Exhibit 10.16 to United Financial Corporation Form 10-K for fiscal year ended December 31, 2005




Exhibit 10.16

HERITAGE BANK


SUPPLEMENTAL
RETIREMENT AGREEMENT


	
 

	
 


	
 

	
THIS
  Supplemental Retirement Agreement (“Agreement”) is made this 1st day of
  January, 2006 by and between Heritage Bank,
  a Montana bank corporation located in Great Falls, Montana (the
  “Company”), and Jeffrey C. Mortensen (the “Executive”). This agreement is effective January 1, 2006 for vesting and
  accrual computation purposes.





INTRODUCTION


          To
encourage the Executive to remain an employee of the Company, the Company is
willing to provide salary continuation benefits to the Executive, in accordance
with the terms of this Agreement. The Company will pay the benefits from its
general assets.


AGREEMENT


          The
Executive and the Company agree as follows:


Article 1


Definitions


          1.1     Definitions.
Whenever used in this Agreement, the
following words and phrases shall have the meanings specified: 


	
 

	
 

	
 


	
 

	
1.1.1

	
“Change
  of Control” means
  the transfer of 51% or more of the Company’s outstanding voting common stock within a period of less than 6
months
  or a transfer of shares, which require regulatory approval.


	
 

	
 

	
 


	
 

	
1.1.2

	
 “Code” means the Internal
  Revenue Code of 1986, as amended.


	
 

	
 

	
 


	
          1.1.3  “Disability” means, if the Executive is
covered by a
  Company sponsored disability insurance policy, total disability as defined in
  such policy without regard to any waiting period. If the Executive is not covered by such a policy, Disability
means the
  Executive suffering a sickness, accident or injury which, in the
  judgment of a physician reasonably satisfactory to the Company, prevents the
  Executive from performing substantially all of the Executive’s normal duties
  for the










	
 

	
 


	
.

	
Company for a period of
  not less than 180 consecutive days. As a condition to any benefits, the Company may require the Executive to
submit to
  such physical or mental evaluations and tests as the Company’s Board
  of Directors reasonably deems appropriate.


	
 

	
 


	
 

	
          1.1.4     “Normal Retirement
  Age” means the Executive’s 65th birthday.


	
 

	
 

	
 


	
 

	
          1.1.5     “Normal
  Retirement Date” means the later of the Normal Retirement Age or the
  date of the Executive’s Termination of Employment.


	
 

	
 


	
 

	
          1.1.6     “Plan
  Year” means
  the plan’s accounting year of twelve consecutive months commencing on the effective date of this
  Agreement and ending on each anniversary date thereafter.


	
 

	
 


	
 

	
          1.1.7     “Termination
  of Employment” means the Executive ceasing to be employed by the Company for any reason whatsoever,
  voluntary or involuntary, other than by reason of an approved leave of absence.





Article 2


Lifetime Benefits


          2.1     Normal
Retirement Benefit . If the Executive
terminates employment on or after the Normal Retirement Age for
reasons other than death, the Company shall pay to the Executive the benefit
described in this Section 2. 1.


                    2.1.1.     Amount
of Benefit. The benefit under this
Section 2.1 is either a lump sum payment in the amount shown on Schedule A, or at the election of the
Executive, an annuity with a term acceptable
to the Executive, which shall be purchased using all available accrued amounts.
The payment or annuity purchase shall begin or be made within 60 days
from the Normal Retirement Date.


                    Notwithstanding
the preceding, if at that time of the payment of any or all benefits pursuant to this Agreement, the Executive is
a key
employee, within the meaning of Code Sections 409A(a)(2)(B)(i)
and 416(i), the payment of such benefits shall not commence in less than six
month’s following the Executive’s separation from service.


          2.2     Early
Termination Benefit. If the Executive terminates employment
before the Normal Retirement Age for reasons other than death, Disability
or Change of Control, the Company shall pay to the Executive the benefit described in this Section 2.2.


	
 

	
 


	
 

	
           2.2.1.     Amount of Benefit. The amount of the
  benefit shall be the vested amount accrued on the books of the
  employer, in accordance with Schedule A, attached. The benefit shall be the accrued balance at the date of
Termination
  of Employment.


