DIRECTORS' DEFERRED COMPENSATION PLAN OF
CFS BANCORP, INC.
EFFECTIVE JANUARY 1, 2005
KRIEG DEVAULT LLP
ONE INDIANA SQUARE
SUITE 2800
INDIANAPOLIS, IN 46204
INTRODUCTION
The purpose of this Plan and its related Trust is to permit Directors to
defer the receipt and resulting taxation of the Fees to be received for services
as a Director. All benefits payable under this Plan shall be paid solely out of
the Trust assets or from the general assets of the Company.
ARTICLE I
DEFINITIONS
Whenever the initial letter of the following words or phrases is
capitalized herein, those words and phrases shall have the meanings stated below
unless a different meaning is plainly required by the context:
1.1. "Accounting Date" means the last day of each calendar three-month
period (and any other date selected by the Committee).
1.2. "Affiliate" means the Company and any other corporation or trade or
business whose employees are treated as being employed by the Company under Code
Sections 414(b), 414(c), 414(m) or 414(o).
1.3. "Bank" means Citizens Financial Services, FSB.
1.4. "Board" means the Board of Directors of CFS Bancorp, Inc.
1.5. "Code" means the Internal Revenue Code of 1986, as amended.
1.6. "Committee" means the committee appointed by the Board to administer
the Plan.
1.7. "Company" means CFS Bancorp, Inc.
1.8. "Company Stock" means CFS Bancorp, Inc. common voting stock.
1.9. "Company Stock Account" means the sub-account under each
Participant's Individual Account to which shares of Company Stock will be
credited as of each Accounting Date.
1.10. "Company Stock Dividend" means the cash dividend payable with
respect to one (1) share of Company Stock which shall be equal to and payable
under the Plan at the same time as a cash dividend is paid with respect to one
(1) share of Company Stock. Section 3.4 provides for the method by which Company
Stock Dividends will be allocated to a Participant's Company Stock Account.
1.11. "Director" means any duly elected and serving member of the board of
directors or advisory board of directors of the Company, the Bank or an
Affiliate.
2
1.12. "Effective Date" means the effective date of this Plan, which is
January 1, 2005.
1.13. "Fair Market Value" means the per share value of a share of Company
Stock, as determined by the Committee in its sole discretion.
1.14. "Fees" means all fees payable to a Participant for a Plan Year, for
services rendered to the Company, the Bank or an Affiliate as a Director, with
respect to such Plan Year, including cash retainers, fees for attendance at
regularly scheduled board meetings, special meetings called from time to time
and any and all meetings of committees of the board of directors.
1.15. "Individual Account" means the individual bookkeeping account
maintained for each Participant in accordance with Section 3.1. Such Individual
Account is comprised of whichever of the following sub-accounts are applicable
to a particular Participant: Company Stock Account and Interest Bearing Account.
1.16. "Interest Bearing Account" means the sub-account under a
Participant's Individual Account to which interest will be credited as of each
Accounting Date.
1.17. "Participant" means a Director who becomes a Participant pursuant to
Article II of the Plan.
1.18. "Participation Agreement" means the written agreement between the
Participant and the Company, pursuant to which the Participant elects to defer
receipt of Fees, elects an investment alternative, designates a beneficiary, and
elects the time of distribution of benefits under the Plan.
1.19. "Plan" means this Directors' Deferred Compensation Plan of CFS
Bancorp, Inc.
1.20. "Plan Year" means the 12-month period beginning each January 1 and
ending each December 31.
1.21. "Trust" means the agreement entered into between the Company and the
Trustee pursuant to Article IV.
1.22. "Trustee" means such independent financial institution as shall be
designated in the Trust to hold in trust any assets of the Plan for the purpose
of providing benefits under the Plan, and shall include any successor to the
Trustee initially designated thereunder.
ARTICLE II
PARTICIPATION
2.1. Eligibility. Each Director shall be eligible to participate in the
Plan on its Effective Date, or if later, on or after the date he becomes a
Director.
