporation or the Bank pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation or the Bank representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's or the Bank's
then outstanding securities, (c) the membership of the board of directors of
the Corporation or the Bank changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption of this
Plan) do not constitute a majority of the Board at the end of such period, or
(d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation. If any of the events enumerated in clauses (a) - (d) occur, the
Board shall determine the effective date of the change in control resulting
therefrom, for purposes of the Plan.
"Company" means Oregon Trail Financial Corp., an Oregon corporation, the
holding company of the Bank.
"Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board must advise the Board that it is either not possible to determine if or
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said employees lifetime.
"Effective Date" means the date the Plan is approved by the Board of the
Bank, or such other date as the Board shall designate in its resolution
approving the Plan.
"Employer" means (i) the Bank or (ii) a subsidiary of the Bank or a
parent company of the Bank which has adopted the plan pursuant to Article VI
hereof.
"Expiration Date" means a date ten (10) years from the Effective Date
unless earlier terminated pursuant to Section 8.2 or extended pursuant to
Section 8.1.
"Just Cause" shall means termination because of Participant's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or other similar offenses) or any final cease-and desist order.
"Payment" means the payment of severance compensation as provided in
Article IV hereof.
"Participant" means an employee of an Employer who meets the
eligibility requirements of Article III.
"Plan" means this Pioneer Bank, FSB Employee Severance Compensation
Plan.
2.2 Applicable Law
The laws of the State of Oregon shall be controlling law in all matters
relating to the Plan to the extent not preempted by Federal law.
2.3 Severability
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
ARTICLE III
ELIGIBILITY
3.1 Participation
The term "Participant" shall include all employees of an Employer who
have completed at least two (2) years of service with the Employer at the time
of any termination pursuant to Section 4.2 herein. For purposes of this Plan,
"years of service" shall include all years of employment with Bank in which an
employee was credited with at least 500 actual hours of service and "years of
service" shall be determined without regard to any break in service. In
addition, the term "Participant" shall, without regard to years of service,
include each employee who is a vice president or assistant vice president of
the Bank. Notwithstanding the foregoing, an employee who has entered into and
continues to be covered by an individual employment contract or change in
control agreement with an Employer shall not be entitled to participate in this
Plan.
3.2 Duration of Participation
A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an employee of an Employer, unless such Participant is
entitled to a Payment as provided in the Plan. A Participant entitled to
receipt of a Payment shall remain a Participant in this Plan until the full
amount of such Payment has been paid to the Participant.
ARTICLE IV
PAYMENTS
4.1 Right to Payment
A Participant shall be entitled to receive from his or her Employer a
Payment in the amount provided in Section 4.3 if a Change in Control occurs and
if, within one (1) year thereafter, the Participant's employment by an Employer
shall terminate for any reason specified in Section 4.2. A Participant shall
not be entitled to a Payment if termination occurs by reason of death,
voluntary retirement, voluntary termination other than for the reasons
specified in Section 4.2, Disability or for Just Cause.
4.2 Reasons for Termination
Following a Change in Control, a Participant shall be entitled to a
Payment in accordance with Section 4.3 if employment by an Employer is
terminated, voluntary or involuntary, for any one or more of the following
reasons:
(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control, or as the
same may have been increased thereafter.
(b) The Employer materially changes Participant's function, duties
or responsibilities which would cause the Participant's position to be one of
lesser responsibility, importance or scope with the Employer than immediately
prior to the Change in Control.
(c) The Employer requires the Participant to change the location of
the Participant's job or office, so that such Participant will be based at a
location more than thirty-five (35) miles from the location of the
Participant's job or office immediately prior to the Change in Control provided
that such new location is not closer to Participant's home.
(d) The Employer materially reduces the benefits and perquisites
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction in benefits and perquisites
generally provided to all employees of the Bank on a nondiscriminatory basis
shall not trigger a Payment pursuant to this Plan.
(e) A successor to the Employer fails or refuses to assume the
Employer's obligations under this Plan, as required by Article VII.
(f) The Employer, or any successor to the Employer, breaches any
other provisions of this Plan.
(g) The Employer terminates the employment of a Participant at or
after a Change in Control other than for Just Cause.
4.3 Amount of Payment
(a) Each Participant who was a vice president of the Bank
immediately prior to the effective date of the Change in Control and entitled
to a Payment under this Plan shall receive from the Bank a lump sum cash
payment equal to the Participant's Annual Compensation.
(b) Each Participant who was an assistant vice president of the
Bank or a manager immediately prior to the effective date of the Change in
Control and entitled to a Payment under this Plan shall receive from the Bank a
lump sum cash payment equal to seventy-five (75) percent of the Participant's
Annual Compensation.
(c) Each Participant (other than a Participant entitled to a
benefit under Sections 4.3(a) and (b) of the Plan) entitled to a Payment under
this Plan shall receive from the Employer a lump sum cash payment equal to the
product of fifty percent (50%) of the Participant's Monthly Compensation and
the Participant's years of service (including partial years rounded up to the
nearest full month) from the Participant's date of hire through the date of
termination. Notwithstanding anything herein to the contrary, (i) the maximum
payment under this Section 4.3(c) to a Participant shall not exceed fifty
percent (50%) of the Participant's Annual Compensation and the (ii) minimum
payment under this Section 4.3(c) shall be the Participant's Monthly
Compensation (determined without regard to the Participant's period of
service).
(d) The Participant shall not be required to mitigate damages on
the amount of the Payment by seeking other employment or otherwise, nor shall
the amount of such Payment be reduced by any compensation earned by the
Participant as a result of employment after termination of employment
hereunder.
4.4 Time of Payment
The Payment to which a Participant is entitled shall be paid to the
Participant by the Employer or the successor to the Employer, in cash and in
full, not later than thirty (30) business days after the termination of the
Participant's employment. If any Participant should die after termination of
the employment but before all amounts have been paid, such unpaid amounts shall
be paid to the Participant's named beneficiary, if living, otherwise to the
personal representative of behalf of or for the benefit of the Participant's
estate.
4.5 Suspension of Payment
Notwithstanding the foregoing, no payments or portions thereof shall be
made under this Plan, if such payment or portion would result in the Bank
failing to meet its minimum regulatory capital requirements as required by 12
C.F.R. ss.567.2. Any payments or portions thereof not paid shall be suspended
until such time as their payment would not result in a failure to meet the
Bank's minimum regulatory capital requirements. Any portion of benefit payments
which have not been suspended will be paid on an equitable basis, pro rata
based upon amounts due each Participant, among all eligible Participants.
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Other Benefits
Neither the provisions of this Plan nor the Payment provided for
hereunder shall reduce any amounts otherwise payable, or in any way diminish
the Participant's rights as an employee of an Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership or any employment agreement or other plan or arrangement.
5.2 Employment Status
This Plan does not constitute a contract of employment or impose on the
Participant's Employer any obligation to retain the Participant, to maintain
the status of the Participant's employment, or to change the Employer's
policies regarding termination of employment.
ARTICLE VI
PARTICIPATING EMPLOYERS
6.1 Upon approval by the Board of the Bank, this Plan may be adopted by
any subsidiary of the Bank or by the Company. Upon such adoption, the
subsidiary or the Company shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the employees of that subsidiary or
the Company. The term "subsidiary" means any corporation in which the Bank,
directly or indirectly, holds a majority of the voting power of its outstanding
shares of capital stock.
ARTICLE VII
SUCCESSOR TO THE BANK
7.1 The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under
this plan, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
8.1 Duration
If a Change in Control has not occurred, this Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2, or unless
extended for an additional period or periods by resolution adopted by the Board
of the Bank.
Notwithstanding the foregoing, if a Change in Control occurs this Plan
shall continue in full force and effect, and shall not terminate or expire
until such date as all Participants who become entitled to Payments hereunder
shall have received such Payments in full.
8.2 Amendment and Termination
The Plan may be terminated or amended in any respect by resolution
adopted by a majority of the Board of the Bank, unless a Change in Control has
previously occurred. If a Change in Control occurs, the Plan no longer shall be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect whatsoever.
8.3 Form of Amendment
The form of any proper amendment or termination of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the Bank,
certifying that the amendment or termination has been approved by the Board. A
proper termination of the Plan automatically shall effect a termination of all
Participants' rights and benefits hereunder.
8.4 No Attachment
(a) Except as required by law, no right to receive payments under this
Plan shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect such action shall be null, void,
and of no effect.
(b) This Plan shall be binding upon, and inure to the benefit of, each
employee, the Employer and their respective successors and assigns.
ARTICLE IX
LEGAL FEES AND EXPENSES
9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto pursuant to any dispute or question of interpretation relating to
this Plan shall be paid or reimbursed by the prevailing party in any legal
judgment, arbitration or settlement.
ARTICLE X
REQUIRED PROVISIONS
10.1 The Bank may terminate the employee's employment at any time, but
any termination by the Bank, other than Termination for Cause, shall not
prejudice employee's right to compensation or other benefits under this
Agreement if the employee is otherwise entitled to a benefit. employee shall
not have the right to receive compensation or other benefits for any period
after termination for Just Cause as defined in Section 2.1 hereinabove.
10.2 If the employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1818(e)(3) or (g)(1), the Bank's obligations under this Plan to such
employee shall be suspended as of the date of service, unless stated by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the employee all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligation which were suspended.
10.3 If the employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1818(e)(4) or (g)(1), all obligations of the Bank under this Plan to the
employee shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
10.4 If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. ss.1818(x)(1), all obligations of the
Bank under this Plan shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
10.5 All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Director of the OTS
(or his designee) or (ii) the Federal Deposit Insurance Corporation ("FDIC") at
the time FDIC enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the Federal Deposits
Insurance Act, 12 U.S.C. ss.1823(c); or (ii) by the Director of the OTS (or his
designee) at the time the Director (or his designee) approves a supervisory
merger to resolve problems related to the operations of the Bank or when the
Bank is determined by the Director to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by such action.
10.6 Any payments made to an employee pursuant to this Plan or otherwise
shall be conditioned upon compliance under 12 U.S.C. ss.1828(k) and any
regulations promulgated thereunder.
ARTICLE XI
ADMINISTRATION OF THE PLAN
11.1 The Plan shall be administered by the Board (or, by a committee of
non-employee directors designated by the Board). Subject to the other
provisions of the Plan, the Board shall have authority to adopt, amend, alter
and repeal such administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time consider advisable, to
interpret the provisions of the Plan and to decide all disputes arising in
connection with the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem appropriate to carry the Plan into effect, in its sole and
absolute discretion. The Board's decision and interpretations shall be final
and binding. Any action of the Board with respect to the administration of the
Plan shall be taken pursuant to a majority vote or by the unanimous written
consent of its members.
Having been adopted by its Board on September 23, 1997, this Plan is
executed by duly authorized officer of the Bank this 6th day of October, 1997.
Attest
/s/Jerry F. Aldape /s/Dan L. Webber
- ------------------ ----------------
Secretary Dan L. Webber
President and Chief Executive Officer
PIONEER BANK, FSB
EMPLOYEE STOCK OWNERSHIP PLAN
EFFECTIVE AS OF JANUARY 1, 1997
PIONEER BANK, FSB
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Page
PREAMBLE........................................................... 1
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.................................................. 2
1.2 Plurals and Gender........................................... 7
1.3 Incorporation of Trust Agreement............................. 7
1.4 Headings..................................................... 7
1.5 Severability................................................. 8
1.6 References to Governmental Regulations....................... 8
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation................................ 9
2.2 Termination of Participation................................. 9
2.3 Resumption of Participation.................................. 9
2.4 Determination of Eligibility................................. 10
ARTICLE III
CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes..................... 11
3.2 Service Counted for Vesting Purposes......................... 11
3.3 Credit for Pre-Break Service................................. 11
3.4 Service Credit During Authorized Leaves...................... 11
3.5 Service Credit During Maternity or Paternity Leave........... 12
3.6 Ineligible Employees......................................... 12
ARTICLE IV
CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions....................... 13
4.2 Time and Manner of Employee Stock Ownership Contributions.... 13
4.3 Records of Contributions..................................... 14
4.4 Erroneous Contributions...................................... 14
ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant Accounts............... 15
5.2 Establishment of Suspense Account............................ 15
5.3 Allocation of Earnings, Losses and Expenses.................. 16
5.4 Allocation of Forfeitures.................................... 16
5.5 Allocation of Annual Employee Stock Ownership Contributions.. 16
5.6 Limitation on Annual Additions............................... 17
5.7 Erroneous Allocations........................................ 20
5.8 Value of Participant's Interest in Fund...................... 21
5.9 Investment of Account Balances............................... 21
ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
6.1 Normal Retirement............................................ 22
6.2 Early Retirement............................................. 22
6.3 Disability Retirement........................................ 22
6.4 Death Benefits............................................... 22
6.5 Designation of Death Beneficiary and Manner of Payment....... 23
ARTICLE VII
VESTING AND FORFEITURES
7.1 Vesting on Death, Disability, Retirement, Change in Control.. 24
7.2 Vesting on Termination of Participation...................... 24
7.3 Disposition of Forfeitures................................... 25
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP RULES
8.1 Right to Demand Employer Securities.......................... 26
8.2 Voting Rights................................................ 26
8.3 Nondiscrimination in Employee Stock Ownership Contributions.. 26
8.4 Dividends.................................................... 27
8.5 Exempt Loans................................................. 27
8.6 Exempt Loan Payments......................................... 28
8.7 Put Option................................................... 29
8.8 Diversification Requirements................................. 30
8.9 Independent Appraiser........................................ 30
8.10 Limitation on Allocation..................................... 30
ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service -- In General............. 32
9.2 Commencement of Payments..................................... 32
9.3 Mandatory Commencement of Benefits........................... 33
9.4 Required Beginning Date...................................... 35
9.5 Form of Payment.............................................. 35
9.6 Payments Upon Termination of Plan............................ 35
9.7 Distribution Pursuant to Qualified Domestic Relations Orders. 36
9.8 Cash-Out Distributions....................................... 36
9.9 ESOP Distribution Rule....................................... 37
9.10 Withholding.................................................. 37
9.11 Waiver of 30-day Notice...................................... 38
ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control................................... 39
10.2 Top-Heavy Plan Definitions................................... 39
10.3 Calculation of Accrued Benefits.............................. 41
10.4 Determination of Top-Heavy Status............................ 42
10.5 Determination of Super Top-Heavy Status...................... 43
10.6 Minimum Contribution......................................... 43
10.7 Maximum Benefit Limitation................................... 44
10.8 Vesting...................................................... 44
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Administrator................................. 45
11.2 Resignation or Removal of Administrator...................... 45
11.3 Appointment of Successors: Terms of Office, Etc.............. 45
11.4 Powers and Duties of Administrator........................... 45
11.5 Action by Administrator...................................... 46
11.6 Participation by Administrators.............................. 47
11.7 Agents....................................................... 47
11.8 Allocation of Duties......................................... 47
11.9 Delegation of Duties......................................... 47
11.10 Administrator's Action Conclusive............................ 47
11.11 Compensation and Expenses of Administrator................... 47
11.12 Records and Reports.......................................... 48
11.13 Reports of Fund Open to Participants......................... 48
11.14 Named Fiduciary.............................................. 48
11.15 Information from Employer.................................... 48
11.16 Reservation of Rights by Employer............................ 48
11.17 Liability and Indemnification................................ 49
11.18 Service as Trustee and Administrator......................... 49
ARTICLE XII
CLAIMS PROCEDURE
12.1 Notice of Denial............................................. 50
12.2 Right to Reconsideration..................................... 50
12.3 Review of Documents.......................................... 50
12.4 Decision by Administrator.................................... 50
12.5 Notice by Administrator...................................... 50
ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments................................................... 51
13.2 Consolidation, Merger or Other Transactions of Employer...... 51
13.3 Consolidation or Merger of Trust............................. 52
13.4 Bankruptcy or Insolvency of Employer......................... 52
13.5 Voluntary Termination........................................ 53
13.6 Partial Termination of Plan or Permanent Discontinuance of
Contributions .............................................. 53
ARTICLE XIV
MISCELLANEOUS
14.1 No Diversion of Funds........................................ 54
14.2 Liability Limited............................................ 54
14.3 Incapacity................................................... 54
14.4 Spendthrift Clause........................................... 54
14.5 Benefits Limited to Fund..................................... 55
14.6 Cooperation of Parties....................................... 55
14.7 Payments Due Missing Persons................................. 55
14.8 Governing Law................................................ 55
14.9 Nonguarantee of Employment................................... 55
14.10 Counsel...................................................... 56
PIONEER BANK, A FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
PREAMBLE
Effective as of January 1, 1997, Pioneer Bank, FSB (the "Sponsor"), a
federally chartered stock savings bank (the "Sponsor"), has adopted the Pioneer
Bank, FSB Employee Stock Ownership Plan in order to enable Participants to
share in the growth and prosperity of the Sponsor, and to provide Participants
with an opportunity to accumulate capital for their future economic security by
accumulating funds to provide retirement, death and disability benefits. The
Plan is a stock bonus plan designed to meet the requirements of an employee
stock ownership plan as described at Section 4975(e)(7) of the Code and Section
407(d)(6) of ERISA. The primary purpose of the employee stock ownership plan is
to invest in employer securities. The Sponsor intends that the Plan will
qualify under Sections 401(a) and 501(a) of the Code and will comply with the
provisions of ERISA.
