TF FINANCIAL CORPORATION
INCENTIVE COMPENSATION PLAN
TF FINANCIAL CORPORATION
INCENTIVE COMPENSATION PLAN
Table of Contents
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PAGE
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ARTICLE I. General Provisions.....................................1
1.01 Purpose.......................................1
1.02 Effective Date................................1
ARTICLE II. Definitions............................................1
"Bank"........................................1
"Base Salary".................................1
"Beneficiary".................................1
"Benefits"....................................1
"Board"
"Bonuses".....................................1
"Budget Year".................................1
"Change in Control"...........................1
"Code"........................................2
"Committee....................................2
"Common Stock"................................2
"Company".....................................2
"Director"....................................2
"Director Compensation".......................2
"Employee"....................................2
"ERISA".......................................2
"Net Income"..................................2
"Budget Plan".................................2
"Participant".................................2
"Participating Director"......................2
"Plan"........................................2
"Plan Year"...................................2
"Retirement"..................................2
"Target Levels"...............................3
ARTICLE III. Eligibility and Participation..........................3
ARTICLE IV. Benefits...............................................3
4.01 Summary.......................................3
4.02 Qualification of Incentive Comp Awards........3
4.03 Illustration of Incentive Comp Calculation....4
4.04 Award Distribution............................4
4.05 Extraordinary Events..........................4
4.06 Bonus Award...................................4
4.07 Revocation for Misconduct.....................5
4.08 Payment of Benefits...........................5
4.09 Minority, Disability, or Incompetency.........5
4.10 Designation of Beneficiary....................5
ARTICLE V. Plan Administration..................................6
5.01 The Committee...............................6
5.02 Claims Procedure............................6
ARTICLE VI. Amendment and Termination............................6
6.01 Right to Amend or Terminate.................6
ARTICLE VII. General Provisions...................................6
7.01 Prohibition Against Alienation..............6
7.02 No Enlargement of Employment Rights.........6
7.03 Gender......................................6
7.04 Applicable Law..............................7
7.05 Titles and Headings.........................7
7.06 Withholding.................................7
EXHIBIT A
TF FINANCIAL CORPORATION
INCENTIVE COMPENSATION PLAN
ARTICLE I. General Provisions
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1.01 Purpose. This document sets forth the TF Financial Corporation
Incentive Compensation Plan, as established by the Company and other sponsoring
subsidiary corporations. The Plan is maintained for the purpose of providing
certain Participating Directors and selected Employees with incentive
compensation payable in the form of Bonuses in the event that the Company and
its subsidiaries meet certain performance goals indicative of its profitability
and stability.
It is intended that the Plan shall be an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees within the meaning of Section
201(2) of ERISA and the non-employee directors of the Company and the Bank and
that benefits provided under the Plan shall be taxable to Participants only when
actually received. The Plan shall be administered, construed, and interpreted in
a manner consistent with the purpose and intent set forth in this Section.
1.02. Effective Date. The effective date of this Plan is October 18,
2004.
ARTICLE II. Definitions
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Unless the context clearly requires otherwise, the terms defined in
this Article II shall, for all purposes of this Plan, have the respective
meanings specified in this Article II.
"Bank" shall mean Third Federal Savings Bank, a federally
chartered stock savings bank.
"Base Salary" is defined as the annual rate of base
compensation of an employee exclusive of bonuses, stock awards, expensive
reimbursement, fees earned, incentive compensation payments, company stock
dividends and base salary increases that have been granted, but not implemented.
An officer's base salary as of close of business December 31st will be the
salary utilized in the incentive compensation calculations.
"Beneficiary" shall mean the person or persons designated as a
Participant's beneficiary or beneficiaries in accordance with Section 4.10.
"Benefits" shall mean as to any Participant any benefits
provided for under Article IV.
"Board" shall mean the Board of Directors of the Company or
other sponsoring subsidiary corporation.
"Bonuses" shall mean cash bonuses payable immediately.
"Budget Year" is defined as the calendar year, January 1st
through December 31st, for which Management has prepared and presented a budget
for approval by the Board detailing the projected performance of the Bank and
Company. The budget is a one year plan which incorporates Management's growth
and performance goals, initiatives and objectives.
"Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company or any merger or recapitalization whereby the
Company is not the surviving entity; (iii) a change of control of the Company,
as otherwise defined or determined by the Office of Thrift Supervision or
regulations promulgated by it; or (iv) the acquisition, directly
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or indirectly, of the beneficial ownership (within the meaning of that term as
it is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder) of twenty-five percent (25%) or more of
the outstanding voting securities of the Company by any person, trust, entity or
group. This limitation shall not apply to the purchase of shares by underwriters
in connection with a public offering of Company stock, or the purchase of shares
of up to 25% of any class of securities of the Company by a tax-qualified
employee stock benefit plan which is exempt from the approval requirements, set
forth under 12 C.F.R. 574.3(c)(1)(vi) as now in effect or as may hereafter be
amended. The term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to a Code section shall include any comparable
section or sections of future legislation that amends, supplements or supersedes
such section.
"Committee" means the Compensation Committee previously
appointed by the Board. Members of the Committee shall serve at the pleasure of
the Board. In the absence at any time of a duly appointed Committee, the Plan
shall be administered by the Board.
"Common Stock" means the common stock of the Company.
"Company" means TF Financial Corporation.
"Director" means any member of the Board of Directors of the
Company or the Bank.
"Director Compensation" defined as the annual rate of
compensation derived from directors fees and committee fees of any member of the
Board of Directors of the Company, any subsidiary of the Company or the Bank
exclusive of bonuses, stock awards, expense reimbursements, incentive
compensation payments, and company stock dividends.
"Employee" means any individual who performs service in the
employ of the Company, or a subsidiary of the Company, excluding any individual
who performs such services as a self-employed person or solely as a Director.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Net Income" shall mean net income of the Company reported on
a consolidated basis for a fiscal year; provided, however, Net Income for a
given fiscal year shall not give effect to any one-time non-recurring or
extraordinary payment or event as interpreted by the Committee.
"Budget Plan" is defined as the current Budget Plan presented
to and approved by the Company's Board of Directors in December of the prior
fiscal year.
"Participant" means an Employee or Participating Director who
has become a Participant in the Plan as provided in Article III.
"Participating Director" shall mean a director serving on the
Board of Directors of the Company or the Bank who is not otherwise an Employee.
"Plan" means the TF Financial Corporation Incentive
Compensation Plan, as herein set forth and as it may from time to time be
amended.
"Plan Year" means the 12 consecutive month period beginning
January 1st and on each anniversary of that date.
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"Retirement" shall mean termination of employment of an
employee of the Company or Bank following attainment of not less than age 60 and
completion of not less than 15 years of service.
"Target Levels" is defined as the performance goals selected
by the Compensation Committee against which the actual performance for the plan
year will be measured. It will be Management's objective to meet or exceed 100%
of the select performance targets as established in the Board-approved budget.
ARTICLE III. Eligibility and Participation
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(a) Directors of the Company or the Bank who are not Employees shall be
deemed Participating Directors as of the Effective Date of their appointment to
the Board of Directors of the Company or the Bank. They shall be entitled to
their pro-rata share of their plan payment based upon the number of days they
served on the Board during the plan year and conditioned upon achievement of
plan targets.
(b) On or before the first day of each Plan Year, the Committee, in its
discretion, shall select the Employee or Employees who shall participate in the
Plan for the Plan Year and each such Participant's award allocation for such
Plan Year; provided that for the Plan Year beginning January 1st, the Employees
are eligible to participate in the Plan. The Committee may, in its sole
discretion, limit participation in the Plan for any reason including, but not
limited to, ensuring that the Plan at all times is a plan described in Section
201(2) of ERISA.
Notwithstanding any provision of the Plan inconsistent herewith, if a
Participant terminates service with the Company and the Bank during a Plan Year
for a reason other than his or her disability, death, Retirement, or a Change in
Control, then the Participant shall not be entitled to receive any Benefits
payable under the Plan.
