Exhibit 10.9

	
  
Annual Incentive Plan
  
	
  
2006-2007 Plan Year
  
	
  


  




Participant: (____________________)


Target Bonus:  (____________________)









	
  
Annual Incentive Plan
  
	
  


  




Table of Contents

	
  
Introduction
  	
  
 
  
	
  
•
  	
  
Purpose
  	
  
3
  
	
  •
  	
  
Plan Year
  	
  
3
  
	
  
•
  	
  
Important Notes
  	
  
3
  
	
   
 	
  
 
  	
   
 
	
  
How the   Plan Works
  	
   
 
	
  
•
  	
  
Eligibility
  	
  
4
  
	
  
•
  	
  
Target Bonus Amounts
  	
  
4
  
	
  
•
  	
  
Bonus Components
  	
  
5
  
	
  
•
  	
  
Participant Personal Performance
  	
  
5
  
	
  •
  	
  
AIP Award Calculation
  	
  
5
  
	
  
 
  	
  
 
  	
   
 
	
  
Plan   Administration
  	
   
 
	
  
•
  	
  
Adding New Participants
  	
  
7
  
	
  
•
  	
  
Changes to Target Bonus
  	
  
7
  
	
  
•
  	
  
Temporary Absence
  	
  
7
  
	
  
•
  	
  
Retirement, Death, or Permanent Disability
  	
  
8
  
	
  
•
  	
  
Voluntary Termination
  	
  
8
  
	
  •
  	
  
Involuntary Termination
  	
  
8
  




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Introduction
  
	
  


  




Purpose


The Annual Incentive Plan (the “Plan”) is an integral part of an executive’s total compensation package that recognizes the executive’s yearly contributions to the success of Kaiser Federal.  The Plan is designed to:

	
  
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support a business change to community-based   banking;
  
	
  
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support a culture change to pay-for-performance;
  
	
  
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focus the executive team on annual goals to meet   long-term goals;
  
	
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reward executives for their effort; and
  
	
  
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align compensation with the goals of the   organization and marketplace practices.
  




All awards under the Plan are based on the understanding and condition that each Participant will act in strict compliance with all applicable laws and Kaiser Federal’s policies and core values.


Plan Year


This Plan applies to Participant and company performance during the fiscal year (July 1 through June 30).  Bonus payments generated from this Plan, if any, will be made in July following the end of the Plan year.


Important Notes


While Kaiser Federal intends to maintain the Plan on an ongoing basis, Kaiser Federal’s Board of Directors reserves the right to modify the Plan’s provisions or its application to specific individuals, or terminate the Plan, at any time for any reason.


Plan benefits represent taxable income to Participants, and all applicable federal, state, FICA and local taxes will be withheld at lump sum rates prescribed by law.  These withholding rates may differ from the Participant’s normal withholding elections.


Kaiser Federal encourages Participants to consult a tax advisor to determine the Plan’s impact on their financial situation.


Each Participant will be required to name a beneficiary to receive Plan awards in the event the Participant dies while covered by the Plan.


AIP awards are not considered income for employee benefits purposes (life insurance, 401(k), LTD, etc.).


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Plan Features
  
	
  


  




Eligibility


Senior Managers who are responsible for one or more unique functions, whose decisions and actions are deemed to have a measurable impact on Kaiser Federal’s earnings are eligible to participate in the Plan. This typically includes direct reports to the Chief Executive Officer (CEO).


Nevertheless, no position is automatically eligible; each individual must be approved for AIP participation by the CEO and Board of Directors.


Newly hired executives are eligible for Plan participation if they are employed during the first three quarters of the Plan year. 


Target Bonus Amounts


Each Participant has an annual target bonus that is expressed as a specific dollar amount.  This target is individually determined for each Participant based on competitive market rates and an internal comparison of targets for Participants in other positions.  The target is the bonus amount that would be paid if the Participant fully achieves all of his/her personal performance goals and Kaiser Federal fully achieves its financial goals.


Guidelines for setting AIP targets are as follows:

	
  Position Level
  	
  
 
  	
  
AIP Target Bonus
  
	
  


  	
  
 
  	
  


  
	
  
CEO
  	
  
 
  	
  
30% of Base Salary
  
	
  
Senior Manager 2
  	
  
 
  	
  
20% of Base Salary
  
	
  
Senior Manager 1
  	
  
 
  	
  
10% of Base Salary
  




The target is rounded to the nearest even $100.  For example, a 20% target applied to a base salary of $105,650 results in a target of $21,130 which rounds to $21,100.


Each Participant’s annual bonus target must be approved by the CEO and Board of Directors.  The AIP target award remains fixed for a given plan year.  When the Participant’s salary increases or decreases, the AIP target award dollar amount will change effective on the first of the plan year following the base salary change, subject to approval by the CEO and Board of Directors.


The actual bonus awarded may be more or less than the target if the Participant and/or the company exceeds or falls short on performance goals.  There is no minimum payout.


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Plan Features
  
	
  


  




Bonus Components


The AIP bonus award depends on the following two components:

	
  
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Kaiser   Federal’s financial performance - based on Kaiser Federal’s   Return on Assets (ROA) compared to its annual goals for the Plan year.  Target ROA must be achieved or exceeded in   order for an AIP award to be made.    The Board of Directors and the CEO may adjust this number up or down   to reflect any extraordinary events or conditions which may have affected   financial performance during the year.
  
	
   
 	
  
 
  
	
   
 	
  
Return   on Assets is defined as annualized net income divided by the year’s average   assets.
  