The terms of this Plan shall apply only with respect to Employees of the
Employer on and after January 1, 1997.
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Plan shall have the following meanings:
(a) "Act" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor statute.
(b) "Administrator" shall mean the administrative committee provided for
in Article XI.
(c) "Annual Additions" shall mean, with respect to each Participant, the
sum of those amounts allocated to the Participant's accounts under this Plan
and under any other qualified defined contribution plan to which the Employer
contributes for any Limitation Year, consisting of the following:
(1) Employer contributions;
(2) Forfeitures; and
(3) Voluntary contributions (if any).
(d) "Authorized Leave of Absence" shall mean an absence from Service with
respect to which the Employee may or may not be entitled to Compensation and
which meets any one of the following requirements:
(1) Service in any of the armed forces of the United
States for up to 36 months, provided that the Employee
resumes Service within 90 days after discharge, or such
longer period of time during which such Employee's employment
rights are protected by law; or
(2) Any other absence or leave expressly approved and
granted by the Employer which does not exceed 24 months,
provided that the Employee resumes Service at or before the
end of such approved leave period. In approving such leaves
of absence, the Employer shall treat all Employees on a
uniform and nondiscriminatory basis.
(e) "Beneficiary" shall mean such persons as may be designated by the
Participant to receive benefits after the death of the Participant, or such
persons designated by the Administrator to receive benefits after the death of
the Participant, all as provided in Section 6.5.
2
(f) "Board of Directors" shall mean the Board of Directors of the
Sponsor.
(g) "Break" shall mean a Plan Year during which an Employee fails to
complete more than 500 Hours of Service.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
(i) "Compensation" shall mean the amount of remuneration paid to an
Employee by the Employer, after the date on which the Employee becomes a
Participant, for services rendered to the Employer during a Plan Year,
including base salary, bonuses, overtime and commissions, and any amount of
compensation contributed pursuant to a salary reduction election under Code
Section 401(k) and any amount of compensation contributed to a cafeteria plan
described at Section 125 of the Code, but excluding amounts paid by the
Employer or accrued with respect to this Plan or any other qualified or
non-qualified unfunded plan of deferred compensation or other employee welfare
plan to which the Employer contributes, payments for group insurance, medical
benefits, reimbursement for expenses, and other forms of extraordinary pay, and
excluding amounts accrued for a prior year.
Notwithstanding the foregoing, for purposes of complying with Code
Section 415, a Participant's contributions to a 401(k) Plan and cafeteria plan
shall not be included in the Participant's compensation. Notwithstanding
anything herein to the contrary, the annual Compensation of each Participant
taken into account under the Plan for any Plan Year shall not exceed $150,000,
as adjusted from time to time in accordance with Section 417 of the Code.
(j) "Date of Hire" shall mean the date on which a person shall perform
his first Hour of Service. Notwithstanding the foregoing, in the event a person
incurs one or more consecutive Breaks after his initial Date of Hire which
results in the forfeiture of his pre-Break Service pursuant to Section 3.3, his
"Date of Hire" shall thereafter be the date on which he completes his first
Hour of Service after such Break or Breaks.
(k) "Disability" shall mean a physical or mental impairment which
prohibits a Participant from engaging in any occupation for wages or profit and
which has caused the Social Security Administration to classify the individual
as "disabled" for purposes of Social Security.
(l) "Disability Retirement Date" shall mean the first day of the month
after which a Participant incurs a Disability.
(m) "Early Retirement Date" shall mean the first day of the month
coincident with or next following the date on which a Participant attains age
55 and completes ten (10) Years of Service.
(n) "Effective Date" shall mean January 1, 1997.
3
(o) "Eligibility Period" shall mean the period of 12 consecutive months
commencing on an Employee's Date of Hire.
(p) "Employee" shall mean any person employed by the Employer, including
officers but excluding directors in their capacity as such; provided, however,
that the term "Employee" shall not include leased employees, employees
regularly employed outside the employer's own offices in connection with the
operation and maintenance of buildings or other properties acquired through
foreclosure or deed, and any employee included in a unit of employees covered
by a collective-bargaining agreement with the Employer that does not expressly
provide for participation of such employees in this Plan, where there has been
good-faith bargaining between the Employer and employees' representatives on
the subject of retirement benefits.
(q) "Employer" shall mean Pioneer Bank, a Federal Savings Bank, a
federally chartered stock savings bank, or any successors to the aforesaid by
merger, consolidation or otherwise, which may agree to continue this Plan, or
any affiliated or subsidiary corporation or business organization of any
Employer which, with the consent of the Sponsor, shall agree to become a party
to this Plan.
(r) "Employer Securities" shall mean the common stock issued by Oregon
Trail Financial Corp., an Oregon corporation, or any other employer security
within the meaning of Section 4975(c)(8) of the Code and Section 407(d)(1) of
ERISA.
(s) "Entry Date" shall mean the first day of the month occurring after an
Employee satisfies the eligibility requirements of Article II.
(t) "Exempt Loan" shall mean a loan described at Section 4975(d)(1) of
the Code to the Trustee to purchase Employer Securities for the Plan, made or
guaranteed by a disqualified person, as defined at Section 4975(e)(2) of the
Code, including, but not limited to, a direct loan of cash, a purchase money
transaction, an assumption of an obligation of the Trustee, an unsecured
guarantee or the use of assets of such disqualified person as collateral for
such a loan.
(u) "Former Participant" shall mean any previous Participant whose
participation has terminated but who has a vested interest in the Plan which
has not been distributed in full.
(v) "Fund" shall mean the Fund maintained by the Trustee pursuant to the
Trust Agreement in order to provide for the payment of the benefits specified
in the Plan.
(w) "Hour of Service" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by an Employer for the
performance of duties or for reasons other than the performance of duties (such
as vacation time, holidays, sickness, disability, paid lay-offs, jury duty and
similar periods of paid nonworking time). To the extent not otherwise included,
Hours of Service shall also include each hour for which back pay, irrespective
of mitigation of damages, is either awarded or agreed to by the Employer. Hours
of working time shall be credited on the basis of actual hours worked, even
though compensated at a
4
premium rate for overtime or other reasons. In computing and crediting Hours of
Service for an Employee under this Plan, the rules set forth in Sections
2530.200b-2(b) and (c) of the Department of Labor Regulations shall apply, said
Sections being herein incorporated by reference. Hours of Service shall be
credited to the Plan Year or other relevant period during which the services
were performed or the nonworking time occurred, regardless of the time when
Compensation therefor may be paid. Any Employee for whom no hourly employment
records are kept by the Employer shall be credited with 45 Hours of Service for
each calendar week in which he would have been credited with a least one Hour
or Service under the foregoing provisions, if hourly records were available.
Solely for purposes of determining whether a Break for participation and
vesting purposes has occurred in an Eligibility Period or Plan Year, an
individual who is absent from work for maternity or paternity reasons shall
receive credit for the Hours of Service which would otherwise have been
credited to such individual but for such absence, or in any case in which such
hours cannot be determined, eight Hours of Service per day of such absence. For
purposes of this Section 1.1(w), an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with the
adoption of such child by such individual, or (4) for purposes of caring for
such child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this provision shall be credited
(1) in the computation period in which the absence begins if the crediting is
necessary to prevent a Break in that period, or (2) in all other cases, in the
following computation period.
(x) "Investment Adjustments" shall mean the increases and/or decreases in
the value of a Participant's accounts attributable to earnings, gains, losses
and expenses of the Fund, as set forth in Section 5.3.
(y) "Limitation Year" shall mean the Plan Year.
(z) "Normal Retirement Date" shall mean the first day of the month
coincident with or during which a Participant attains age 65.
(aa) "Participant" shall mean an Employee who has met all of the
eligibility requirements of the Plan and who is currently included in the Plan
as provided in Article II hereof.
(bb) "Plan" shall mean the Pioneer Bank, FSB Employee Stock Ownership
Plan, as described herein or as hereafter amended from time to time.
(cc) "Plan Year" shall mean any 12 consecutive month period commencing on
January 1 and ending on December 31.
(dd) "Qualified Domestic Relations Order" shall mean any judgment, decree
or order (including approval of a property settlement agreement) that relates
to the provision of child support, alimony, marital property rights to a
spouse, former spouse, child or other dependent of the Participant (all such
persons hereinafter termed "alternate payee") and is made pursuant to a
5
State domestic relations law (including community property law) and, further,
that creates or recognizes the existence of an alternate payee's right to, or
assigns to an alternate payee the right to receive all or a portion of the
benefits payable with respect to a Participant and that clearly specifies the
following:
(1) the name and last known mailing address (if available) of the
Participant and the name and mailing address of each alternate
payee to which the order relates;
(2) the amount or percentage of the Participant's benefits to be paid
to an alternate payee or the manner in which the amount is to be
determined; and
(3) the number of payments or period for which payments are required.
A domestic relations order is not a Qualified Domestic Relations Order if
it:
(1) requires the Plan to provide any type or form of benefit or any
option not otherwise provided under the Plan; or,
(2) requires the Plan to provide increased benefits; or
(3) requires payment of benefits to an alternate payee that is required
to be paid to another alternate payee under a previously existing
Qualified Domestic Relations Order.
(ee) "Retirement" shall mean termination of employment which qualifies as
early, normal or Disability retirement as described in Article VI.
(ff) "Service" shall mean employment with the Employer.
(gg) "Sponsor" shall mean Pioneer Bank, a Federal Savings Bank, a
federally chartered stock savings bank.
(hh) "Trust Agreement" shall mean the agreement, the Sponsor and the
Trustee (or any successor Trustee governing the administration of the Trust as
it may be amended from time to time.
(ii) "Trustee" shall mean the Trustee or Trustees by whom the assets of
the Plan are held, as provided in the Trust Agreement, or his or their
successors.
(jj) "Valuation Date" shall mean the last day of each Plan Year. The
Trustee may make additional valuations, at the instruction of the
Administrator, but in no event may the Administrator request additional
valuations by the Trustee more frequently than quarterly.
6
Whenever such date falls on a Saturday, Sunday or holiday, the preceding
business day shall be the Valuation Date.
(kk) "Year of Service" shall mean any Plan Year during which an Employee
has completed at least 500 Hours of Service. Except as otherwise specified in
Article III, in the determination of Years of Service for eligibility and
vesting purposes under this Plan, the term "Year of Service" shall also mean
any Plan Year during which an Employee has completed at least 500 Hours of
Service with an entity that is:
(1) a member of a controlled group including the Employer, while it is
a member of such controlled group (within the meaning of Section
414(b) of the Code);
(2) in a group of trades or businesses under common control with the
Employer, while it is under common control (within the meaning of
Section 414(c) of the Code);
(3) a member of an affiliated service group including the Employer,
while it is a member of such affiliated service group (within the
meaning of Section 414(m) of the Code); or
(4) a leasing organization, under the circumstances described in
Section 414(n) of the Code.
1.2 Plurals and Gender.
Where appearing in the Plan and the Trust Agreement, the masculine gender
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
1.3 Incorporation of Trust Agreement.
The Trust Agreement, as the same may be amended from time to time, is
intended to be and hereby is incorporated by reference into this Plan and for
all purposes shall be deemed a part of the Plan.