	
 

	
 


	
 

	
           2.2.2     Payment of Benefit. The payment shall be
  in a lump sum, made within 60 days of Termination of Employment.





                    Notwithstanding
the preceding, if at that time of the payment of any or all benefits pursuant to this Agreement, the Executive is
a key
employee, within the meaning of Code Sections






	
 

	
 


	
409A(a)(2)(B)(i)
  and 416(i), the payment of such benefits shall not commence in less than six
  month’s following the
  Executive’s separation from service.




	

          2.3     Disability
Benefit. If the Executive terminates employment for Disability
prior to the Normal Retirement Age, the Company shall pay to the Executive
the benefit described in this Section 2.3. 








	
 

	
 

	
 


	
 

	
           2.3.1     Amount of Benefit. The amount of the benefit
  shall be the vested amount accrued on the books of the employer, in accordance with Schedule A, attached.
  The employee will be considered 100% vested upon a determination of
  Disability.


	
 

	
 

	
 


	
 

	
           2.3.2     Payment
  of Benefit. The payment shall be made in a lump sum within 60 days of Termination of Employment as a
result of
  disability.








	
 

	
 


	
 

	
          Not
  withstanding the preceding, if at that time of the payment of any or all
  benefits pursuant to this Agreement, the Executive is a key employee, within
  the meaning of Code Sections 409A(a)(2)(B)(i) and 416(i), the payment of such
  benefits shall not commence in less than six month’s following the Executive’s separation
  from service.








	
 

	
 

	
 


	
          2.4     Change
of
  Control Benefit. Upon a Change of Control while the Executive is
  in the active service of the Company
  resulting in termination of Executive, the Company shall pay to the Executive
  the benefit described in this Section 2.4 in lieu of any other benefit under
  this Agreement.


	
 

	
 

	
 


	
 

	
          2.4.1     Amount of Benefit. The amount of the benefit shall be
the
  vested amount accrued on the books of the
  employer, in accordance with Schedule A, attached. The employee will be
  considered 100% vested upon a change in control.


	
 

	
 

	
 


	
 

	
          2.4.2     Payment
  of Benefit. The payment shall be made in a lump sum within 60 days of Termination of Employment as a result
of a
  change in control.





                    Notwithstanding
the preceding, if at that time of the payment of any or all benefits pursuant
to this
Agreement, the Executive is a key employee, within the meaning of Code Sections
409A(a)(2)(B)(i) and 416(i), the payment of such benefits shall not commence in less than
six month’s following the Executive’s
separation from service.



          2.5     Vesting
of Benefit. The Executive shall vest 10% for every Plan Year he is employed
beginning
January 1, 2009 and 100% vested December 31, 2018. The initial effective date
for vesting is January 1, 2006.  


Article 3


Death Benefits


          3.1     Death
During Active Service. If the Executive dies while in the active service of the Company, the Company
shall pay to the Executive’s designated beneficiary the benefit described in
this Section 3.1.






	
 

	
 


	
 

	
          3.1.1.     
  Amount of Benefit. The amount
  of the benefit shall be the vested amount accrued on the books of the employer, in accordance
  with Schedule A, attached. The Executive shall become fully vested if death
  is prior to the normal retirement date.


	
 

	
 


	
 

	
          3.1.2     Payment of Benefit. The payment shall be made in a lump
sum
  within 60 days of death.





                    Notwithstanding
the preceding, if at that time of the payment of any or all benefits pursuant
to this
Agreement, the Executive is a key employee, within the meaning of Code Sections
409A(a)(2)(B)(i) and 416(i), the payment of such benefits shall not commence in less than
six month’s following the Executive’s
separation from service.


Article 4


Beneficiaries


          4.1     Beneficiary
Designations. The Executive shall designate a beneficiary
by filing a written designation with the
Company (See Schedule B). The Executive may revoke or modify the designation at
any time by filing a new designation. However, designations will only be
effective if signed by the Executive
and receipt by the Company of the designation. The Executive’s beneficiary
designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary
and the marriage is subsequently dissolved. If the Executive dies without a
valid beneficiary designation, all payments
shall be made to the Executive’s surviving spouse, if any, and if none, to the Executive’s surviving children and
the
descendants of any deceased child by right of representation, and if no
children or descendants survive, to the Executive’s estate.