3
2.2. Participation and Deferrals. A Director shall become a Participant by
electing, on a Participation Agreement, to defer the receipt of all or any
portion of the Fees he would otherwise receive with respect to a Plan Year,
consistent with Section 2.3.
2.3. Participation Agreement. As a condition to the Company's and the
Committee's obligation to withhold and credit deferred Fees for a Participant
under the Plan, the Participant must execute a Participation Agreement on such
forms as shall be prescribed by the Committee.
(a) Timing of Execution and Delivery of Participation Agreement. Except
as provided below, a Participation Agreement must be executed by the
Participant and the Committee prior to the first day of the Plan
Year in which the Fees specified in the Participation Agreement will
be paid. For example, to defer Fees payable in the 2006 Plan Year, a
Participation Agreement must be executed on or prior to December 31,
2005. The Participation Agreement may not be amended or revoked
during the Plan Year.
(b) Directors Elected Mid-Year. Notwithstanding subsection (a), a
non-employee who is elected or appointed to fill a vacancy on the
Board and who was not a Director on the preceding December 31st may,
by completing a Participation Agreement, elect to defer Fees for the
balance of the Plan Year and succeeding Plan Years. In order to
defer Fees under this subsection (b), the newly elected or appointed
Director must, within thirty (30) days after such election or
appointment, execute and deliver a Participation Agreement to the
Committee, which will be effective for Fees payable on or after the
date the executed Participation Agreement is delivered to the
Committee.
(c) Modification of Participant Deferral Election. During each December,
a Participant and the Committee may execute and deliver an amended
Participation Agreement which increases, decreases, commences or
terminates the deferral of the Participant's Fees payable after the
31st day of that December.
ARTICLE III
DEFERRALS AND ALLOCATIONS
3.1. Establishment of Individual Accounts. The Committee shall establish
and maintain an Individual Account for each Participant, to which the Committee
shall credit the Fees deferred by the Participant pursuant to Article II and
from which the Committee shall debit all amounts paid to the Participant or his
or her designated beneficiary pursuant to Article V.
3.2. Accounting. As of each Accounting Date, each Participant's Individual
Account will be adjusted as follows:
(a) First, by charging the Individual Account with any distributions
pursuant to Article V made to or on behalf of the Participant or his
or her designated beneficiary since the last Accounting Date.
4
(b) Second, by allocating any Company Stock Dividends which are
allocable to the Participant's Company Stock Account in accordance
with Section 3.4.
(c) Third, by allocating any interest which is allocable to the
Participant's Interest Bearing Account in accordance with Section
3.6.
(d) Finally, by crediting the Individual Account with any deferred Fees
that are to be allocated in accordance with Section 3.7.
3.3. Conversion of Deferrals. For deferred Fees that are to be invested in
Company Stock and allocated to the Participant's Company Stock Account on any
Allocation Date, such Account shall be credited with a number of shares of
Company Stock, including fractions thereof, determined by dividing the Fair
Market Value of the Company's common stock on that Accounting Date into the
applicable amount of such deferred Fees to be invested in shares of Company
Stock since the last Accounting Date.
3.4. Allocation of Company Stock Dividends to Company Stock Accounts. As
of each Accounting Date, the number of shares of Company Stock, including
fractions thereof, allocated to a Participant's Company Stock Account shall be
credited with any Company Stock Dividends which were paid with respect to such
shares of Company Stock since the preceding Accounting Date. The aggregate
amount of such Company Stock Dividends shall be divided by the Fair Market Value
of the Company Stock as of the Accounting Date specified in the first sentence
of this Section to determine the number of shares of Company Stock, including
fractions thereof, to be credited to the Participant's Company Stock Account.
3.5. Changes in Stock. In the event of any change in Company Stock through
stock dividends, split-ups, recapitalizations, reclassifications, conversions or
otherwise, or in the event that other stock shall be converted into or
substituted for the present Company Stock as the result of any merger,
consolidation, reorganization or similar transaction, then the Committee shall
make appropriate adjustment in the aggregate number, price and kind of shares of
Company Stock held in each Individual Account.