1.4 Headings.
The headings and sub-headings in this Plan are inserted for the
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
7
1.5 Severability.
In case any provision of this Plan shall be held illegal or void, such
illegality or invalidity shall not affect the remaining provisions of this
Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
1.6 References to Governmental Regulations.
References in this Plan to regulations issued by the Internal Revenue
Service, the Department of Labor, or other governmental agencies shall include
all regulations, rulings, procedures, releases and other position statements
issued by any such agency.
8
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation.
(a) An Employee shall initially become a Participant on the Entry Date
coincident with or next following the later of the following dates, provided he
is employed by the Employer on that Entry Date:
(1) The date on which the Employee completes 500 Hours of Service after
his Date of Hire within the Employee's Eligibility Period or a Plan
Year; and
(2) The date on which he attains age 21.
(b) Any Employee who had satisfied the requirements set forth in Section
2.1(a) prior to the Effective Date shall become a Participant on the Effective
Date, provided he is still employed by the Employer on the Effective Date.
2.2 Termination of Participation.
After commencement or resumption of his participation, an Employee shall
remain a Participant during each consecutive Plan Year thereafter until the
earliest of the following dates:
(a) His actual Retirement date;
(b) His date of death; or
(c) The last day of a Plan Year during which he incurs a Break.
2.3 Resumption of Participation
(a) Any Participant whose employment terminates and who resumes Service
before he incurs a Break shall resume participation immediately on the date he
is reemployed.
(b) Except as otherwise provided in Section 2.3(c), any Participant who
incurs one or more Breaks and resumes Service shall resume participation
retroactively as of the first day of the first Plan Year in which he completes
a Year of Service after such Break(s).
(c) Any Participant who incurs one or more Breaks and resumes Service,
but whose pre-Break Service is not reinstated to his credit pursuant to Section
3.3, shall be treated as a new Employee and shall again be required to satisfy
the eligibility requirements contained in Section 2.1 before resuming
participation on the appropriate Entry Date, as specified in Section 2.1.
2.4 Determination of Eligibility.
The Administrator shall determine the eligibility of Employees in
accordance with the provisions of this Article. For each Plan Year, the
Employer shall furnish the Administrator a list of all Employees, indicating
the original date of their reemployment with the Employer and any Breaks they
may have incurred.
10
ARTICLE III
CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes.
Except as provided in Section 3.3, all Service completed by an Employee
shall be counted in determining his eligibility to become a Participant on and
after the Effective Date, whether such Service was completed before or after
the Effective Date.
3.2 Service Counted for Vesting Purposes.
All Years of Service completed by an Employee (including Years of Service
completed prior to the Effective Date) shall be counted in determining his
vested interest in this Plan, except the following:
(a) Service which is disregarded under the provisions of Section 3.3;
and
(b) Service prior to the Effective Date of this Plan if such Service
would have been disregarded under the "break in service" rules
(within the meaning of Section 1.411(a)-5(b)(6) of the Treasury
Regulations).
3.3 Credit for Pre-Break Service.
Upon his resumption of participation following one or a series of
consecutive Breaks, an Employee's pre-Break Service shall be reinstated to his
credit for all purposes of this Plan only if either:
(a) He was vested in any portion of his accrued benefit at the time the
Break(s) began; or
(b) The number of his consecutive Breaks does not equal or exceed the
greater of five or the number of his Years of Service credited to him before
the Breaks began.
Except as provided in the foregoing, none of an Employee's Service prior
to one or a series of consecutive Breaks shall be counted for any purpose in
connection with his participation in this Plan thereafter.
3.4 Service Credit During Authorized Leaves.
An Employee shall receive no Service credit under Section 3.1 or 3.2
during any Authorized Leave of Absence. However, solely for the purpose of
determining whether he has incurred a Break during any Plan Year in which he is
absent from Service for one or more Authorized Leaves of Absence, he shall be
credited with 45 Hours of Service for each week
11
during any such leave period. Notwithstanding the foregoing, if an Employee
fails to return to Service on or before the end of a leave period, he shall be
deemed to have terminated Service as of the first day of such leave period and
his credit for Hours of Service, determined under this Section 3.4, shall be
revoked. Notwithstanding anything contained herein to the contrary, an Employee
who is absent by reason of military service as set forth in Section 1.1(d)(1)
shall be given Service credit under this Plan for such military leave period to
the extent, and for all purposes, required by law.
3.5 Service Credit During Maternity or Paternity Leave.
For purposes of determining whether a Break has occurred for
participation and vesting purposes, an individual who is on maternity or
paternity leave as described in Section 1.1(w), shall be deemed to have
completed Hours of Service during such period of absence, all in accordance
with Section 1.1(w). Notwithstanding the foregoing, no credit shall be given
for such Hours of Service unless the individual furnishes to the Administrator
such timely information as the Administrator may reasonably require to
determine:
(a) that the absence from Service was attributable to one of the
maternity or paternity reasons enumerated in Section 1.1(w); and
(b) the number of days for which such absence lasted.
In no event, however, shall any credit be given for such leave other than
for determining whether a Break has occurred.
3.6 Ineligible Employees.
Notwithstanding any provisions of this Plan to the contrary, any person
who is employed by the Employer, but who is ineligible to participate in this
Plan, either because of his failure:
(a) To meet the eligibility requirements contained in Article II; or
(b) To be an Employee, as defined in Section 1.1(p), shall, nevertheless,
earn Years of Service for eligibility and vesting purposes pursuant to the
rules contained in this Article III. However, such a person shall not be
entitled to receive any contributions hereunder unless and until he becomes a
Participant in this Plan, and then, only during his period of participation.
12
ARTICLE IV
CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions.
(a) Subject to all of the provisions of this Article IV, for each Plan
Year commencing on or after the Effective Date, the Employer shall make an
Employee Stock Ownership contribution to the Fund, in such amount as may be
determined by the Board of Directors in its discretion. Such contribution shall
be in the form of cash or Employer Securities. In determining the value of
Employer Securities transferred to the Fund as an Employee Stock Ownership
contribution, the Administrator may determine the average of closing prices of
such securities for a period of up to 90 consecutive days immediately preceding
the date on which the securities are contributed to the Fund. In the event that
the Employer Securities are not readily tradable on an established securities
market, the value of the Employer Securities transferred to the Fund shall be
determined by an independent appraiser in accordance with Section 8.9.
(b) In no event shall such contribution by the Employer exceed for any
Plan Year the maximum amount that may be deducted by the Employer under Section
404 of the Code, nor shall such contribution cause the Employer to violate its
regulatory capital requirements. Each Employee Stock Ownership contribution by
the Employer shall be deemed to be made on the express condition that the Plan,
as then in effect, shall be qualified under Sections 401 and 501 of the Code
and that the amount of such contribution shall be deductible from the
Employer's income under Section 404 of the Code.
4.2 Time and Manner of Employee Stock Ownership Contributions.
(a) The Employee Stock Ownership contribution (if any) for each Plan Year
shall be paid to the Trustee in one lump sum or installments at any time on or
before the expiration of the time prescribed by law (including any extensions)
for filing of the Employer's federal income tax return for its fiscal year
ending concurrent with or during such Plan Year. Any portion of the Employee
Stock Ownership contribution for each Plan Year that may be made prior to the
last day of the Plan Year shall be maintained by the Trustee in the Employee
Stock Ownership suspense account described in Section 5.2 until the last day of
such Plan Year.
(b) If an Employee Stock Ownership contribution for a Plan Year is paid
after the close of the Employer's fiscal year which ends concurrent with or
during such Plan Year but on or prior to the due date (including any
13
extensions) for filing of the Employer's federal income tax return for such
fiscal year, it shall be considered, for allocation purposes, as an Employee
Stock Ownership contribution to the Fund for the Plan Year for which it was
computed and accrued, unless such contribution is accompanied by a statement to
the Trustee, signed by a representative of the Employer, which specifies that
the Employee Stock Ownership contribution is made with respect to the Plan Year
in which it is received by the Trustee. Any Employee Stock Ownership
contribution paid by the Employer during any Plan Year but after the due date
(including any extensions) for filing of its federal income tax return for the
fiscal year of the Employer ending on or before the last day of the preceding
Plan Year shall be treated, for allocation purposes, as an Employee Stock
Ownership contribution to the Fund for the Plan Year in which the contribution
is paid to the Trustee.
(c) Notwithstanding anything contained herein to the contrary, no
Employee Stock Ownership contribution shall be made for any year during which a
"limitations account" created pursuant to Section 5.6(c)(2) is in existence
until the balance of such limitations account has been reallocated in
accordance with Section 5.6(c)(2).
4.3 Records of Contributions.
The Employer shall deliver at least annually to the Trustee, with respect
to the contributions contemplated in Section 4.1, a certificate of the
Administrator, in such form as the Trustee shall approve, setting forth:
(a) The aggregate amount of contributions, if any, to the Fund for such
Plan Year;
(b) The names, Internal Revenue Service identifying numbers and current
residential addresses of all Participants in the Plan;
(c) The amount and category of contributions to be allocated to each such
Participant; and
(d) Any other information reasonably required for the proper operation of
the Plan.
4.4 Erroneous Contributions.
(a) Notwithstanding anything herein to the contrary, upon the Employer's
request, a contribution which was made by a mistake of fact, or conditioned
upon the initial qualification of the Plan, under Code Section 401, or upon the
deductibility of the contribution under Section 404 of the Code, shall be
returned to the Employer by the Trustee within one year after the payment of
the contribution, the denial of the qualification or the disallowance of the
deduction (to the extent disallowed), whichever is applicable; provided,
however, that in the case of denial of the initial qualification of the Plan, a
contribution shall not be returned unless an Application for Determination has
been timely filed with the Internal Revenue Service. Any portion of a
contribution returned pursuant to this Section 4.4 shall be adjusted to reflect
its proportionate share of the losses of the fund, but shall not be adjusted to
reflect any earnings or gains. Notwithstanding any provisions of this Plan to
the contrary, the right or claim of any Participant or Beneficiary to any asset
of the Fund or any benefit under this Plan shall be subject to and limited by
this Section 4.4.
(b) In no event shall voluntary Employee contributions be accepted. Any
such voluntary Employee contributions (and any earnings attributable thereto)
mistakenly received by the Trustee shall promptly be returned to the
Participant.
14
ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant Accounts.
The Administrator shall establish and maintain separate individual
accounts for Participants in the Plan and for each Former Participant in
accordance with the provisions of this Article V. Such separate accounts shall
be for accounting purposes only and shall not require a segregation of the
Fund, and no Participant, Former Participant or Beneficiary shall acquire any
right to or interest in any specific assets of the Fund as a result of the
allocations provided for under this Plan, except where segregation is expressly
provided for in this Plan.
(a) Employee Stock Ownership Accounts.
The Administrator shall establish a separate Employee Stock Ownership
Account in the Fund for each Participant. The account shall be credited as of
the last day of each Plan Year with the amounts allocated to the Participant
under Sections 5.4 and 5.5. The Administrator may establish subaccounts
hereunder, including an Employer Stock Account reflecting a Participant's
interest in Employer Securities held by the Trust and an Other Investments
Account reflecting the Participant's interest in his Employee Stock Ownership
Account other than Employer Securities.
(b) Distribution Accounts.
In any case where distribution of a terminated Participant's vested
interest in the Plan is to be deferred, the Administrator shall establish a
separate, nonforfeitable account in the Fund to which the balance in his
Employee Stock Ownership Account in the Plan shall be transferred after such
Participant incurs a Break. Unless the Former Participant's distribution
accounts are segregated for investment purposes pursuant to section 9.4, they
shall share in Investment Adjustments.
(c) Other Accounts.
The Administrator shall establish such other separate accounts for each
Participant as may be necessary or desirable for the convenient administration
of the Fund.
5.2 Establishment of Suspense Accounts.
The Administrator shall establish separate accounts to be known as
"suspense accounts." There shall be credited to such appropriate suspense
accounts any Employee Stock Ownership contributions that may be made prior to
the last day of the Plan Year, as provided in Section 4.2. The suspense
accounts shall share proportionately as to time and amount in any Investment
Adjustments. As of the last day of each Plan Year, the balance of the Employee
Stock
15
Ownership suspense account shall be added to the Employee Stock Ownership
contribution and allocated to the Employee Stock Ownership Accounts of
Participants as provided in Section 5.5, except as provided herein. In the
event that the Plan takes an Exempt Loan, the Employer Securities purchased
thereby shall be allocated to a separate Exempt Loan Suspense Account, from
which allocations shall be made in accordance with Section 8.5.
5.3 Allocation of Earnings, Losses and Expenses.
As of each Valuation Date, any increase or decrease in the net worth of
the aggregate Employee Stock Ownership Accounts held in the Fund attributable
to earnings, losses, expenses and unrealized appreciation or depreciation in
each such aggregate Account, as determined by the Trustee pursuant to the Trust
Agreement, shall be credited to or deducted from the appropriate suspense
accounts and all Participants' Employee Stock Ownership Accounts (except
segregated distribution accounts described in Section 5.1(b) and the
"limitations account" described in Section 5.6(c)(4)) in the proportion that
the value of each such Account (determined immediately prior to such allocation
and before crediting any Employee Stock Ownership contributions and forfeitures
for the current Plan Year but after adjustment for any transfer to or from such
Accounts and for the time such funds were in such Accounts) bears to the value
of all Employee Stock Ownership Accounts.
5.4 Allocation of Forfeitures.
As of the last day of each Plan Year, all forfeitures attributable to the
Employee Stock Ownership Accounts which are then available for reallocation
shall be, as appropriate, added to the Employee Stock Ownership contribution
(if any) for such year and allocated among the Participants' Employee Stock
Ownership Accounts, as appropriate, in the manner provided in Sections 5.5 and
5.6.
5.5 Allocation of Annual Employee Stock Ownership Contributions.
As of the last day of each Plan Year for which the Employer shall make an
Employee Stock Ownership contribution, the Administrator shall allocate the
Employee Stock Ownership contribution (including reallocable forfeitures) for
such Plan Year to the Employee Stock Ownership account of each Participant who
completed at least 1,000 Hours of Service during that Plan Year, provided that
he is still employed by the Employer on the last day of the Plan Year. Such
allocation shall be made in the same proportion that each such Participant's
Compensation for such Plan Year bears to the total Compensation of all such
Participants for such Plan Year, subject to Section 5.6, provided, however,
that, for purposes of this Section 5.5, Compensation shall not be considered
for any part of a Plan Year prior to the date the Participant commenced
participation in the Plan. Notwithstanding the foregoing, if a Participant
attains his Normal Retirement Date and terminates Service prior to the last day
of the Plan Year or if the Participant terminates service by reason of his
death or Disability, he shall be entitled to an allocation based on his
Compensation earned prior to his termination and during the Plan Year.