ARTICLE IV. Benefits
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4.01 Summary. When the Company achieves target levels of performance
detailed in the Budget Plan as determined by the Company's Board of Directors
prior to the beginning of the Plan Year, each participant in the Plan will
receive an award equal to their base annual salary, multiplied by a Final
Incentive Program percentage. The Final Incentive Program percentage is
calculated at the end of the Plan Year and is the sum of three component
percentages ("Components") - Number of new Deposit Households, Consolidated Net
Income, and Originated Loans Outstandings - each of which comprises separate
Component Ratio and Weighting Factor. The Components are subject to change
annually based upon the goals and objectives of the Company.
Number of new Deposit Households from calendar year-end to calendar year-end
exclusive of zero balance and certificate of deposit only households.
Consolidated Net Income is defined as the Net Income of the Company excluding
any extraordinary factors or events as identified and so designated by the
Committee and the Board of Directors.
Originated Loans Outstandings is defined as the net change in total originated
loans outstandings from calendar year-end to calendar year-end.
Each Component has a Weighting Percentage depending on the importance of that
attribute, and each executive is assigned an Individual Target Participant
Factor as recommended by the Compensation Committee and approved by the Board of
Directors.
Goals will have been met when the performance for the current year equals the
Plan Year's Budget Plan, in which case, the Resultant will equal the Component
Target. However, the Resultant may be greater or less than the Component Target
depending on the ability to reach or exceed the Budget Plan.
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4.02 Qualification of Incentive Comp Awards. No awards will be granted
unless the Actual Year Consolidated Net Income for the Company is at least 90%
of the Budget Year Consolidated Net Income, after factoring in the cost of
payment of all respective Incentive Plan awards.
4.03 Illustration of Incentive Comp Calculation. Exhibit A illustrates
the calculations that lead to the Final Incentive Program Percentage. Note that
Number of Deposit Households, Net Income, and Originated Loan Outstandings are
all on a consolidated basis and, for the example, a 40% Participant Factor was
used. The columns are identified by number, e.g. [1], and the discussion refers
to those numbers.
Formula [1] is the comparison, for example in the first row, of actual
Consolidated Net Income to Budget Plan Consolidated Net Income. The goal is to
achieve Consolidated Net Income equal to the Budget Plan, resulting in a
Component Ratio [2] of 1.00. The Weighting Factor [3] for this component is 40%.
Multiplying columns [2] x [3] x the Individual Target [4] yields the Resultant
[5]. The Component Target [6] is not variable and shows what the Resultant
column is if the Consolidated Net Income exactly equals the Budget Plan. Any
deviation from the Budget Plan Target will be reflected by a corresponding
change in the Resultant percentage for that Incentive Plan Component. The sum of
the Resultants for each Component will yield the Final Incentive Plan
Percentage. Multiplication of the Final Incentive Plan Percentage times the
respective base salary of the individual will yield the Incentive Plan payout,
which may be equal to, less than, or more than the Participant's Incentive Plan
award target, depending on the achievement of the relevant Components of the
Budget Plan.
4.04 Award Distribution. Awards will be distributed to all participants
as a percent (%) of Base Salary. Awards will be calculated and paid on an annual
basis. Interim reports will be provided at the close of each quarter upon the
public release of that quarter's financial information.
All Incentive Plan awards will be based on the Company's performance in
the current year. Regardless of the calculation, no Resultant shall exceed 150%
of the Component Target.
The sum of 100% of the Bonus payable to a Participant, less applicable
federal and state income tax withholding, for any Plan Year shall be paid in
cash within 45 days of the completion of the audited financial statements for
the Company and immediately upon the closing date in the case of a Change in
Control.
4.05 Extraordinary Events. Extraordinary events or occurrences which
significantly impact the Components in a positive or adverse manner may be
excluded or adjusted for by the Committee and the Board of Directors.
4.06 Bonus Award.
(a) Aggregate Amount of Bonuses. Except as otherwise provided in this
Article, for each Plan Year, the Company shall pay Bonuses in cash to those
Participants eligible to participate in the Plan and to receive a Bonus for the
Plan Year if all conditions as defined within the Plan are met.