3.6. Allocation of Interest to Interest Bearing Accounts. The interest
rate to be credited to a Participant's Interest Bearing Account as of each
Accounting Date shall be equal to Forty-Five Percent (45%) of the prime rate as
reported in the Wall Street Journal on the applicable Accounting Date. Interest
shall be compounded on each Accounting Date, based on the amount of the
Participant's Individual Account allocated to the Interest Bearing Account as of
the prior Accounting Date.
3.7. Crediting of Deferrals. All amounts deferred by a Participant
pursuant to Article II shall be credited to the Participant's Individual Account
effective as of the Accounting Date immediately following the period in which
the Fees would otherwise have been paid to the Participant had they not been
deferred.
5
ARTICLE IV
INVESTMENT OF DEFERRALS
4.1. Trust and Investments. Each Participant's deferrals under the Plan
shall be credited to the Participant's Individual Account as provided in Section
3.2 and may be invested by the Trustee in accordance with the terms and
conditions of the Trust. The Participant may, upon (i) initial enrollment in the
Plan, and (ii) making any subsequent deferral election, direct that his or her
Individual Account be invested in shares of Company Stock in the Trust, credited
to the Interest Bearing Account, or in a combination of these investments. The
Participant may change his or her investment direction at any time after the
initial election; provided, however, any such change shall relate only to Fees
being deferred in the the Plan Year to which the deferral election which
includes the investment direction relates. Thus, once given, an investment
direction applicable to Fees deferred in a particular Plan Year cannot later be
changed insofar as it relates to such Fees.
4.2. Unsecured Contractual Rights. The Plan at all times shall be unfunded
and shall constitute a mere promise by the Company to make benefit payments in
the future. No provision of the Plan shall impose or be deemed to impose any
obligation upon the Company, other than an unsecured contractual obligation to
make a cash payment to Participants and their beneficiaries in accordance with
the terms of the Plan. Benefits payable under the Plan shall be paid directly by
the Trustee from the Trust or by the Company from its general assets.
Notwithstanding any other provision of this Plan, neither a Participant nor his
designated beneficiary shall have any preferred claim on, or any beneficial
ownership interest in, any assets of the Company or any Affiliate prior to the
time benefits are distributed as provided in Article V.
ARTICLE V
DISTRIBUTIONS
5.1. Time of Payment of Benefits. All amounts credited to a Participant's
Individual Account shall be distributed for the benefit of a Participant (or his
designated beneficiary) as soon as administratively practicable following the
earlier of (i) the Participant's death, (ii) the date the Participant ceases to
be a Director or (iii) the date elected by the Director.
5.2. Method of Payment of Benefits. The balance of a Participant's
Individual Account shall be distributed in a single sum payment unless the
Participant has made an election, at the time of his or her initial deferral
election, to receive the distribution in annual installments over a period of
five (5) years. All shares of Company Stock held in the Company Stock Account at
the time of distribution will be distributed in kind, and all amounts invested
in the Interest Bearing Account at the time of distribution will be distributed
in cash.
5.3. Benefit Payment Elections. In order to be effective, a Participant's
election to receive installment payments or to select an earlier distribution
date must be made by delivering a Participation Agreement to the Committee that
includes such elections at the same time as the
6
Participant's initial deferral election. If the Participant does not elect to
receive installment payments or if such election is not timely or properly made
under this Section 5.3, the Company shall pay the entire benefit in the form of
a single sum within nine (9) months after the date the Participant first becomes
eligible for the distribution under Section 5.1. If the Participant does not
elect an additional distribution date, or if such election is not timely or
properly made under this Section 5.3, the Company shall pay the benefit at the
time provided in Section 5.1.
5.4. Death of a Participant and Beneficiary Designation.
(a) Time of Payment. In the event of a Participant's death prior to the
time his benefits under the Plan are distributed, the balance in his
Individual Account shall be paid, or begin to be paid, to his
designated beneficiary within nine (9) months of the date of the
Participant's death.