Furthermore, if a Participant completes 1,000 Hours of Service and is on a
Leave of Absence on the last day of
16
the Plan Year because of pregnancy or other medical reason, such a Participant
shall be entitled to an allocation based on his Compensation earned during such
Plan Year.
5.6 Limitation on Annual Additions.
(a) Notwithstanding any provisions of this Plan to the contrary, the
total Annual Additions credited to a Participant's accounts under this Plan
(and under any other defined contribution plan to which the Employer
contributes) for any Limitation Year shall not exceed the lesser of:
(1) 25% of the Participant's compensation for such Limitation
Year; or
(2) $30,000 (or, if greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1)(A) of the Code). Whenever
otherwise allowed by law, the maximum amount of $30,000 shall be
automatically adjusted annually for cost-of-living increases in
accordance with Section 415(d) of the Code and the highest such
increase effective at any time during the Limitation Year shall be
effective for the entire Limitation Year, without any amendment to
this Plan.
(b) Solely for the purpose of this Section 5.6, the term "compensation"
is defined as wages, salaries, and fees for professional services and other
amounts received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are includable in
gross income (including, but not limited to, commissions paid to salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described in Treas.
Regs. Section 1.62-2(c)), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are
not includable in the Employee's gross income for the taxable year
in which contributed, or Employer contributions under a simplified
employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of
deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by the employee either
becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction
agreement)
17
towards the purchase of an annuity contract described in
section 403(b) of the Code (whether or not the contributions are
actually excludable from the gross income of the Employee).
(c) In the event that the limitations on Annual Additions described in
this Section 5.6(a) above are exceeded with respect to any Participant in any
Limitation Year, then the contributions allocable to the Participant for such
year shall be reduced to the minimum extent required by such limitations in the
following order of priority:
(1) If any further reductions in Annual Additions are necessary, then
the Employee Stock Ownership contributions and forfeitures
allocated during such Limitation Year to the Participant's Employee
Stock Ownership Account shall be reduced. The amount of any such
reductions in the Employee Stock Ownership contributions and
forfeitures shall be reallocated to all other Participants in the
same manner as set forth under Sections 5.4 and 5.5.
(2) Any amounts which cannot be reallocated to other Participants in a
current Limitation Year in accordance with Section 5.6(c)(1) above
because of the limitations contained in Sections 5.6(a) and (d)
shall be credited to an account designated as the "limitations
account" and carried forward to the next and subsequent Limitation
Years until it can be reallocated to all Participants as set forth
in Sections 5.4, and 5.5, as appropriate. No Investment Adjustments
shall be allocated to this limitations account. In the next and
subsequent Limitation Years, all amounts in the limitations account
must be allocated in the manner described in Sections 5.4 and 5.5,
as appropriate, before any Employee Stock Ownership contributions
may be made to this Plan for that Limitation Year.
(3) The Administrator shall determine to what extent the Annual
Additions to any Participant's Employee Stock Ownership Account
must be reduced in each Limitation Year. The Administrator shall
reduce the Annual Additions to all other tax-qualified retirement
plans maintained by the Employer in accordance with the terms
contained therein for required reductions or reallocations mandated
by Section 415 of the Code before reducing any Annual Additions in
this Plan.
(4) In the event this Plan is voluntarily terminated by the Employer
under Section 13.5, any amounts credited to the limitations account
described in Section 5.6(c)(2) above which have not be reallocated
as set forth herein shall be distributed to the Participants who
are still employed by the Employer on the date of termination, in
the proportion that each Participant's Compensation bears to the
Compensation of all Participants.
18
(d) The Annual Additions credited to a Participant's accounts for each
Limitation Year are further limited so that in the case of an Employee who is a
Participant in both this Plan and any qualified defined benefit plan
(hereinafter referred to as a "pension plan") of the Employer, the sum of (1)
and (2) below will not exceed 1.0:
(1) (A) The projected annual normal retirement benefit of a Participant
under the pension plan, divided by
(B) The lesser of:
(i) The product of 1.25 multiplied by the dollar limitation
in effect under Section 415(b)(1)(A) of the Code for
such Limitation Year; or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under
Section 415(b)(1)(B) of the Code for the Participant
for such Limitation Year; plus
(2) (A) The sum of Annual Additions credited to the Participant under
this Plan for all Limitation Years, divided by:
(B) The sum of the lesser of the following amounts determined for
such Limitation Year and for each prior year of service with the
Employer:
(i) The product of 1.25 multiplied by the dollar limitation
in effect under Section 415(b)(1)(A) of the Code for
such Limitation Year, or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under
Section 415(b)(1)(B) of the Code for the Participant
for such Limitation Year. The Administrator may, in
calculating the defined contribution plan fraction
described in Section 5.6(d)(2), elect to use the
transitional rule pursuant to Section 415(e)(6) of
the Code, if applicable. If the sum of the fractions
produced above will exceed 1.0, even after the use
of the
19
"fresh start" rule contained in Section 235 of
the Tax Equity and Fiscal Responsibility Act of 1982
("TEFRA"), if applicable, then the same provisions as
stated in Section 5.6(c) above shall apply. If, even
after the reductions provided for in Section 5.6(c),
the sum of the fractions still exceed 1.0, then the
benefits of the Participant provided under the
pension plan shall be reduced to the extent necessary,
in accordance with Treasury Regulations issued under
the Code. Solely for the purposes of this Section
5.6(d), the term "years of service" shall mean all
years of service defined by Treasury Regulations issued
under Section 415 of the Code.
(e) In the event that the Employer is a member of (1) a controlled group
of corporations or a group of trades or businesses under common control (as
described in Section 414(b) or (c) of the Code, as modified by Section 415(h)
thereof), or (2) an affiliated service group (as described in Section 414(m) of
the Code), the Annual Additions credited to any Participant's accounts in any
such Limitation Year shall be further limited by reason of the existence of all
other qualified retirement plans maintained by such affiliated corporations,
other entities under common control or other members of the affiliated service
group, to the extent such reduction is required by Section 415 of the Code and
the regulations promulgated thereunder. The Administrator shall determine if
any such reduction in the Annual Additions to a Participant's accounts is
required for this reason, and if so, the same provisions as stated in 5.6(c)
and (d) above shall apply.
(f) Annual Additions shall not include any Employer contributions which
are used by the Trust to pay interest on an Exempt Loan nor any forfeitures of
Employer Securities purchased with the proceeds of an Exempt Loan, provided
that not more than one-third of the Employer contributions are allocated to
Participants who are among the group of employees deemed "highly compensated
employees" within the meaning of Code Section 414(q).
5.7 Erroneous Allocations.
No Participant shall be entitled to any Annual Additions or other
allocations to his accounts in excess of those permitted under Sections 5.3,
5.4, 5.5, and 5.6. If it is determined at anytime that the Administrator and/or
Trustees have erred in accepting and allocating any contributions or
forfeitures under this Plan, or in allocating Investment Adjustments, or in
excluding or including any person as a Participant, then the Administrator, in
a uniform and nondiscriminatory manner, shall determine the manner in which
such error shall be corrected and shall promptly advise the Trustee in writing
of such error and of the method for correcting such
20
error. The accounts of any or all Participants may be revised, if necessary, in
order to correct such error.
5.8 Value of Participant's Interest in Fund
At any time, the value of a Participant's interest in the Fund shall
consist of the aggregate value of his Employee Stock Ownership Account and his
distribution account, if any, determined as of the next-preceding Valuation
Date. The Administrator shall maintain adequate records of the cost basis of
Employer Securities allocated to each Participant's Employer Stock Ownership
Account.
5.9 Investment of Account Balances.
The Employee Stock Ownership Accounts shall be invested primarily in
Employer Securities. All sales of Employer Securities by the Trustee
attributable to the Employee Stock Ownership Accounts of all Participants shall
be charged pro rata to the Employee Stock Ownership Accounts of all
Participants.
21
ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
6.1 Normal Retirement.
A Participant who reaches his Normal Retirement Date and who shall retire
at that time shall thereupon be entitled to retirement benefits based on the
value of his interest in the Fund, payable pursuant to the provisions of
Section 9.1. A Participant who remains in Service after his Normal Retirement
Date shall not be entitled to any retirement benefits until his actual
termination of Service thereafter (except as provided in Section 9.3(g)) and he
shall meanwhile continue to participate in this Plan.
6.2 Early Retirement.
A Participant who reaches his Early Retirement Date may retire at such
time (or, at his election, as of the first day of any month thereafter prior to
his Normal Retirement Date) and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to
the provisions of Section 9.1.
6.3 Disability Retirement.
In the event a Participant incurs a Disability, he may retire on his
Disability Retirement Date and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to
the provisions of Section 9.1.
6.4 Death Benefits.
(a) Upon the death of a Participant before his Retirement or other
termination of Service, the value of his interest in the Fund shall be payable
pursuant to the provisions of Section 9.1. The Administrator shall direct the
Trustee to distribute his interest in the Fund to any surviving Beneficiary
designated by the Participant or, if none, to such persons designated by the
Administrator pursuant to Section 6.5.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee to distribute any undistributed balance of his interest in
the Fund to any surviving Beneficiary designated by him or, if none, to such
persons designated by the Administrator pursuant to Section 6.5.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive the interest in the Fund of a
deceased Participant or Former Participant as the Administrator may deem
desirable. The Administrator's determination of death and of the right of any
person to receive payment shall be conclusive.
22
6.5 Designation of Death Beneficiary and Manner of Payment.
(a) Each Participant shall have the right to designate a Beneficiary or
Beneficiaries to receive the sum or sums to which he may be entitled upon his
death. The Participant may also designate the manner in which any death
benefits under this Plan shall be payable to his Beneficiary, provided that
such designation is in accordance with Section 9.4. Such designation of
Beneficiary and manner of payment shall be in writing and delivered to the
Administrator, and shall be effective when received by the Administrator. The
Participant shall have the right to change such designation by notice in
writing to the Administrator. Such change of Beneficiary or the manner of
payment shall become effective upon its receipt by the Administrator. Any such
change shall be deemed to revoke all prior designations.
(b) If a Participant shall fail to designate validly a Beneficiary or
if no designated Beneficiary survives the Participant, his interest in the Fund
shall be paid to the person or persons in the first of the following classes of
successive preference Beneficiaries surviving at the death of the Participant:
the Participant's (1) widow or widower, (2) children, (3) parents, and (4)
estate. The Administrator shall decide what Beneficiaries, if any, shall have
been validly designated, and its decision shall be binding and conclusive on
all persons.
(c) Notwithstanding the foregoing, if a Participant has been married
throughout the 12 month period preceding the date of his death, the sum or sums
to which he may be entitled under this Plan upon his death shall be paid to his
spouse, unless the Participant's spouse shall have consented to the election of
another Beneficiary. Such a spousal consent shall be in writing and shall be
witnessed either by a representative of the Plan or a notary public. If it is
established to the satisfaction of the Administrator that such spousal consent
cannot be obtained because there is no spouse, because the spouse cannot be
located, or other reasons prescribed by governmental regulations, the consent
of the spouse may be waived, and the Participant may designate a Beneficiary or
Beneficiaries other than his spouse.
23
ARTICLE VII
VESTING AND FORFEITURES
7.1 Vesting on Death, Disability, Retirement and Change in Control.
Unless his participation in this Plan shall have terminated prior
thereto, upon a Participant's death, Disability, Early Retirement, or upon his
attainment of Normal Retirement Date (whether or not he actually retires at
that time) while he is still employed by the Employer, the Participant's entire
interest in the Fund shall be fully vested and nonforfeitable. In addition, a
Participant's interest shall be fully vested and unforfeitable upon a Change in
Control. For purposes of this Plan, a "Change in Control" shall mean an event
deemed to occur if and when (1) an offeror other than the Oregon Trail
Financial Corp. purchases shares of the stock of Oregon Trail Financial Corp.
or the Sponsor pursuant to a tender or exchange offer for such shares, (2) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of securities
of Oregon Trail Financial Corp. or the Sponsor representing 25% or more of the
combined voting power of Oregon Trail Financial Corp.'s or the Sponsor's then
outstanding securities, (3) the membership of the board of directors of Oregon
Trail Financial Corp. or the Sponsor changes as the result of a contested
election, such that individuals who were directors at the beginning of any 24
month period (whether commencing before or after the date of adoption of this
Plan) do not constitute a majority of the Board at the end of such period, or
(4) shareholders of Oregon Trail Financial Corp. or the Sponsor approve a
merger, consolidation, sale or disposition of all or substantially all of
Oregon Trail Financial Corp.'s or the Sponsor's assets, or a plan of partial or
complete liquidation. If any of the events enumerated in clauses (1) - (4)
occur, the Board of Directors shall determine the effective date of the change
in control resulting therefrom.
7.2 Vesting on Termination of Participation.
Upon termination of his participation in this Plan for any reason other
than death, Disability, or Normal Retirement, a Participant shall be vested in
a percentage of his Employee Stock Ownership Account, such vested percentages
to be determined under the following table, based on the Years of Service
(including Years of Service prior to the Effective Date) credited to him for
vesting purposes at the time of his termination of participation:
Years of Service Completed Percentage Vested
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
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Any portion of the Participant's Employee Stock Ownership Account which
is not vested at the time he incurs a Break shall thereupon be forfeited and
disposed of pursuant to Section 7.3. Distribution of the vested portion of a
terminated Participant's interest in the Plan may be authorized by the
Administrator in any manner permitted under Section 9.1.
7.3 Disposition of Forfeitures.
(a) In the event a Participant incurs a Break and subsequently resumes
both his Service and his participation in the Plan prior to incurring at least
five Breaks, the forfeitable portion of his Employee Stock Ownership Account
shall be reinstated to the credit of the Participant as of the date he resumes
participation.
(b) In the event a Participant terminates Service and subsequently incurs
a Break and receives a distribution, or in the event a Participant does not
terminate Service, but incurs at least five Breaks, or in the event that a
Participant terminates Service and incurs at least five Breaks but has not
received a distribution, then the forfeitable portion of his Employer Account,
including Investment Adjustments, shall be reallocated to other Participants,
pursuant to Section 5.4 as of the date the Participant incurs such Break or
Breaks, as the case may be.