          4.2     Facility
of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person
incapable of handling the disposition of his or her property, the Company may
pay such benefit to the guardian,
legal representative or person having the care or custody of such minor, incompetent person or incapable person.
The
Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit. In the event the company
institutes legal proceeding to determine appropriate issues as to distribution
it will be entitled as a cost to recover from the distribution its reasonable
attorney fees and cost.


Article 5


General Limitations


                    Notwithstanding
any provision of this Agreement to the contrary, the Company shall not pay any benefit under this
Agreement:


          5.1     Excess
Parachute Payment. To the extent the benefit would be an excess parachute payment under Section 28OG of the
Code.


	
 

	
 


	
          5.2     Termination
far Cause. If the Company
  terminates the Executive’s employment for:


	
 

	
 


	
 

	
          5.2.1     Good
cause;


	
 

	
 


	
 

	
          5.2.2     Conviction
of a
  felony;










	
 

	
 


	
 

	
or


	
 

	
 


	
 

	
          5.2.3     Fraud,
dishonesty or
  violation of any law or Company policy committed in connection with the
  Executive’s employment and resulting in a material adverse effect on the Company. 





Article 6




Claims and Review Procedures


          6.1     Claims
Procedure. The
Company shall notify the Executive, the Executive’s beneficiary, or any other party who claims a right to an
interest under the Agreement (the “Claimant”) in writing, within sixty (30) days of his or her written
application for benefits, of his or her eligibility or ineligibility for
benefits under the Agreement. If the Company determines that the Claimant is
not eligible for benefits or full benefits,
the notice shall set forth (1) the specific reasons for such denial, (2) a
specific reference to the provisions
of the Agreement on which the denial is based, (3) a description of any additional information or material
necessary for
the claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of
the Agreement’s claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the
claim reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision,
the Company shall notify the Claimant of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to
an additional ninety-day period.






Article 7


Amendments and Termination


          This
Agreement may be amended or terminated only by a written agreement signed by
the Company and the Executive except that the Company, in its sole discretion, may
amend or terminate this Agreement at any time if, pursuant to legislative,
judicial or regulatory action, continuation of the Agreement would (i)
cause benefits to be taxable to the Executive prior to actual receipt, or (ii)
result in significant financial penalties or detriment to the Company (other
than the financial impact of paying the benefits). In the event of any termination of the
employee or of the Agreement, the Executive shall be treated as if the date
of termination of the Agreement were his Termination of Employment under
Section 2.2.


Article 8 


Miscellaneous 

          8.
1     Binding Effect. This Agreement shall
bind the Executive and the Company, and their beneficiaries, survivors,
executors, administrators and transferees.



          8.2     No
Guarantee
of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the
right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the
Executive. It
also does not require the Executive to remain an employee nor interfere
with the Executive’s right to terminate employment at any time. 


          8.3     Non-Transferability.
Benefits
under this Agreement cannot be sold, transferred, assigned, pledged,
attached or encumbered in any manner.



          8.4     Tax
Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided
under
this Agreement. 


          8.5     Applicable
Law. The
Agreement and all rights hereunder shall be governed by the laws of the State of Montana, except to the extent
preempted by the laws of the United States of America.


          8.6     Unfunded
Arrangement. The Executive and beneficiary are general unsecured
creditors of
the Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights to benefits are
not subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors.


          8.7     Reorganization.
The Company shall not
merge or consolidate into or with another company, or reorganize, or sell substantially all
of its assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume and discharge the
obligations of the Company under this Agreement. Upon the occurrence of such
event, the term “Company” as used in
this Agreement shall be deemed to refer to the successor or survivor company.
In the event of a failure to expressly assume, this Agreement will be deemed
assumed.






          8.8     Entire
Agreement. This Agreement is the entire agreement between the parties and it contains all of the covenants
and agreements
between the Executive and the Company. 