	
   
 	
   
  
	
  
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Participant   personal performance - based on achieving individual goals   set by the Participant and the CEO.
  




Participant Personal Performance


The Participant and the CEO will set one to five objectives for the Participant to achieve by the end of the Plan year:

	
  
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One or more of these objectives must address expense   management, where keeping expenses at budget is the goal, a favorable   variance is exceeding expectations, and an unfavorable variance is below   expectations.
  
	
   
 	
  
 
  
	
  
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All other personal objectives should address   nonroutine job goals—e.g., a new initiative or a substantial enhancement to   an existing performance standard.    Each objective should be assigned a percentage weight to reflect its   relative importance and/or difficulty.    The sum of the weights must equal 100%.
  




The goals are set at the beginning of the Plan year using the Personal Goals form (see attached). Throughout the year, the Participant and the CEO should meet to ensure that the goals are still relevant and properly weighted in light of changing circumstances.  If the Participant’s objectives change substantially during the year (e.g. an objective is deleted and/or a new one is added), the changes must be documented.



AIP Award Calculation


Kaiser Federal must achieve or exceed its Target ROA in order for an AIP award to be made.  If the company falls short of its target, no award is made.


At the end of the Plan year, the Participant’s performance on each objective will be evaluated by the CEO and given a rating on the scale on the next page.  This rating is a multiplier that is applied to the AIP target for payout purposes.  The Participant is rated on his/her achievement of specific and quantitative objectives. If the Participant does not fully meet the personal objectives, a reduced or zero AIP award will be paid per the table below:


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Plan Features
  
	
  


  




AIP Award Calculation (Cont’d.)

	
  
AIP Multiplier
  	
   
 	
  
Performance Results
  
	
  


  	
   
 	
  


  
	
  101-120%
  	
  
 
  	
  
Outcome significantly exceeded all expectations and   made a contribution well beyond what was originally envisioned.
  
	
  
100%
  	
  
 
  	
  
Objective fully attained; nothing short of complete   success.
  
	
  
25-99%
  	
  
 
  	
  
Objective partially attained or significant progress   made, but fell short of goal.
  
	
  
0%
  	
  
 
  	
  
Failed to achieve objective or to make reasonable   progress.
  





	
  
 
  	
  
For   example, assume an AIP target award of $20,000 and personal performance that   exceeded expectations.  The   calculation is:
  	
  
 
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
$20,000 x 1.20 = $24,000
  	
  
 
  




The CEO will determine the multiplier for his/her direct reports, and the Board will determine the CEO’s multiplier.


The AIP award is subject to all normal federal, state and local tax withholding, and is not considered income for employee benefits purposes (life insurance, 401(k), LTD, etc.).


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Plan Administration
  
	
  


  




Adding New Participants


The CEO may add newly hired eligible employees to the Plan during the first three quarters of the Plan year.  An employee is not automatically eligible—the CEO must approve participation.  The target in the first year will be prorated to reflect the number of months in which the Participant worked during the year, and payout after the plan year will be based on the prorated target (rounded to the nearest even $100).

	
   
  	
  
For   example, a Participant is hired on September 20 with a target of   $20,000.  The Participant is given   credit for working in 10 months of the plan year (September through   June).  The prorated target is:
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
($20,000 x 10 months)   = $16,667 ($16,700 rounded)
  	
  
 
  
	
  
 
  	
  
                              12   months
  	
  
 
  




Changes to Target Bonus


The CEO and Board of Directors may adjust a Participant’s AIP target during the year if there is a material change in the Participant’s job responsibility or scope.  The new AIP target is prorated with the original target for payout purposes at the end of the Plan year.

	
   
  	
  
For   example, if a $20,000 AIP target is adjusted to $26,000 after nine months in   the Plan year, the prorated award for payout purposes is:
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
($20,000 x 9 months) + ($26,000 x   3 months) = $21,500
  	
  
 
  
	
  
 
  	
  
12 months
  	
  
 
  




Temporary Absence


If a Participant is temporarily disabled or is absent for any other reason for more than thirty calendar days during the Plan year, any award that might otherwise be payable under the Plan will be prorated.


For example, a Participant has a $20,000 target, was on leave of absence for 3 months, but still managed to exceed expectations for the nine months worked.  The AIP award calculation is:


$20,000 x 1.20  x 9/12 = $18,000


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Plan Administration
  
	
  


  




Retirement, Death, or Permanent Disability


If employment is terminated because of total and permanent disability, normal or late retirement, early retirement approved by the Company, or death, the Participant will be granted an AIP award that will be prorated based on the number of full weeks the Participant was employed during the year.


Voluntary Termination

	
  
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Before   the end of the Plan year – the AIP award will not be paid.
  
	
  
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After   the end of the Plan year – the AIP award will be paid at   the same time as to other Participants.
  




Involuntary Termination

	
  
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For Cause - If the Participant is terminated by Kaiser   Federal for cause, the AIP award will not be paid.
  
	
   
  	
   
  
	
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  Not For Cause -   If the Participant is terminated by Kaiser Federal because the Participant’s   job has been eliminated as a result of an organizational restructuring or a   reduction in the workforce, the Participant will be granted an AIP award, if   such an award is otherwise payable.    The award will be prorated based on the number of full weeks the   Participant was employed during the Plan year.
  



Kaiser Federal reserves the right to review, alter, amend or terminate the Plan at any time.  This Plan does not constitute a contract of employment and cannot be relied on as such.

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