(c) In the event a former Participant who had received a distribution
from the Plan is rehired, he shall repay the amount of his distribution before
the earlier of five years after the date of his rehire by the Employer, or the
close of the first period of five consecutive Breaks commencing after the
withdrawal in order for any forfeited amounts to be restored to him.
25
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS
8.1 Right to Demand Employer Securities.
A Participant entitled to a distribution from his Employee Stock
Ownership Account shall be entitled to demand that his interest in the Account
be distributed to him in the form of Employer Securities, all subject to
Section 9.9. In the event that the Employer Securities are not readily tradable
on an established market, the Participant shall be entitled to require that the
Employer repurchase the Employer Securities under a fair valuation formula, as
provided by governmental regulations. The Participant or Beneficiary shall be
entitled to exercise the put option described in the preceding sentence for a
period of not more than 60 days following the date of distribution of Employer
Securities to him. If the put option is not exercised within such 60-day
period, the Participant or Beneficiary may exercise the put option during an
additional period of not more than 60 days after the beginning of the first day
of the first Plan Year following the Plan Year in which the first put option
period occurred, all as provided in regulations promulgated by the Secretary of
the Treasury.
8.2 Voting Rights.
Each Participant with an Employee Stock Ownership Account shall be
entitled to direct the Trustee as to the manner in which the Employer
Securities in such Account are to be voted. Employer Securities held in the
Employee Stock Ownership Suspense Account or the Exempt Loan Suspense Account
shall be voted by the Trustee on each issue with respect to which shareholders
are entitled to vote in the manner directed by the majority of the Participants
who directed the Trustee as to the manner of voting their shares in the
Employee Stock Ownership Accounts with respect to such issue. Prior to the
initial allocation of shares, the Trustee shall be entitled to vote the shares
in the Suspense Account without prior direction from the Participants or the
Administrator. In the event that a Participant fails to give timely voting
instructions to the Trustee with respect to the voting of his allocated
Employer Securities, the Trustee shall be entitled to vote such shares in its
discretion.
8.3 Nondiscrimination in Employee Stock Ownership Contributions.
In the event that the amount of the Employee Stock Ownership
contributions that would be required in any Plan Year to make the scheduled
payments on an Exempt Loan would exceed the amount that would otherwise be
deductible by the Employer for such Plan Year under Code Section 404, then no
more than one-third of the Employee Stock Ownership contributions for the Plan
Year, which is also the Employer's taxable year, shall be allocated to the
group of Employees who during the Plan Year or the preceding Plan Year:
(a) During the Plan Year or the preceding Plan Year was at any time a 5%
owner of the Employer; or
26
(b) During the preceding Plan Year, received compensation from the
Employer in excess of $80,000, as adjusted under Code Section 414(q) and, if
elected by the Employer, was in the top paid group of Employees for such Plan
Year.
8.4 Dividends.
Any cash dividends or other cash contributions received by the Trustee of
Employer Securities allocated to the Employee Stock Account of Participants
shall be credited to the applicable Participants' Ownership Accounts unless the
Sponsor, in its sole discretion, elects to pay the cash dividends directly to
the applicable Participants or directs the Trustee to pay the cash dividends to
the Participants (or, if applicable, their Beneficiaries) within 90 calendar
days of the close of the Plan Year in which the cash dividend were paid to the
Fund. Notwithstanding anything contained in this Section to the contrary, the
Sponsor may direct cash dividends, including dividends on non-allocated shares,
be applied to repay an Exempt Loan, but only to the extent shares of Employer
Securities with an aggregate fair market value equal to the amount of dividends
so applied are allocated to the Employee Stock Ownership Account of the
applicable Participants and to the extent the cash dividends are deductible
under Section 404(k) of the Code. To the extent cash dividends on allocated
shares are applied to repay an Exempt Loan, shares released from encumbrance
the value equal to the amount of the dividends which, but for the repayment of
the Exempt Loan, would have been allocated to Participants' Employee Stock
Ownership Accounts shall be allocated to the Employee Stock Ownership Accounts
of the affected Participants, and the remaining shares to be allocated shall be
allocated among the Participants in accordance with Section 5.5. Dividends on
Employer Securities obtained pursuant to an Exempt Loan and not yet allocated
may be used to make payments on an Exempt Loan, as described in Section 8.5.
8.5 Exempt Loans.
(a) The Sponsor may direct the Trustee to obtain Exempt Loans. The Exempt
Loan may take the form of (i) a loan from a bank or other commercial lender to
purchase Employer Securities (ii) a loan from the Employer or affiliated
corporation, to the Plan; or (iii) an installment sale of Employer Securities
to the Plan. The proceeds of any such Exempt Loan shall be used, within a
reasonable time after the Exempt Loan is obtained, only to purchase Employer
Securities, repay the Exempt Loan, or repay any prior Exempt Loan. Any such
Exempt Loan shall provide for no more than a reasonable rate of interest and
shall be without recourse against the Plan. The number of years to maturity
under the Exempt Loan must be definitely ascertainable at all times. The only
assets of the Plan that may be given as collateral for an Exempt Loan are
Employer Securities acquired with the proceeds of the Exempt Loan and Employer
Securities that were used as collateral for a prior Exempt Loan repaid with the
proceeds of the current Exempt Loan. Such Employer Securities so pledged shall
be placed in an Exempt Loan Suspense Account. No person or institution entitled
to payment under an Exempt Loan shall have recourse against Trust assets other
than the aforesaid collateral, Employer Stock Ownership contributions (other
than contributions of Employer Securities) that are available under the Plan to
meet obligations under the Exempt Loan and earnings attributable to such
27
collateral and the investment of such contributions. All Employee Stock
Ownership contributions paid during the Plan Year in which an Exempt Loan is
made (whether before or after the date the proceeds of the Exempt Loan are
received), all Employee Stock Ownership contributions paid thereafter until the
Exempt Loan has been repaid in full, and all earnings from investment of such
Employee Stock Ownership contributions, without regard to whether any such
Employee Stock Ownership contributions and earnings have been allocated to
Participants' Employee Stock Ownership Accounts, shall be available to meet
obligations under the Exempt Loan as such obligations accrue, or prior to the
time such obligations accrue, unless otherwise provided by the Employer at the
time any such contribution is made. Any pledge of Employer Securities shall
provide for the release of shares so pledged upon the payment of any portion of
the Exempt Loan.
(b) For each Plan Year during the duration of the Exempt Loan, the number
of shares of Employer Securities released from such pledge shall equal the
number of encumbered shares held immediately before release for the current
Plan Year multiplied by a fraction. The numerator of the fraction is the sum of
principal and interest paid in such Plan Year. The denominator of the fraction
is the sum of the numerator plus the principal and interest to be paid for all
future years. Such years will be determined without taking into account any
possible extension or renewal periods. If interest on any Exempt Loan is
variable, the interest to be paid in future years under the Exempt Loan shall
be computed by using the interest rate applicable as of the end of the Plan
Year.
(c) Notwithstanding the foregoing, the Trustee may obtain an Exempt Loan
pursuant to the terms of which the number of Employer Securities to be released
from encumbrance shall be determined solely with reference to principal
payments. In the event that such an Exempt Loan is obtained, annual payments of
principal and interest shall be at a cumulative rate that is not less rapid at
any time than level payments of such amounts for not more than 10 years. The
amount of interest in any such annual loan repayment shall be disregarded only
to the extent that it would be determined to be interest under standard loan
amortization tables. The requirement set forth in the preceding sentence shall
not be applicable from the time that, by reason of a renewal, extension, or
refinancing, the sum of the expired duration of the Exempt Loan, the renewal
period, the extension period, and the duration of a new Exempt Loan exceeds 10
years.
8.6 Exempt Loan Payments.
(a) Payments of principal and interest on any Exempt Loan during a Plan
Year shall be made by the Trustee (as directed by the Administrator) only from
(1) Employee Stock Ownership contributions to the Trust made to meet the Plan's
obligation under an Exempt Loan (other than contributions of Employer
Securities) and from any earnings attributable to Employer Securities held as
collateral for an Exempt Loan and investments of such contributions (both
received during or prior to the Plan Year); (2) the proceeds of a subsequent
Exempt Loan made to repay a prior Exempt Loan; and (3) the proceeds of the sale
of any Employer Securities held as collateral for an Exempt Loan. Such
contribution and earnings shall be accounted for separately by the Plan until
the Exempt Loan is repaid.
28
(b) Employer Securities released by reason of the payment of principal or
interest on an Exempt Loan from amounts allocated to Participants' Employee
Stock Ownership Accounts shall be allocated as set forth in Section 5.5.
(c) The Employer shall contribute to the Trust sufficient amounts to
enable the Trust to pay principal and interest on any such Exempt Loans as they
are due, provided however that no such contribution shall exceed the
limitations in Section 5.6. In the event that such contributions by reason of
the limitations in Section 5.6 are insufficient to enable the Trust to pay
principal and interest on such Exempt Loan as it is due, then upon the
Trustee's request the Employer or an affiliated corporation shall:
(1) Make an Exempt Loan to the Trust in sufficient amounts to meet such
principal and interest payments. Such new Exempt Loan shall be
subordinated to the prior Exempt Loan. Securities released from the
pledge of the prior Exempt Loan shall be pledged as collateral to
secure the new Exempt Loan. Such Employer Securities will be
released from this new pledge and allocated to the Employee Stock
Ownership Accounts of the Participants in accordance with
applicable provisions of the Plan;
(2) Purchase any Employer Securities pledged as collateral in an amount
necessary to provide the Trustee with sufficient funds to meet the
principal and interest repayments. Any such sale by the Plan shall
meet the requirements of Section 408(e) of ERISA; or
(3) Any combination of the foregoing. However, the Employer shall not,
pursuant to the provisions of this subsection, do, fail to do or
cause to be done any act or thing which would result in a
disqualification of the Plan as an Employee Stock Ownership Plan
under the Code.
(d) Except as provided in Section 8.1 above and notwithstanding any
amendment to or termination of the Plan which causes it to cease to qualify as
an Employee Stock Ownership plan within the meaning of Section 4975(e)(7) of
the Code, or any repayment of an Exempt Loan, no shares of Employer Securities
acquired with the proceeds of an Exempt Loan obtained by the Trust to purchase
Employer Securities may be subject to a put, call or other option, or
buy-sellor similar arrangement while such shares are held by the Plan or when
such Shares are distributed from the Plan.
8.7 Put Option.
If a Participant exercises a put option (as set forth in Section 8.1)
with respect to Employer Securities that were distributed as part of a total
distribution pursuant to which a Participant's Employee Stock Ownership Account
is distributed to him in a single taxable year, the Employer or the Plan may
elect to pay the purchase price of the Employer Securities over a period not to
exceed five years. Such payments shall be made in substantially equal
29
installments not less frequently than annually over a period beginning not
later than 30 days after the exercise of the put option. Reasonable interest
shall be paid to the Participant with respect to the unpaid balance of the
purchase price and adequate security shall be provided with respect thereto. In
the event that a Participant exercises a put option with respect to Employer
Securities that are distributed as part of an installment distribution, the
amount to be paid for such securities shall be paid not later than 30 days
after the exercise of the put option.
8.8 Diversification Requirements
Each Participant who has completed at least 10 years of participation in
the Plan and has attained age 55 may elect within 90 days after the close of
each Plan Year during his "qualified election period" to direct the Plan as to
the investment of at least 25% of his Employee Stock Ownership Account (to the
extent such percentage exceeds the amount to which a prior election under this
Section 8.8 had been made). For purposes of this Section 8.8, the term
"qualified election period" shall mean the five-Plan Year period beginning with
the Plan Year after the Plan Year in which the Participant attains age 55 (or,
if later, beginning with the Plan Year after the first Plan Year in which the
Employee first completes at least 10 years of participation in the Plan). In
the case of the Employee who has attained age 60 and completed 10 years of
participation in the prior Plan Year and in the case of the election year in
which any other Participant who has met the minimum age and service
requirements for diversification can make his last election hereunder, he shall
be entitled to direct the Plan as to the investment of at least 50% of his
Employee Stock Ownership Account (to the extent such percentage exceeds the
amount to which a prior election under this Section 8.8 had been made). The
Plan shall make available at least three investment options (not inconsistent
with regulations prescribed by the Department of Treasury) to each Participant
making an election hereunder. The Plan shall be deemed to have met the
requirements of this Section if the portion of the Participant's Employee Stock
Ownership Account covered by the election hereunder is distributed to the
Participant or his designated Beneficiary within 90 days after the period
during which the election may be made. In the absence of such a distribution,
the Trustee shall implement the Participant's election within 90 days following
the expiration of the qualified election period.
8.9 Independent Appraiser.
An independent appraiser meeting the requirements of Code 170(a)(1) shall
value the Employer Securities in those Plan Years when such securities are not
readily tradable on an established securities market.
8.10 Limitation on Allocations.
In the event that the Trustee acquires shares of Employer Securities in a
transaction to which section 1042 of the Code applies, such Shares shall not be
allocated, directly or indirectly, to any Participant described in Section
409(n)(1) of the Code for the duration of the "nonallocation period" (as
defined in Section 409(n)(3)(C) of the Code). Where any shares of Employer
Securities are prevented from being allocated due to he prohibition contained
in this
30
section the allocation of contributions otherwise provided under Section 5.5
shall be adjusted to reflect such result.
31
ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service -- In General.
All benefits provided under this Plan shall be funded by the value of a
Participant's vested interest in the Fund. As soon as practicable after a
Participant's Retirement, death or termination of Service, the Administrator
shall ascertain the value of his vested interest in the Fund, as provided in
Article V, and the Administrator shall hold or dispose of the same in
accordance with the following provisions of this Article IX.
9.2 Commencement of Payments.
(a) Distributions upon Retirement or Death. Upon a Participant's
Retirement or Death, payment of benefits under this Plan shall, unless the
Participant otherwise elects (in accordance with Section 9.3), commence no
later than six months after the close of the Plan Year in which occurs the date
of the Participant's Retirement or death.