          IN WITNESS WHEREOF, the Executive and a duly
authorized Company officer have signed this Agreement.


	
 

	
 

	
 


	
EXECUTIVE

	
 

	
COMPANY:

Heritage Bank  


	
 

	
 

	
 


	


	
 

	



	


	
 

	



	
Executive 

	
 

	
BY 


	
 

	
 

	
 


	
 

	
 

	
Ex
  Vice
  President


	
 

	
 

	



	
 

	
 

	
Title 


	
 

	
 

	
 


	
 

	
 

	
12-20-05


	
 

	
 

	



	
 

	
 

	
Date 










Schedule
B


Designation of Beneficiary

Supplemental Retirement Agreement

By and between Jeffrey C. Mortensen and Heritage Bank




Beneficiary
Designation:


	
 

	
 


	
 

	
MARCIE D. MARTIN (SPOUSE)


	



	
 

	
886 WIERDA WAY


	



	
 

	
MANHATTAN, MT 59741


	









	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 


	
Signed:

	


	
 

	
Date:
  12-20, 2005


	
 

	


	
 

	
 

	






This
Beneficiary Designation only refers to that Supplemental Retirement Agreement
between Jeffrey C. Mortensen
and Heritage Bank signed on 12-20-2005.


Schedule A






Supplemental
Retirement Agreement

By and between Jeffrey C. Mortensen and Heritage Bank

Dated
January 1,2006


Benefit
Accrual


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Year

	
 

	
Annual

	
 

	
Total
  Accrual

	
 

	
Monthly

	
 

	
Vesting%

  (as of 12-31)

	
 


	
2006

	
 

	
$

	
8,391

	
 

	
 

	
$

	
8,391

	
 

	
 

	
$

	
699.25

	
 

	
 

	
0

	
 


	
2007

	
 

	
$

	
9,062

	
 

	
 

	
$

	
17,453

	
 

	
 

	
$

	
755.19

	
 

	
 

	
0

	
 


	
2008

	
 

	
$

	
9,787

	
 

	
 

	
$

	
27,241

	
 

	
 

	
$

	
815.61

	
 

	
 

	
0

	
 


	
2009

	
 

	
$

	
10,570

	
 

	
 

	
$

	
37,811

	
 

	
 

	
$

	
880.85

	
 

	
 

	
10

	
 


	
2010

	
 

	
$

	
11,416

	
 

	
 

	
$

	
49,227

	
 

	
 

	
$

	
951.32

	
 

	
 

	
20

	
 


	
2011

	
 

	
$

	
12,329

	
 

	
 

	
$

	
61,556

	
 

	
 

	
$

	
1,027.43

	
 

	
 

	
30

	
 


	
2012

	
 

	
$

	
13,315

	
 

	
 

	
$

	
74,871

	
 

	
 

	
$

	
1,109.62

	
 

	
 

	
40

	
 


	
2013

	
 

	
$

	
14,381

	
 

	
 

	
$

	
89,252

	
 

	
 

	
$

	
1,198.39

	
 

	
 

	
50

	
 


	
2014

	
 

	
$

	
15,531

	
 

	
 

	
$

	
104,783

	
 

	
 

	
$

	
1,294.26

	
 

	
 

	
60

	
 


	
2015

	
 

	
$

	
16,774

	
 

	
 

	
$

	
121,557

	
 

	
 

	
$

	
1,397.80

	
 

	
 

	
70

	
 


	
2016

	
 

	
$

	
18,116

	
 

	
 

	
$

	
139,672

	
 

	
 

	
$

	
1,509.63

	
 

	
 

	
80

	
 


	
2017

	
 

	
$

	
19,565

	
 

	
 

	
$

	
159,237

	
 

	
 

	
$

	
1,630.40

	
 

	
 

	
90

	
 


	
2018

	
 

	
$

	
21,130

	
 

	
 

	
$

	
180,367

	
 

	
 

	
$

	
1,760.83

	
 

	
 

	
100

	
 


	
2019

	
 

	
$

	
22,820

	
 

	
 

	
$

	
203,187

	
 

	
 

	
$

	
1,901.70

	
 

	
 

	
100

	
 


	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
$

	
203,187