(b) Designation of Beneficiaries. The Participant may designate a
primary and contingent beneficiary or beneficiaries on forms
provided by the Committee, which for this purpose may include the
Participation Agreement. Such designation may be changed at any time
for any reason by the Participant. If the Participant fails to
designate a beneficiary, or if such designation shall for any reason
be illegal or ineffective, or if the designated beneficiary(ies)
shall not survive the Participant, his benefits under the Plan shall
be paid to his estate.
5.5. Participant Ceases to be a Director. In the event a Participant
ceases to be a Director prior to the time his benefits under the Plan are
distributed, the balance in his Individual Account shall be paid, or begin to be
paid, within nine (9) months of the Participant's cessation as a Director.
ARTICLE VI
PLAN ADMINISTRATION
6.1. Administration by the Committee. The Committee shall be responsible
for administering the Plan. Except as the Company shall otherwise expressly
determine, the Committee shall be charged with the full power and the
responsibility for administering the Plan in all its details. No Participant who
is also a member of the Committee shall vote on any matter concerning that
Participant's individual benefit hereunder.
6.2. Powers and Responsibilities of the Committee.
(a) The Committee shall have all powers necessary to administer the
Plan, including the power to construe and interpret the Plan
documents; to decide all questions relating to an individual's
eligibility to participate in the Plan; to determine the amount,
manner and timing of any distribution of benefits under the Plan; to
resolve any claim for benefits in accordance with Section 6.4, and
to appoint or employ advisors, including legal counsel, to render
advice with respect to any of the Committee's responsibilities under
the Plan. Any construction, interpretation,
7
or application of the Plan by the Committee shall be final,
conclusive and binding on all persons. All actions by the Committee
shall be taken pursuant to uniform standards applied to all
similarly situated persons.
(b) Records and Reports. The Committee shall be responsible for
maintaining sufficient records to determine each Participant's
eligibility to participate in the Plan, and the Fees of each
Participant for purposes of determining the amount of contributions
that may be made by or on behalf of the Participant under the Plan.
(c) Rules and Decisions. The Committee may adopt such rules as it deems
necessary, desirable or appropriate in the administration of the
Plan. All rules and decisions of the Committee shall be applied
uniformly and consistently to all Participants in similar
circumstances. When making a determination or calculation, the
Committee shall be entitled to rely upon information furnished by a
Participant or beneficiary, the Company or the Company's legal
counsel.
(d) Application and Forms for Benefits. The Committee may require a
Participant or beneficiary to complete and file with it an
application for a benefit, and to furnish all pertinent information
requested by it. The Committee may rely upon all such information so
furnished to it, including the Participant's or beneficiary's
current mailing address.
6.3. Liabilities. The Committee members shall be indemnified and held
harmless by the Company with respect to any actual or alleged breach of
responsibilities performed or to be performed hereunder in their official
capacities in the administration of the Plan.
6.4. Claims Procedure.
(a) Filing a Claim. Any Participant or beneficiary under the Plan may
file a written claim for a Plan benefit with the Committee or with a
person named by the Committee to receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or limitation of
any benefit or payment due to or requested by any Participant or
beneficiary under the Plan ("Claimant"), the Claimant shall be given
a written notification containing specific reasons for the denial or
limitation of his benefit. The written notification shall contain
specific reference to the pertinent Plan provisions on which the
denial or limitation of his benefit is based.
(c) Court Action. No Participant or beneficiary shall have the right to
seek judicial review of a denial of benefits, or to bring any action
in any court to enforce a claim for benefits prior to filing a claim
for benefits or exhausting his rights to review under this Section
6.4.
6.5. Trustee. The Company shall appoint an independent financial
institution to act as Trustee under the Trust Agreement. The Trustee shall serve
at the pleasure of the Company and
8
its powers and responsibilities shall be set forth in a written Trust Agreement
between the Company and the Trustee. An amount equal to the amount of
contributions made pursuant to the Plan may be contributed to the Trust and held
by the Trustee in accordance with the terms of the Trust Agreement.