(b) Distribution following Termination of Service. Unless a Participant
elects otherwise, if a Participant terminates Service prior to Retirement or
death, he shall be accorded an opportunity to commence receipt of distributions
from his Accounts within six months after the Valuation Date next following the
date of his termination of service. A Participant who terminates Service with a
deferred vested benefit shall be entitled to receive from the Administrator a
statement of his benefits. In the event that a Participant elects not to
commence receipt of distributions from his Accounts in accordance with this
Section 9.2(b), after the Participant incurs a Break, the Administrator shall
transfer his deferred vested interest to a distribution account. If a
Participant's vested Employer Account does not exceed (or at the time of any
prior distribution did not exceed) $5,000, the Plan Administrator may
distribute the vested portion of his Employer Account as soon as
administratively feasible without the consent of the Participant or his spouse.
(c) Distribution of Accounts Greater Than $5,000. If the value of a
Participant's vested Account balance exceeds (or at the time of any prior
distribution exceeded) $5,000 (o $5,000 for Plan Years beginning August 5,
1997), and the Account balance is immediately distributable, the Participant
must consent to any distribution of such Account balance. The Plan
Administrator shall notify the Participant of the right to defer any
distribution until the Participant's Account balance is no longer immediately
distributable. The consent of the Participant shall not be required to the
extent that a distribution is required to satisfy Code Section 401(a)(9) or
Code Section 415.
32
9.3 Mandatory Commencement of Benefits.
(a) Unless a Participant elects otherwise, in writing, distribution of
benefits will begin no later than the 60th day after the latest of the close of
the Plan Year in which (i) the Participant attains age 65, (ii) occurs the
tenth anniversary of the year in which the Participant commenced participation
in the Plan Year, or (iii) the Participant terminates Service with the
Employer.
(b) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, as of the first distribution
calendar year, distributions, if not made in a lump sum, may be made only over
one of the following periods (or a combination thereof):
(i) the life of the Participant,
(ii) the life of the Participant and the designated beneficiary,
(iii) a period certain not extending beyond the life expectancy of the
Participant, or
(iv) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, if the participant's interest
is to be distributed in other than a lump sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(i) If a Participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy
of the Participant and the Participant's designated
beneficiary or (2) a period not extending beyond the life
expectancy of the designated beneficiary, the amount
required to be distributed for each calendar year,
beginning with distributions for the first distribution
calendar year, must at least equal the quotient obtained by
dividing the Participant's benefit by the applicable life
expectancy.
(ii) The amount to be distributed each year, beginning with
distributions for the first distribution calendar year
shall not be less than the quotient obtained by dividing
the Participant's benefit by the lesser of (1) the
applicable life expectancy or (2) if the Participant's
spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of
section 1.401(a)(9)-2 of the Proposed Regulations.
Distributions after the death of the participant shall be
distributed using the
33
applicable life expectancy in sub-section (iii) above as the
relevant divisor without regard to Proposed Regulations
1.401(a)(9)-2.
(iii) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution for
other calendar years, including the minimum distribution for the
distribution calendar year in which the employee's required
beginning date occurs, must be made on or before December 31 of the
distribution calendar year.
(d) If a Participant dies after a distribution has commenced in
accordance with Section 8.3(b) but before his entire interest has been
distributed to him, the remaining portion of such interest shall be distributed
to his Beneficiary at least as rapidly as under the method of distribution in
effect as of the date of his death.
(e) If a Participant shall die before the distribution of his interest in
the Plan has begun, the entire interest of the Participant shall be distributed
by December 31 of the calendar year containing the fifth anniversary of the
death of the Participant, except in the following events:
(i) If any portion of the Participant's interest is payable to (or for
the benefit of) a designated beneficiary over a period not
extending beyond the life expectancy of such beneficiary and such
distributions begin not later than December 31 of the calendar year
immediately following the calendar year in which the Participant
died.
(ii) If any portion of the Participant's interest is payable to (or for
the benefit of) the Participant's spouse over a period not
extending beyond the life expectancy of such spouse and such
distributions begin no later than December 31 of the calendar year
in which the Participant would have attained age 70-1/2.
If the Participant has not made a distribution election by the time
of his death, the Participant's designated beneficiary shall elect
the method of distribution no later than the earlier of (1)
December 31 of the calendar year in which distributions would be
required to begin under this Article or (2) December 31 of the
calendar year which contains the fifth anniversary of the date of
death of the Participant. If the Participant has no designated
beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the Participant's entire
interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
(f) For purposes of this Article, the life expectancy of a Participant
and his spouse may be redetermined but not more frequently than annually. The
life expectancy (or joint and last
34
survivor expectancy) shall be calculated using the attained age of the
Participant (or designated beneficiary) as of the Participant's (or designated
beneficiary's) birthday in the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so recalculated. The applicable
calendar year shall be the first distribution calendar year, and if life
expectancy is being recalculated, such succeeding calendar year. Unless
otherwise elected by the Participant (or his spouse, if applicable) by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Any such election not to recalculate shall be irrevocable and shall
apply to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
(g) For purposes of Section 9.3(b) and 9.3(e), any amount paid to a child
shall be treated as if it had been paid to a surviving spouse if such amount
will become payable to the surviving spouse upon such child reaching majority
(or other designated event permitted under regulations).
(h) For distributions beginning before the Participant's death, the first
distribution calendar year is the calendar year immediately preceding the
calendar year which contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are required to begin
pursuant to this Article.
9.4 Required Beginning Dates.
The required beginning date of a Participant is the first day of April of
the calendar year following the later of (1) calendar year in which the
participant attains age 70-1/2 or (2) the calendar year in which the
Participant terminated his employment, unless he is a 5% owner (as defined in
Section 416) with respect to the Plan Year ending in the calendar year in which
he attains age 70-1/2, in which case clause (2) shall not apply.
9.5 Form of Payment.
Each Participant's vested interest shall be distributed in a lump sum
payment. Notwithstanding the preceding sentence, but subject to Section 9.3,
the Administrator may not distribute a lump sum when the present value of a
Participant's total Account balances is in excess of $5,000 without the
Participant's consent. This form of payment shall be the normal form of
distribution provided, however, that in the event that the Administrator must
commence distributions with respect to an Employee who has attained age 70-1/2
and is still employed by the Employer, if the Employee does not elect a lump
sum distribution, payments shall be made in installments in such amounts as
shall satisfy the minimum distribution rules of Section 9.3.
9.6 Payments Upon Termination of Plan.
Upon termination of this Plan pursuant to Sections 13.2, 13.4, 13.5 or
13.6, the Administrator shall continue to perform its duties and the Trustee
shall make all payments upon
35
the following terms, conditions and provisions: All interests of Participants
shall immediately become fully vested; the value of the interests of all
Participants shall be determined within 60 days after such termination, and the
Administrator shall have the same powers to direct the Trustee in making
payments as contained in Sections 9.1 and 13.5.
9.7 Distributions Pursuant to Qualified Domestic Relations Orders.
Upon receipt of a domestic relations order, the Administrator shall
notify promptly the Participant and any alternate payee of receipt of the order
and the Plan's procedure for determining whether the order is a Qualified
Domestic Relations Order. While the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined, if the benefits
would otherwise be paid, the Administrator shall segregate in a separate
account in the Plan the amounts that would be payable to the alternate payee
during such period if the order were a Qualified Domestic Relations Order. If
within 18 months the order is determined to be a Qualified Domestic Relations
Order, the amounts so segregated, along with the interest or investment
earnings attributable thereto shall be paid to the alternate payee.
Alternatively, if within 18 months, it is determined that the order is not a
Qualified Domestic Relations Order or if the issue is still unresolved, the
amounts segregated under this Section 9.6, with the earnings attributable
thereto, shall be paid to the Participant or Beneficiary who would have been
entitled to such amounts if there had been no order. The determination as to
whether the order is qualified shall be applied prospectively. Thus, if the
Administrator determines that the order is a Qualified Domestic Relations Order
after the 18-month period, the Plan shall not be liable for payments to the
alternative payee for the period before the order is determined to be a
Qualified Domestic Relations Order.
9.8 Cash-Out Distributions
If a Participant receives a distribution of the entire present value of
his vested Account balances under this Plan because of the termination of his
participation in the Plan, the Plan shall disregard a Participant's Service
with respect to which such cash-out distribution shall have been made, in
computing his accrued benefit under the Plan in the event that a Former
Participant shall again become an Employee and become eligible to participate
in the Plan. Such a distribution shall be deemed to be made on termination of
participation in the Plan if it is made not later than the close of the second
Plan Year following the Plan Year in which such termination occurs. The
forfeitable portion of a Participant's accrued benefit shall be restored upon
repayment to the Plan by such former Participant of the full amount of the
cash-out distribution, provided that the former Participant again becomes an
Employee. Such repayment must be made by the Employee not later than the end of
the five-year period beginning with the date of the distribution. Forfeitures
required to be restored by virtue of such repayment shall be restored from the
following sources in the following order of preference: (i) current
forfeitures; (ii) additional employee stock ownership contributions, as
appropriate and as subject to Section 5.6; and (iii) investment earnings of the
Fund. In the event that a Participant's interest in the Plan is totally
forfeitable, a Participant shall be deemed to have received a distribution of
zero upon his termination of Service. In the event of a return to Service
within five years of the date of his
36
deemed distribution, the Participant shall be deemed to have repaid his
distribution in accordance with the rules of this Section 9.8.
9.9 ESOP Distribution Rules.
Notwithstanding any provision of this Article IX to the contrary, the
distribution of a Participant's Employee Stock Ownership Account (unless the
Participant elects otherwise in writing), shall commence as soon as
administratively feasible as of the first Valuation Date coincident with or
next following his death, disability or termination of Service, but not later
than one year after the close of the Plan Year in which the Participant
separates from Service by reason of the attainment of his Normal Retirement
Date, disability, death or separation from Service. In addition, all
distributions hereunder shall, to the extent that the Participant's Account is
invested in Employer Securities, be made in the form of Employer Securities.
Fractional shares, however, may be distributed in the form of cash.
9.10 Withholding.
(a) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Article IX, a distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an "eligible rollover distribution" paid directly to an
"eligible retirement plan" specified by the distributee in a "direct rollover."
(b) For purposes of this Section 9.10, an "eligible rollover
distribution" is any distribution of all or any portion of the balance to the
credit of the distributee, except that an "eligible rollover distribution" does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of 10 years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
Employer Securities).
(c) For purposes of this Section 9.10, an "eligible retirement plan" is
an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an "eligible rollover
distribution" to the surviving spouse, an "eligible retirement plan" is an
individual retirement account or individual retirement annuity.
(d) For purposes of this Section 9.10, a distributee includes a
Participant or former Participant. In addition, the Participant's or former
Participant's surviving spouse and the Participant's or former Participant's
spouse or former spouse who is the alternate payee under
37
a qualified domestic relations order, as defined in section 414(p) of the Code,
are "distributees" with regard to the interest of the spouse or former spouse.
(e) For purposes of this Section 9.10, a "direct rollover" is a payment
by the Plan to the "eligible retirement plan" specified by the distributee.
9.11 Waiver of 30-day Notice.
If a distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that: (1) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and (2) the Participant,
after receiving the notice, affirmatively elects a distribution.
38
ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control.
Anything contained in this Plan to the contrary notwithstanding, if for
any Plan Year the Plan is a top-heavy plan, as determined pursuant to Section
416 of the Code, then the Plan must meet the requirements of this Article X for
such Plan Year.
10.2 Top-Heavy Plan Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Article X shall have the following meanings:
(a) "Accrued Benefit" shall mean the account balances or accrued benefits
of an Employee, calculated pursuant to Section 10.3.
(b) "Determination Date" shall mean, with respect to any particular Plan
Year of this Plan, the last day of the preceding Plan Year (or, in the case of
the first Plan Year of the Plan, the last day of the first Plan Year). In
addition, the term "Determination Date" shall mean, with respect to any
particular plan year of any plan (other than this Plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the last day of the plan
year of such plan which falls within the same calendar year as the
Determination Date for this Plan.
(c) "Employer" shall mean the Employer (as defined in Section 1.1(q)) and
any entity which is (1) a member of a controlled group including such Employer,
while it is a member of such controlled group (within the meaning of Section
414(b) of the Code), (2) in a group of trades or businesses under common
control with such Employer, while it is under common control (within the
meaning of Section 414(c) of the Code), and (3) a member of an affiliated
service group including such Employer, while it is a member of such affiliated
service group (within the meaning of Section 414(m) of the Code).
(d) "Key Employee" shall mean any Employee or former Employee (or any
Beneficiary of such Employee or former Employee, as the case may be) who, at
any time during the Plan Year or during the four immediately preceding Plan
Years is one of the following:
(1) An officer of the Employer who has compensation greater than 50% of
the amount in effect under Code 415(b)(1)(A) for the Plan Year;
provided, however, that no more than 50 Employees (or, if lesser,
the greater of three or 10% of the Employees) shall be deemed
officers;
(2) One of the 10 Employees having annual compensation (as defined in
Section 415 of the Code) in excess of the limitation in effect
under Section
39
415(c)(1)(A) of the Code, and owning (or considered as owning,
within the meaning of Section 318 of the Code) the largest
interests in the Employer;
(3) Any Employee owning (or considered as owning, within the meaning of
Section 318 of the Code) more than 5% of the outstanding stock of
the Employer or stock possessing more than 5% of the total combined
voting power of all stock of the Employer; or
(4) Any Employee having annual compensation (as defined in Section 415
of the Code) of more than $150,000 and who would be described in
Section 10.2(d)(3) if "1%" were substituted for "5%" wherever the
latter percentage appears.
For purposes of applying Section 318 of the Code to the provisions
of this Section 10.2(d), Section 318(a)(2)(C) of the Code shall be
applied by substituting "5%" for "50%" wherever the latter
percentage appears. In addition, for purposes of this Section
10.2(d), the provisions of Section 414(b), (c) and (m) shall not
apply in determining ownership interests in the Employer. However,
for purposes of determining whether an individual has compensation
in excess of $150,000, or whether an individual is a Key Employee
under Section 10.2(d)(1) and (2), compensation from each entity
required to be aggregated under Sections 414(b), (c) and (m) of the
Code shall be taken into account. Notwithstanding anything
contained herein to the contrary, all determinations as to whether
a person is or is not a Key Employee shall be resolved by reference
to Section 416 of the Code and any rules and regulations
promulgated thereunder.
(e) "Non-Key Employee" shall mean any Employee or former Employee (or any
Beneficiary of such Employee or former Employee, as the case may be) who is not
considered to be a Key Employee with respect to this Plan.
(f) "Permissive Aggregation Group" shall mean all plans in the Required
Aggregation Group and any other plans maintained by the Employer which satisfy
Sections 401(a)(4) and 410 of the Code when considered together with the
Required Aggregation Group.