(b) Capitalization Requirement. Notwithstanding anything herein to the
contrary, the aggregate amount of Bonuses payable shall be proportionately
reduced (to zero, if necessary) to the extent that the payment would cause the
Bank to cease to be a well-capitalized institution for the fiscal year.
(c) Vesting: General Schedule. Except as otherwise provided
hereinafter, Benefits shall become 100% earned and non-forfeitable at the time
of payment to the Participant.
(d) Vesting: Exception for Termination Due to Retirement, Death, or
Disability. Bonuses payable to a Participant whose service with the Company or
the Bank terminates prior to the conclusion of the current Plan year whether due
to Retirement, death, disability shall be entitled to their pro-rata share of
their plan
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payment based upon the number of days they were employed or served on the Board
of Director of the Company or Bank during the plan year and conditioned upon
achievement of plan targets. Payment will be made concurrent with all
participant plan payments for that plan year.
(e) Vesting: Exception for a Change in Control. All Bonuses payable to
a Participant shall be deemed to be immediately 100% earned and payable on the
closing date in the event of a Change in Control. The decision of the Committee
as to whether a change in control has occurred shall be conclusive and binding
as to all affected Participants.
4.07 Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Company's Board of Directors may, by resolution, immediately
revoke, rescind and terminate any Benefits earned by Employees or Participating
Directors, to the extent the Participant has not collected a Bonus, if the
Participant is discharged from the service or employ of the Company for Cause
(as hereinafter defined), or is discovered after termination of service or
employment to have engaged in conduct that would have justified termination for
Cause. "Cause" is defined as personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profits, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), or a final
cease-and-desist order, or a material breach of the Participant's employment
agreement (if any) with the Company or the Bank. A determination of Cause shall
be made by the Board of Directors of the Company or the Bank within its sole
discretion.
4.08 Payment of Benefits. All Benefits under this Plan shall be
provided by the Company or the Bank directly to Participants, and the Committee
shall have no responsibility thereto other than to inform the Company or the
Bank, as soon as practicable after the end of each Plan Year, in writing as to
the Benefits to be provided.
(a) No Trust or Trust Fund. The Benefits payable under the Plan shall
be paid by the Company or the Bank out of its general assets and shall not be
funded by trust or otherwise. Nothing contained in this Plan shall constitute,
or be treated as, a trust or create any fiduciary relationship. The Company or
the Bank shall be under no obligation to segregate any assets for the purpose of
providing Benefits under the Plan and no person or entity which is entitled to
payment under the terms of the Plan shall have any claim, right, security
interest, or other interest in any fund, trust, account, insurance contract, or
asset of the Company or the Bank. To the extent that a Participant or any other
person acquires a right to receive any Benefit under the Plan, such right shall
be limited to that of a recipient of an unfunded, unsecured promise to pay
amounts in the future and the Participant's (or other person's) position with
respect to such amounts shall be that of a general unsecured creditor of the
Company or the Bank, as applicable.
4.09 Minority, Disability, or Incompetency. If any Benefit becomes
payable under this Plan to a minor, to a person under legal disability or to a
person not adjudicated incompetent but who the Committee in its discretion
determines to be incapable by reason of illness or mental or physical disability
of managing his financial affairs, the Committee may direct that such Benefit
shall be paid to the legal representative or custodian of such person or to any
relative or friend of such person, or that such amount be paid directly for such
person's support and maintenance. Payments so made in good faith shall
completely discharge the Committee, the Company and the Bank of any and all
obligations and liabilities with respect to such payments.
4.10 Designation of Beneficiary. A Participant may file with the
Committee a written designation of a Beneficiary who is to receive his vested
benefits in the event of the Participant's death prior to his or her collection
of said benefits. Such designation of Beneficiary may be changed at any time by
written notice to the Committee. The designation last filed with the Committee
shall be controlling. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of the Participant's death, the Participant's estate shall be deemed to be
the Beneficiary for purposes of this Plan.
