Document:

EXHIBIT
10.29

 

LEASE
AGREEMENT

 

THIS
Lease made and entered into this 1st day of April,
2002, by and between DIRK INVESTMENTS, INC., a Delaware corporation
with its principal office located 2331 S. Pullman Street, Santa Ana,
California, 92705 (hereinafter referred to as “Lessor”), and TROY Group, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware, with its principal office at 1 Bryan Drive, Wheeling, West Virginia
26003 (hereinafter referred to as “Lessee”).

 

WITNESSETH: That Lessor does
hereby let, lease and demise unto Lessee the premises located in
the City of Wheeling, County of Ohio, State of West Virginia, described as
follows, to-wit:

 

DESCRIPTION OF PREMISES

 

All of the office area and
warehouse space containing approximately 78,000 square feet, including all
improvements therein, as shown
on the plot plan attached hereto and made a part hereof, (The “Demised
Premises” shall include the residential property described in exhibit A-1
attached hereto.) “ Exhibit A “, hereinafter referred to as the “Demised
Premises”. Said Demised Premises is a complex situated on 43.342 acres of land
as shown on the plot plan
attached hereto and made a part hereof, “Exhibit B”, hereinafter
referred to as the “Building”, designated by street address as One Bryan Drive,
Wheeling, West
Virginia 26003, together with the right in common with Lessor
to use and to have ingress and egress on, over and across and to permit
Lessee’s employees, invitees and customers to use and to have ingress and
egress on, over and across all the parking, driving, walking and other common
areas of the Building as shown on Exhibit B; provided, however, that Lessee
shall comply with the parking restrictions set forth in Paragraph 26 of this
Lease and shall not block the driveway or otherwise interfere with the ingress
and egress to and from the building;

 

in consideration of the following
mutual covenants, agreements, terms and conditions hereby agreed to by and
between Lessor and Lessee, to-wit:

 

1. TERM: The term of this
Lease and Lessee’s obligation to pay rent hereunder shall commence upon April 1, 2002  and shall thereafter continue for a
period of six (6) consecutive years ending on the last day of the sixth (6th)
full lease year as said term lease year is hereinafter defined.

 

The first lease
year shall begin on the date of the commencement of the term hereof, if the
date of commencement of the term hereof shall occur on the first (1st) day of a
calendar month. If not, then the first lease year shall commence upon the first
(1st) day of the calendar month next following the date of commencement of the
term hereof. Each succeeding lease year shall commence upon the anniversary
date of the first lease year without notice by either Lessor or Lessee any
custom, usage, practice, law, statute or ordinance to the contrary
notwithstanding.

 

a.               Renewal of Term:
This agreement shall be renewed automatically for additional periods of six (6)
year terms at the end of its current term unless either Party provides to the
other a written notice of its intention not to renew the agreement at least
sixty (60) days prior to the end of the then current term.

 

 

 

2. RENT: Lessee agrees to
pay the sum of Twenty Two Thousand Four Hundred Seventy Two Dollars
($22,472.00) per month as rent, which payments shall be made without demand by
checks made payable to Lessor and mailed by United States Mail addressed to
Lessor or to the address or to whom Lessor may designate in writing on the
first day of every month to be received by the fifth (5th) business day of
every month for which rent is due hereunder. Lesser reserves the right to
increase the rent on an annual basis at a rate of up to six (6%) percent.

 

3. SECURITY DEPOSIT:
Lessor reserves the right to request and require Lessee to provide a Security
Deposit in an amount equal to that of one (1) months base rent. Lessee shall
deposit with Lessor upon execution hereof the Security Deposit as security for
Lessee’s faithful performance of its obligations under this Lease. If Lessee
fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use,
apply or retain all or any portion of said Security Deposit for the payment of
any amount due Lessor or to reimburse or compensate Lessor for any liability,
expense, loss or damage which Lessor may suffer or incur by reason thereof. If
Lessor uses or applies all or any portion of said Security Deposit, Lessee
shall within ten (10) days after written request therefore deposit monies with
Lessor sufficient to restore said Security Deposit to the full amount required
by this Lease. If the Base Rent increases during the term of this Lease, Lessee
shall, upon written request from Lessor, deposit additional moneys with Lessor
so that the total amount of the Security Deposit shall at all times bear the
same proportion to the increased Base Rent as the initial Security Deposit bore
to the initial Base Rent. Should the Agreed Use be amended to accommodate a
material change In the business of Lessee or to accommodate a sub lessee or
assignee, Lessor shall have the right to Increase the Security Deposit to the
extent necessary, In Lessor’s reasonable judgment, to account for any increased
wear and tear that the Premises may suffer as a result thereof. If a change in
control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor’s reasonable judgment,
significantly reduced, Lessee shall deposit such additional monies with Lessor
as shall be sufficient to cause the Security Deposit to be at a commercially reasonable
level based on said change in financial condition. Lessor shall not be required
to keep the Security Deposit separate from its general accounts. Within
fourteen (14) days after the expiration or termination of this Lease, unless
Lessor elects to apply the Security Deposit to unpaid Rent or otherwise as
permitted above, within thirty-days (30) after the Premises have been vacated
by Lessee, Lessor shall return that portion of the Security Deposit not so used
or applied by Lessor. No part of the Security Deposit shall be considered to be
held in trust, to bear interest or to be prepayment for any monies to be paid
by Lessee under this Lease.