(g) "Required Aggregation Group" shall mean each plan (including any
terminated plan) of the Employer in which a Key Employee is (or in the case of
a terminated plan, had been) a Participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and each other plan
of the Employer which enables any plan of the Employer in which a Key Employee
is a Participant to meet the requirement of Sections 401(a)(4) and 410 of the
Code.
40
10.3 Calculation of Accrued Benefits.
(a) An Employee's Accrued Benefit shall be equal to:
(1) With respect to this Plan or any other defined contribution plan
(other than a defined contribution pension plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the Employee's
account balances under the respective plan, determined as of the
most recent plan valuation date within a 12-month period ending on
the Determination Date, including contributions actually made after
the valuation date but before the Determination Date (and, in the
first plan year of a plan, also including any contributions made
after the Determination Date which are allocated as of a date in
the first plan year).
(2) With respect to any defined contribution pension plan in a Required
Aggregation Group or a Permissive Aggregation Group, the Employee's
account balances under the plan, determined as of the most recent
plan valuation date within a 12-month period ending on the
Determination Date, including contributions which have not actually
been made, but which are due to be made as of the Determination
Date.
(3) With respect to any defined benefit plan in a Required Aggregation
Group or a Permissive Aggregation Group, the present value of the
Employee's accrued benefits under the plan, determined as of the
most recent plan valuation date within a 12-month period ending on
the Determination Date, pursuant to the actuarial assumptions used
by such plan, and calculated as if the Employee terminated Service
under such plan as of the valuation date (except that, in the first
plan year of a plan, a current Participant's estimated Accrued
Benefit Plan as of the Determination Date shall be taken into
account).
(4) If any individual has not performed services for the Employer
maintaining the Plan at any time during the five-year period ending
on the Determination Date, any Accrued Benefit for such individual
shall not be taken into account.
(b) The Accrued Benefit of any Employee shall be further adjusted as
follows:
(1) The Accrued Benefit shall be calculated to include all amounts
attributable to both Employer and Employee contributions, but shall
exclude amounts attributable to voluntary deductible Employee
contributions, if any.
41
(2) The Accrued Benefit shall be increased by the aggregate
distributions made with respect to an Employee under the plan or
plans, as the case may be, during the five-year period ending on
the Determination Date.
(3) Rollover and direct plan-to-plan transfers shall be taken into
account as follows:
(A) If the transfer is initiated by the Employee and made from a
plan maintained by one employer to a plan maintained by
another unrelated employer, the transferring plan shall
continue to count the amount transferred; the receiving plan
shall not count the amount transferred.
(B) If the transfer is not initiated by the Employee or is made
between plans maintained by related employers, the
transferring plan shall no longer count the amount
transferred; the receiving plan shall count the amount
transferred.
(c) If any individual has not performed services for the Employer at any
time during the five-year period ending on the Determination Date, any accrued
benefit for such individual (and the account of such individual) shall not be
taken into account.
10.4 Determination of Top-Heavy Status.
This Plan shall be considered to be a top-heavy plan for any Plan Year
if, as of the Determination Date, the value of the Accrued Benefits of Key
Employees exceeds 60% of the value of the Accrued Benefits of all eligible
Employees under the Plan. Notwithstanding the foregoing, if the Employer
maintains any other qualified plan, the determination of whether this Plan is
top-heavy shall be made after aggregating all other plans of the Employer in
the Required Aggregation Group and, if desired by the Employer as a means of
avoiding top-heavy status, after aggregating any other plan of the Employer in
the Permissive Aggregation Group. If the required Aggregation Group is
top-heavy, then each plan contained in such group shall be deemed to be
top-heavy, notwithstanding that any particular plan in such group would not
otherwise be deemed to be top-heavy. Conversely, if the Permissive Aggregation
Group is not top-heavy, then no plan contained in such group shall be deemed to
be top-heavy, notwithstanding that any particular plan in such group would
otherwise be deemed to be top-heavy. In no event shall a plan included in a
top-heavy Permissive Aggregation Group be deemed a top-heavy plan unless such
plan is also included in a top-heavy Required Aggregation Group.
42
10.5 Determination of Super Top-Heavy Status.
The Plan shall be considered to be a super top-heavy plan if, as of the
Determination Date, the Plan would meet the test specified in Section 10.4
above for classification as a top-heavy plan, except that "90%" shall be
substituted for "60%" whenever the latter percentage appears.
10.6 Minimum Contribution.
(a) For any year in which the Plan is top-heavy, each Non-Key Employee
who has met the age and service requirements, if any, contained in the Plan,
shall be entitled to a minimum contribution (which may include forfeitures
otherwise allocable) equal to a percentage of such Non-Key Employee's
compensation (as defined in Section 415 of the Code) as follows:
(1) If the Non-Key Employee is not covered by a defined benefit plan
maintained by the Employer, then the minimum contribution under
this Plan shall be 3% of such Non-Key Employee's compensation.
(2) If the Non-Key Employee is covered by a defined benefit plan
maintained by the Employer, then the minimum contribution under
this Plan shall be 5% of such Non-Key Employee's compensation.
(b) Notwithstanding the foregoing, the minimum contribution otherwise
allocable to a Non-Key Employee under this Plan shall be reduced in the
following circumstances:
(1) The percentage minimum contribution required under this Plan shall
in no event exceed the percentage contribution made for the Key
Employee for whom such percentage is the highest for the Plan Year
after taking into account contributions under other defined
contribution plans in this Plan's Required Aggregation Group;
provided, however, that this Section 10.7(b)(1) shall not apply if
this Plan is included in a Required Aggregation Group and this Plan
enables a defined benefit plan in such Required Aggregation Group
to meet the requirements of Section 401(a)(4) or 410 of the Code.
(2) No minimum contribution shall be required (or the minimum
contribution shall be reduced, as the case may be) for a Non-Key
Employee under this Plan for any Plan Year if the Employer
maintains another qualified plan under which a minimum benefit or
contribution is being accrued or made on account of such Plan Year,
in whole or in part, on behalf of the Non-Key Employee, in
accordance with Section 416(c) of the Code.
(c) For purposes of this Section 10.6, there shall be disregarded (1) any
Employer contributions attributable to a salary reduction or similar
arrangement, or (2) any Employer
43
contributions to or any benefits under Chapter 21 of the Code (relating to the
Federal Insurance Contributions Act), Title II of the Social Security Act, or
any other federal or state law.
(d) For purposes of this Section 10.6, minimum contributions shall be
required to be made on behalf of only those Non-Key Employees, as described in
Section 10.7(a), who have not terminated Service as of the last day of the Plan
Year. If a Non-Key Employee is otherwise entitled to receive a minimum
contribution pursuant to this Section 10.6(d), the fact that such Non-Key
Employee failed to complete 1,000 Hours of Service or failed to make any
mandatory or elective contributions under this Plan, if any are so required,
shall not preclude him from receiving such minimum contribution.
10.7 Maximum Benefit Limitation.
For any Plan Year in which the Plan is a top-heavy plan, Section
5.6(d)(1)(B)(i) and Section 5.6(d)(2)(B)(i)shall be read by substituting "1.0"
for "1.25" wherever the latter figure appears; provided, however, that such
substitution shall not have the effect of reducing any benefit accrued under a
defined benefit plan prior to the first day of the plan year in which this
Section 10.8 becomes applicable.
10.8 Vesting.
(a) For any Plan Year in which the Plan is a top-heavy plan, a
Participant's Employer account shall continue to vest according to the schedule
set forth in Section 7.2.
(b) For purposes of Section 10.8(a), the term "year of service" shall
have the same meaning as set forth in Section 1.1(kk), as modified by Section
3.2
(c) If for any Plan Year the Plan becomes top-heavy and the vesting
schedule set forth in Section 10.8(a) becomes effective, then, even if the Plan
ceases to be top-heavy in any subsequent Plan Year, the vesting schedule set
forth in Section 10.8(a) shall remain applicable with respect to any
Participant who has completed 3 Years of Service.
44
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Administrator.
This Plan shall be administered by a committee consisting of up to five
persons, whether or not Employees or Participants, who shall be appointed from
time to time by the Board of Directors to serve at its pleasure. The Sponsor
may require that each person appointed as an Administrator shall signify his
acceptance by filing an acceptance with the Sponsor. The term "Administrator"
as used in this Plan shall refer to the members of the committee, either
individually or collectively, as appropriate. In the event that the Sponsor
shall elect not to appoint any individuals to constitute a committee to
administer the Plan, the Sponsor shall serve as the Administrator hereunder.
11.2 Resignation or Removal of Administrator.
An Administrator shall have the right to resign at any time by giving
notice in writing, mailed or delivered to the Employer and to the Trustee. Any
Administrator who was an employee of the Employer at the time of his
appointment shall be deemed to have resigned as an Administrator upon his
termination of Service. The Board of Directors may, in its discretion, remove
any Administrator with or without cause, by giving notice in writing, mailed or
delivered to the Administrator and to the Trustee.
11.3 Appointment of Successors: Terms of Office, Etc.
Upon the death, resignation or removal of an Administrator, the Employer
may appoint, by Board of Directors' resolution, a successor or successors.
Notice of termination of an Administrator and notice of appointment of a
successor shall be made by the Employer in writing, with copies mailed or
delivered to the Trustee, and the successor shall have all the rights and
privileges and all of the duties and obligations of the predecessor.
11.4 Powers and Duties of Administrator.
The Administrator shall have the following duties and responsibilities in
connection with the administration of this Plan:
(a) To promulgate and enforce such rules, regulations and procedures as
shall be proper for the efficient administration of the Plan, such rules,
regulations and procedures to apply uniformly to all Employees, Participants
and Beneficiaries;
(b) To determine all questions arising in the administration,
interpretation and application of the Plan, including questions of eligibility
and of the status and rights of Participants, Beneficiaries and any other
persons hereunder;
45
(c) To decide any dispute arising hereunder strictly in accordance with
the terms of the Plan; provided, however, that no Administrator shall
participate in any matter involving any questions relating solely to his own
participation or benefits under this Plan;
(d) To advise the Employer and the Trustee regarding the known future
needs for funds to be available for distribution in order that the Trustee may
establish investments accordingly;
(e) To correct defects, supply omissions and reconcile inconsistencies to
the extent necessary to effectuate the Plan;
(f) To advise the Employer of the maximum deductible contribution to the
Plan for each fiscal year;
(g) To direct the Trustee concerning all payments which shall be made out
of the Fund pursuant to the provisions of this Plan;
(h) To advise the Trustee on all terminations of Service by Participants,
unless the Employer has so notified the Trustee;
(i) To confer with the Trustee on the settling of any claims against the
Fund;
(j) To make recommendations to the Board of Directors with respect to
proposed amendments to the Plan and the Trust Agreement;
(k) To file all reports with government agencies, Employees and other
parties as may be required by law, whether such reports are initially the
obligation of the Employer, the Plan or the Trustee; and
(l) To have all such other powers as may be necessary to discharge its
duties hereunder.
Reasonable discretion is granted to the Administrator to affect the
benefits, rights and privileges of Participants, Beneficiaries or other persons
affected by this Plan. The Administrator shall exercise reasonable discretion
under the terms of this Plan and shall administer the Plan strictly in
accordance with its terms, such administration to be exercised uniformly so
that all persons similarly situated shall be similarly treated.
11.5 Action by Administrator.
The Administrator may elect a Chairman and Secretary from among its
members and may adopt rules for the conduct of its business. A majority of the
members then serving shall constitute a quorum for the transaction of business.
All resolutions or other action taken by the Administrator shall be by vote of
a majority of those present at such meeting and entitled to vote. Resolutions
may be adopted or other action taken without a meeting upon written consent
signed by at least a majority of the members. All documents, instruments,
orders, requests, directions,
46
instructions and other papers shall be executed on behalf of the Administrator
by either the Chairman or the Secretary of the Administrator, if any, or by any
member or agent of the Administrator duly authorized to act on the
Administrator's behalf.
11.6 Participation by Administrators.
No Administrator shall be precluded from becoming a Participant in the
Plan if he would be otherwise eligible, but he shall not be entitled to vote or
act upon matters or to sign any documents relating specifically to his own
participation under the Plan, except when such matters or documents relate to
benefits generally. If this disqualification results in the lack of a quorum,
then the Board of Directors shall appoint a sufficient number of temporary
Administrators who shall serve for the sole purpose of determining such a
question.
11.7 Agents.
The Administrator may employ agents and provide for such clerical, legal,
actuarial, accounting, medical, advisory or other services as it deems
necessary to perform its duties under this Plan. The cost of such services and
all other expenses incurred by the Administrator in connection with the
administration of the Plan shall be paid from the Fund, unless paid by the
Employer.
11.8 Allocation of Duties.
The duties, powers and responsibilities reserved to the Administrator may
be allocated among its members so long as such allocation is pursuant to
written procedures adopted by the Administrator, in which case, except as may
be required by the Act, no Administrator shall have any liability, with respect
to any duties, powers or responsibilities not allocated to him, for the acts of
omissions of any other Administrator.
11.9 Delegation of Duties.
The Administrator may delegate any of its duties to other employees of
the Employer, to the Trustee with its consent, or to any other person or firm,
provided that the Administrator shall prudently choose such agents and rely in
good faith on their actions.
11.10 Administrator's Action Conclusive.
Any action on matters within the authority of the Administrator shall be
final and conclusive except as provided in Article XII.
11.11 Compensation and Expenses of Administrator.
No Administrator who is receiving compensation from the Employer as a
full-time employee, as a director or agent, shall be entitled to receive any
compensation or fee for his
47
services hereunder. Any other Administrator shall be entitled to receive such
reasonable compensation for his services as an Administrator hereunder as may
be mutually agreed upon between the Employer and such Administrator. Any such
compensation shall be paid from the Fund, unless paid by the Employer. Each
Administrator shall be entitled to reimbursement by the Employer for any
reasonable and necessary expenditures incurred in the discharge of his duties.
11.12 Records and Reports.
The Administrator shall maintain adequate records of its actions and
proceedings in administering this Plan and shall file all reports and take all
other actions as it deems appropriate in order to comply with the Act, the Code
and governmental regulations issued thereunder.