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ARTICLE V. Plan Administration
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5.01 The Committee. In its sole and absolute discretion, which
discretion when exercised shall be final and binding on all parties, the
Committee shall have the responsibility and authority to control the operation
and administration of the Plan in accordance with its terms including, without
limiting the generality of the foregoing, the powers and duties: (i) to
interpret, apply, and administer the Plan, to decide all questions of
eligibility, participation, status, benefits, and rights of Participants and
Beneficiaries under the Plan; (ii) to establish and amend such rules and
procedures as it deems necessary or appropriate to the proper administration of
the Plan; (iii) to employ or retain such agents as it deems necessary or
advisable to assist in the administration of the Plan, and to delegate to the
extent permitted by applicable law such powers and duties as it deems necessary
or advisable; (iv) to prepare and file all statements, returns, and reports
required to be filed by the Plan with any agency of government; (v) to comply
with all disclosure requirements of all applicable state and federal law; and
(vi) to perform all functions otherwise assigned to it under the terms of the
Plan.
5.02 Claims Procedure. Claims for Benefits under the Plan shall be
filed in writing with the Committee. Written notice of the Committee's
disposition of a claim generally shall be furnished to the claimant within 60
days after the application therefore is filed. However, if special circumstances
exist of which the Committee notifies the claimant within such 60-day period,
the Committee may extend such period to the extent necessary, but in no event
beyond 180 days after the claim is filed. In the event the claim is denied, the
reasons for the denial shall be specifically set forth in writing, pertinent
provisions of the Plan shall be cited and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. Any claimant who has
been denied a Benefit shall be entitled, upon request to the Committee, to
appeal the denial of his claim within 60 days following the Committee's
determination described in the preceding sentence. Upon such appeal, the
claimant, or his representative, shall be entitled to examine pertinent
documents, submit issues and comments in writing to the Committee, and meet with
the Committee. The Committee shall review its decision and issue a final
decision to the claimant in writing, generally within 60 days following such
appeal. However, if special circumstances exist of which the Committee notifies
the claimant within such 60-day period, the Committee may extend such period to
the extent necessary, but in no event beyond 120 days following such appeal.
ARTICLE VI. Amendment and Termination
-------------------------
6.01 Right to Amend or Terminate. The Board of Directors of the Company
or the Bank reserves the right at any time to terminate or amend the Plan in any
manner and for any reason; provided, that no amendment or termination shall,
without the consent of the Participant or, if applicable, the Beneficiary,
adversely affect such Participant's or Beneficiary's rights with respect to
Benefits accrued as of the date of such amendment or termination.
Notwithstanding the foregoing, the Board or the Committee reserves the right at
any time to terminate the Plan, the participation of any Participant and/or to
distribute all sums due under the Plan to any or all Participants in whole or in
part without prior notice or consent.
ARTICLE VII. General Provisions
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7.01 Prohibition Against Alienation. Benefits payable to a Participant
or Beneficiary under the terms of this Plan shall not be subject in any manner
to alienation, anticipation, sale, transfer, assignment, pledge, hypothecation,
attachment, receivership, or encumbrance of any kind, nor shall it pass to any
trustee in bankruptcy or be reached or applied by any legal process for the
payment of any obligations of the Participant or Beneficiary, except at such
times and in such manner as provided in this Plan.
7.02 No Enlargement of Employment Rights. Nothing contained in this
Plan shall give or be construed as giving any Employee or Participating Director
the right to be retained in the service or employment of the Company or the
Bank, or shall interfere with the right of the Company or the Bank to discharge
or otherwise terminate any Participating Director's or Employee's employment or
service at any time.
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7.03 Gender. Whenever any masculine terminology is used in this Plan,
it shall be taken to include the feminine, unless the context otherwise
indicates.
7.04 Applicable Law. This Plan shall be construed and regulated, and
its validity and effect and the rights hereunder of all parties interested shall
at all times be determined, in accordance with the laws of the Commonwealth of
Pennsylvania, except to the extent such state law is preempted by federal law.
7.05 Titles and Headings. The titles and headings included herein are
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.
7.06 Withholding. The Company and the Bank reserves the right to
withhold from payments of Benefits such amounts of income, payroll, and other
taxes as it deems advisable.