ARTICLE VII
AMENDMENT AND TERMINATION
The Company may amend, suspend or terminate the Plan, in whole or in part,
without the consent of the Committee, Participants, beneficiaries or any other
person, except that no amendment, suspension or termination shall retroactively
impair or otherwise adversely affect (without written consent) the rights of a
Participant or beneficiary which have accrued prior to the date of such action,
as determined by the Committee in its sole discretion. It is noted, however,
that the Participant's benefits under the Plan constitute mere unsecured claims
on the general assets of the Company.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Governing Law. The Plan shall be construed, regulated and
administered according to the laws of the State of Indiana, without regard to
the choice of law principles thereof, except in those areas preempted by the
laws of the United States of America in which case such laws will control.
8.2. Headings and Gender. The headings and subheadings in the Plan have
been inserted for convenience of reference only and shall not affect the
construction of the provisions hereof. In any necessary construction the
masculine shall include the feminine and the singular the plural, and vice
versa.
8.3. Participant's Rights; Acquittance. No Participant shall acquire any
right to be retained as a Director by virtue of the Plan, nor, upon his
dismissal, or upon his voluntary termination as a Director shall he have any
right or interest in or to any Plan assets other than as specifically provided
herein.
8.4. Spendthrift Clause. No benefit or interest available hereunder will
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Participant or the Participant's designated beneficiary, either voluntarily or
involuntarily.
8.5. Counterparts. This Plan may be executed in any number of
counterparts, each of which shall constitute but one and the same instrument and
may be sufficiently evidenced by any one counterpart.
9
8.6. No Enlargement of Rights. Nothing contained in the Plan shall be
construed as a contract of employment between the Company or any Affiliate and
any person, nor shall the Plan be deemed to give any person the right to be
retained in the employ or as a Director or limit the right of the Company to
employ or discharge any person with or without cause.
8.7. Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company, the Committee nor any individual
acting as an employee or agent of the Company shall be liable to any
Participant, Director or beneficiary for any claim, loss, liability or expense
incurred in connection with the Plan, except when the same shall have been
judicially determined to be due to the gross negligence or willful misconduct of
such person.
8.8. Incapacity of Participant or Beneficiary. If any person entitled to
receive a distribution under the Plan is physically or mentally incapable of
personally receiving and giving a valid receipt for any payment due (unless
prior claim therefor shall have been made by a duly qualified guardian or other
legal representative), then, unless and until claim therefor shall have been
made by a duly appointed guardian or other legal representative of such person,
the Committee may provide for such payment or any part thereof to be made to any
other person or institution then contributing toward or providing for the care
and maintenance of such person. Any such payment shall be a payment for the
account of such person and a complete discharge of any liability of the Company
and the Plan.
8.9. Corporate Successors. The Plan shall not be automatically terminated
by a transfer or sale of assets of the Company or by the merger or consolidation
of the Company into or with any other corporation or other entity
("Transaction"), but the Plan shall be continued after the Transaction only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan.
8.10. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
8.11. Action by the Company. Any action required of or permitted by the
Company under the Plan shall be by resolution of its Board, or by resolution of
a committee of the Board or by a person or persons authorized by resolution of
the Board or a committee.
8.12. Severability. In the event any provisions of the Plan shall be held
to be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
endorsed as if such illegal or invalid provisions had never been contained in
the Plan.
10
SIGNATURES
IN WITNESS WHEREOF, the Company has caused this Directors' Deferred
Compensation Plan of CFS Bancorp, Inc. to be established by its officers
hereunder duly authorized, this 20th day of December, 2004, but effective as
of January 1, 2005.
CFS BANCORP, INC.
By: /s/ Thomas F. Prisby
---------------------------------
Thomas F. Prisby, President,
Chief Executive Officer
11