11.13 Reports of Fund Open to Participants.
The Administrator shall keep on file, in such form as it shall deem
convenient and proper, all annual reports of the Fund received by the
Administrator from the Trustee, and a statement of each Participant's interest
in the Fund as from time to time determined. The annual reports of the Fund and
the statement of his own interest in the Fund, as well as a complete copy of
the Plan and the Trust Agreement and copies of annual reports to the Internal
Revenue Service, shall be made available by the Administrator to the Employer
for examination by each Participant during reasonable hours at the office of
the Employer, provided, however, that the statement of a Participant's interest
shall not be made available for examination by any other Participant.
11.14 Named Fiduciary.
The Administrator is the named fiduciary for purposes of the Act and
shall be the designated agent for receipt of service of process on behalf of
the Plan. It shall use ordinary care and diligence in the performance of its
duties under this Plan. Nothing in this Plan shall preclude the Employer from
indemnifying the Administrator for all actions under this Plan, or from
purchasing liability insurance to protect it with respect to its duties under
this Plan.
11.15 Information from Employer.
The Employer shall promptly furnish all necessary information to the
Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the Employer, unless it knows or should have
known that such information is erroneous.
11.16 Reservation of Rights by Employer.
Where rights are reserved in this Plan to the Employer, such rights shall
be exercised only by action of the Board of Directors, except where the Board
of Directors, by written resolution, delegates any such rights to one or more
officers of the Employer or to the Administrator.
48
Subject to the rights reserved to the Board of Directors acting on behalf of
the Employer as set forth in this Plan, no member of the Board of Directors
shall have any duties or responsibilities under this Plan, except to the extent
he shall be acting in the capacity of an Administrator or Trustee.
11.17 Liability and Indemnification.
(a) The Administrator shall perform all duties required of it under this
Plan in a prudent manner. To the extent not prohibited by the Act, the
Administrator shall not be responsible in any way for any action or omission of
the Employer, the Trustee or any other fiduciaries in the performance of their
duties and obligations set forth in this Plan and in the Trust Agreement. To
the extent not prohibited by the Act, the Administrator shall also not be
responsible for any act or omission of any of its agents, or with respect to
reliance upon advice of its counsel (whether or not such counsel is also
counsel to the Employer or the Trustee), provided that such agents or counsel
were prudently chosen by the Administrator and that the Administrator relied in
good faith upon the action of such agent or the advice of such counsel.
(b) The Administrator shall not be relieved from responsibility or
liability for any responsibility, obligation or duty imposed upon it under this
Plan or under the Act. Except for its own gross negligence, willful misconduct
or willful breach of the terms of this Plan, the Administrator shall be
indemnified and held harmless by the Employer against liability or losses
occurring by reason of any act or omission of the Administrator to the extent
that such indemnification does not violate the Act or any other federal or
state laws.
11.18 Service as Trustee and Administrator.
Nothing in this Plan shall prevent one or more Trustees from serving as
Administrator under this Plan.
49
ARTICLE XII
CLAIMS PROCEDURE
12.1 Notice of Denial.
If a Participant or his Beneficiary is denied any benefits under this
Plan, either in whole or in part, the Administrator shall advise the claimant
in writing of the amount of his benefit, if any, and the specific reasons for
the denial. The Administrator shall also furnish the claimant at that time with
a written notice containing:
(a) A specific reference to pertinent Plan provisions;
(b) A description of any additional material or information necessary for
the claimant to perfect his claim, if possible, and an explanation of why such
material or information is needed; and
(c) An explanation of the Plan's claim review procedure.
12.2 Right to Reconsideration.
Within 60 days of receipt of the information described in 12.1 above, the
claimant shall, if he desires further review, file a written request for
reconsideration with the Administrator.
12.3 Review of Documents.
So long as the claimant's request for review is pending (including the
60-day period described in Section 12.2 above), the claimant or his duly
authorized representative may review pertinent Plan documents and the Trust
Agreement (and any pertinent related documents) and may submit issues and
comments in writing to the Administrator.
12.4 Decision by Administrator.
A final and binding decision shall be made by the Administrator within 60
days of the filing by the claimant of his request for reconsideration;
provided, however, that if the Administrator feels that a hearing with the
claimant or his representative present is necessary or desirable, this period
shall be extended an additional 60 days.
12.5 Notice by Administrator.
The Administrator's decision shall be conveyed to the claimant in writing
and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific references to the
pertinent Plan provisions on which the decision is based.
50
ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments.
The Employer reserves the right at any time and from time to time, and
retroactively if deemed necessary or appropriate by it, to the extent
permissible under law, to conform with governmental regulations or other
policies, to amend in whole or in part any or all of the provisions of this
Plan, provided that:
(a) No amendment shall make it possible for any part of the Fund to be
used for, or diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Trust Agreement, except to the
extent provided in Section 4.4;
(b) No amendment may, directly or indirectly, reduce the vested portion
of any Participant's interest as of the effective date of the amendment or
change the vesting schedule with respect to the future accrual of Employer
contributions for any Participants unless each Participant with three or more
Years of Service with the Employer is permitted to elect to have the vesting
schedule in effect before the amendment used to determine his vested benefit;
(c) No amendment may eliminate an optional form of benefit;
(d) No amendment may increase the duties of the Trustee without its
consent; and
(e) No amendment that shall change any of the following types of
provisions shall be made more than once every six months, other than to comport
with changes in the Code, the Act or the regulations thereunder: (i) any
provision stating the amount and price of Employer Securities to be awarded to
designated officers and directors or categories of officers and directors; (ii)
any provisions specifying the timing of awards or allocations to officers and
directors; (iii) any provision setting forth a formula that determines the
amount, price and timing of allocations or awards, using objective criteria
such as earnings of the issuer, value of the Employer Securities, Years of
Service, job classification and Compensation levels.
Amendments may be made in the form of Board of Directors' resolutions or
separate written document. Copies of all amendments shall be delivered to the
Trustee.
13.2 Consolidation, Merger or Other Transactions of Employer.
Nothing in this Plan shall prevent the consolidation, merger,
reorganization or liquidation of the Employer, or prevent the sale by Employer
of any or all of its property. Any successor corporation or other entity formed
and resulting from any such transaction shall have the right to become a party
to this Plan by adopting the same by resolution and by appointing a new Trustee
as though the Trustee had resigned in accordance with the Trust Agreement, and
by
51
executing a proper supplemental agreement with the Trustee. If, within 180 days
from the effective date of such transaction, such new entity does not become a
party to this Plan as above provided, this Plan shall automatically be
terminated and the Trustee shall make payments to the persons entitled thereto
in accordance with Section 9.5.
13.3 Consolidation or Merger of Trust.
In the event of any merger or consolidation of the Fund with, or transfer
in whole or in part of the assets and liabilities of the Fund to, another trust
fund held under any other plan of deferred compensation maintained or to be
established for the benefit of all or some of the Participants of this Plan,
the assets of the Fund applicable to such Participants shall be transferred to
the other trust fund only if:
(a) Each Participant would receive a benefit under such successor trust
fund immediately after the merger, consolidation or transfer which is equal to
or greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer (determined as if this Plan and
such transferee trust fund had then terminated);
(b) Resolutions of the Board of Directors under this Plan, or of any new
or successor employer of the affected Participants, shall authorize such
transfer of assets, and, in the case of the new or successor employer of the
affected Participants, its resolutions shall include an assumption of
liabilities with respect to such Participants' inclusion in the new employer's
plan; and
(c) Such other plan and trust are qualified under Sections 401(a) and
501(a) of the Code.
13.4 Bankruptcy or Insolvency of Employer.
In the event of (a) the Employer's legal dissolution or liquidation by
any procedure other than a consolidation or merger, (b) the Employer's
receivership, insolvency, or cessation of its business as a going concern, or
(c) the commencement of any proceeding by or against the Employer under the
federal bankruptcy laws, and similar federal or state statute, or any federal
or state statute or rule providing for the relief of debtors, compensation of
creditors, arrangement, receivership, liquidation or any similar event which is
not dismissed within 30 days, this Plan shall terminate automatically on such
date (provided, however, that if a proceeding is brought against the Employer
for reorganization under Chapter 11 of the United States Bankruptcy Code or any
similar federal or state statute, then this Plan shall terminate automatically
if and when said proceeding results in a liquidation of the Employer, or the
approval of any Plan providing therefor, or the proceeding is converted to a
case under Chapter 7 of the Bankruptcy Code or any similar conversion to a
liquidation proceeding under federal or state law including, but not limited
to, a receivership proceeding). In the event of any such termination as
provided in the foregoing sentence, the Trustee shall make payments to the
persons entitled thereto in accordance with Section 9.5 hereof.
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13.5 Voluntary Termination.
The Board of Directors reserves the right to terminate this Plan at any time by
giving to the Trustee and the Administrator notice in writing of such desire to
terminate. The Plan shall terminate upon the date of receipt of such notice,
the interests of all Participants shall become fully vested, and the Trustee
shall make payments to each Participant or Beneficiary in accordance with
Section 9.5. Alternatively, the Employer, in its discretion, may determine to
continue the Trust Agreement and to continue the maintenance of the Fund, in
which event distributions shall be made upon the contingencies and in all the
circumstances which would have been entitled such distributions on a fully
vested basis, had there been no termination of the Plan.
13.6 Partial Termination of Plan or Permanent Discontinuance of
Contributions.
In the event that a partial termination of the Plan shall be deemed to
have occurred, or if the Employer shall discontinue completely its
contributions hereunder, the right of each affected Participant to his interest
in the Fund shall be fully vested. The Employer, in its discretion, shall
decide whether to direct the Trustee to make immediate distribution of such
portion of the Fund assets to the persons entitled thereto or to make
distribution in the circumstances and contingencies which would have controlled
such distributions if there had been no partial termination or discontinuance
of contributions.
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ARTICLE XIV
MISCELLANEOUS
14.1 No Diversion of Funds.
It is the intention of the Employer that it shall be impossible for any
part of the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of the Participants or their
Beneficiaries, except to extent that a return of the Employer's contribution is
permitted under Section 4.4.
14.2 Liability Limited.
Neither the Employer nor the Administrator, nor any agents, employees,
officers, directors or shareholders of any of them, nor the Trustee, nor any
other person shall have any liability or responsibility with respect to this
Plan, except as expressly provided herein.
14.3 Incapacity.
If the Administrator shall receive evidence satisfactory to it that a
Participant or Beneficiary entitled to receive any benefit under the Plan is,
at the time when such benefit becomes payable, a minor, or is physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of such Participant or Beneficiary, and that no guardian, committee or
other representative of the estate of such Participant or Beneficiary shall
have been duly appointed, the Administrator may direct the Trustee to make
payment of such benefit otherwise payable to such Participant or Beneficiary,
to such other person or institution, including a custodian under a Uniform
Gifts to Minor Act, or corresponding legislation (who shall be an adult, a
guardian of the minor or a trust company), and the release of such other person
or institution shall be a valid and complete discharge for the payment of such
benefit.
14.4 Spendthrift Clause.
Except as permitted by the Act or the Code, no benefits or other amounts
payable under the Plan shall be subject in any manner to anticipation, sale,
transfer, assignment, pledge, encumbrance, charge or alienation. If the
Administrator determines that any person entitled to any payments under the
Plan has become insolvent or bankrupt or has attempted to anticipate, sell,
transfer, assign, pledge, encumber, charge or otherwise in any manner alienate
any benefit or other amount payable to him under the Plan or that there is any
danger of any levy or attachment or other court process or encumbrance on the
part of any creditor of such person entitled to payments under the Plan against
any benefit or other accounts payable to such person, the Administrator may, at
any time, in its discretion, direct the Trustee to withhold any or all payments
to such person under the Plan and apply the same for the benefit of such
person, in such manner and in such proportion as the Administrator may deem
proper.
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14.5 Benefits Limited to Fund.
All contributions by the Employer to the Fund shall be voluntary, and the
Employer shall be under no legal liability to make any such contributions. The
benefits of this Plan shall be only as can be provided by the assets of the
Fund, and no liability for the payment of benefits under the Plan or for any
loss of assets due to any action or inaction of the Trustee shall be imposed
upon the Employer.
14.6 Cooperation of Parties.
All parties to this Plan and any party claiming interest hereunder agree
to perform any and all acts and execute any and all documents and papers which
are necessary and desirable for carrying out this Plan or any of its
provisions.
14.7 Payments Due Missing Persons.
The Administrator shall direct the Trustee to make a reasonable effort to
locate all persons entitled to benefits under the Plan; however,
notwithstanding any provision in the Plan to the contrary, if, after a period
of five years from the date such benefit shall be due, any such persons
entitled to benefits have not been located, their rights under the Plan shall
stand suspended. Before this provision becomes operative, the Trustee shall
send a certified letter to all such persons at their last known address
advising them that their interest in benefits under the Plan shall be
suspended. Any such suspended amounts shall be held by the Trustee for a period
of three additional years (or a total of eight years from the time the benefits
first became payable), and thereafter such amounts shall be reallocated among
current Participants in the same manner that a current contribution would be
allocated. However, if a person subsequently makes a valid claim with respect
to such reallocated amounts and any earnings thereon, the Plan earnings or the
Employer's contribution to be allocated for the year in which the claim shall
be paid shall be reduced by the amount of such payment. Any such suspended
amounts shall be handled in a manner not inconsistent with regulations issued
by the Internal Revenue Service and Department of Labor.
14.8 Governing Law.
This Plan has been executed in the State of Oregon and all questions
pertaining to its validity, construction and administration shall be determined
in accordance with the laws of that State, except to the extent superseded by
the Act.
14.9 Nonguarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any Employee
to be continued in the employment of the Employer, or as a limitation of the
right of the Employer to discharge any of its Employees, with or without cause.
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14.10 Counsel.
The Trustee and the Administrator may consult with legal counsel, who may
be counsel for the Employer and for the Administrator or the Trustee (as the
case may be), with respect to the meaning or construction of this Plan and the
Trust Agreement, their respective obligations or duties hereunder or with
respect to any action or proceeding or any question of law, and they shall be
fully protected with respect to any action taken or omitted by them in good
faith pursuant to the advice of legal counsel.
IN WITNESS WHEREOF, the Sponsor has caused this Plan to be executed by
its duly authorized officer and its corporate seal to be affixed on this 6th
day of October, 1997.
Attest: PIONEER BANK, FSB
/s/Jerry F. Aldape By: /s/Dan L. Webber
- ------------------------- -------------------------------
Secretary Dan L. Webber
President and Chief Executive Officer
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