 

4. USE: The Demised
Premises may be used and occupied by Lessee only for the manufacture of wired
and wireless print servers, magnetic ink character recognition ribbons and
toner and the manufacture and assembly of other office supplies and the storage
and warehousing of same.

 

5. ASSIGNMENT AND SUBLET:
This Lease shall not be assigned nor the premises sublet in whole
or in part by Lessee without the prior written consent of Lessor. Lessor
hereby agrees not to withhold or delay unreasonably Lessor’s consent to
assignment or subletting in the event Lessee requests said consent. Lessor’s
consent shall not be required for: (a) an assignment or subletting to the
parent or subsidiary company of Lessee; (b) the merger with or consolidation
into any other corporation by Lessee or the reorganization or redistribution of
the manner by which Lessee is held, owned or operated; or (c) any other
transfer of the Demised Premises, this Lease, or any part of either, occasioned
by a consolidation, merger, reorganization or other sale or similar event
involving all or, substantially all of the assets or stock of Lessee, provided
that in each instance the successor to Lessee’s interest assumes in full, for
the benefit of Lessor, all of the obligations of Lessee under this Lease. As
used herein, the phrase “withhold or delay unreasonably Lessor’s consent” shall
not entitle Lessor to demand or receive in exchange therefore or as a condition
thereto an amount or sum of rent or other financial consideration not

 

 

expressly required pursuant to the
terms of this Lease. Any
assignment or subletting (including, without limitation, an, assignment
or subletting which does not require Lessor’s consent) shall not affect or
limit, in any way, the liability of Lessee under the terms of this Lease.  Lessee shall not mortgage, pledge or
otherwise encumber the Demised Premises without the prior written consent of
Lessor (which consent shall not be unreasonably withheld). Lessor reserves the
right to assign its right to receive rents under the terms of this Lease as
collateral for loans from time to time.

 

6. SIGNS: Lessee, with
Lessor’s approval (which approval shall not be unreasonably withheld), shall
have the right to construct,
erect, place, put, maintain and control on the Demised Premises
and in common areas at points of ingress and egress to the Building any sign or
signs which may be removed by Lessee at any time provided that: (a) said sign
or signs are constructed, erected and removed in a workmanlike manner and
comply with the rules, regulations, laws, statutes and ordinances of the city
and state in which the Demised Premises are located; and (b) the location,
dimensions, design, appearance and construction of such sign or signs are
approved by Lessor in writing (which approval shall not be unreasonably
withheld). Prior to the termination of this Lease, Lessee shall remove such
sign or signs and shall repair any damage to the Demised Premises caused by
such removal.

 

7. LESSEE’S EQUIPMENT:
Lessee shall have the right to install and maintain in and on the Demised
Premises such equipment as is necessary to the conduct of its business, all of
which shall remain the property of Lessee and may be removed by Lessee at any
time. Prior to the termination of this Lease, Lessee shall remove Lessee’s
equipment from the Demised Premises and shall repair any damage to the Demised
Premises, which shall have resulted from removing Lessee’s equipment.

 

Lessee’s equipment shall mean
fixtures, machinery, equipment, furniture and furnishings (whether or not
affixed to the Demised Premises) installed and
maintained by Lessee for use in connection with the operation of its business
as distinguished from the operation of the Demised Premises as a real estate
unit.

 

8. ALTERATIONS: Lessee
shall have the right to make any interior, non-structural alterations,
additions, changes or improvements on the Demised Premises at Lessee’s cost,
provided that said alterations, additions, changes, or improvements do not cost
in excess of One Thousand Dollars ($1,000.00) in each instance and do not
impair the value of the Demised Premises. All other alterations, additions,
changes or improvements on or to the Demised Premises shall require the prior
written consent of Lessor, which consent shall not be unreasonably withheld.
Any alterations, additions, changes or improvements made by Lessee of the type
permitted in this paragraph
(including, without limitation those requiring the prior written
consent of Lessor), excluding Lessee’s equipment, shall become a part of the
Demised Premises and, at the expiration or earlier termination of this Lease,
Lessee, upon written request by Lessor, may be required, with the exception of
normal wear and tear, to restore the Demised Premises to the condition they
were in prior to the making of any said alterations, additions, changes or
improvements.

 

Lessee shall pay, when due, all
claims for labor or materials furnished to or for Lessee and shall keep the
Building free and clear of any mechanics’ or materialmen’s liens arising from
any alterations, additions, changes or improvements performed by or for Lessee.

 

9. REPAIRS: Lessee agrees
to maintain in good repair, at Lessee’s cost, the roof, outer walls (which will
include the bulkheads under plate glass windows), downspouts, underground
plumbing, exterior lighting, fire protection (dry system), electrical wiring
and ceilings, support of floors, and structural portions of the Building
and Demised Premises. Lessee agrees to make repairs to the interior
of the Demised Premises including, without limitation, repairs and seasonal
servicing to the air conditioning and heating equipment serving the Demised Premises.
Lessee shall not be required or obligated to make

 

 

any repairs to the Demised Premises
when the repairs or replacements are made necessary by reason of fire, flood,
windstorm, earthquake or other casualty covered by standard fire and extended coverage
insurance sold in West Virginia. Lessee agrees to surrender the Demised
Premises at the expiration or earlier termination of this Lease in as good a condition as at the commencement
of the term of this Lease, except Lessee shall not be responsible for the
repair or condition of those portions of the Building and Demised Premises
which Lessor agrees to maintain, nor damage by dry rot, termites, sinking of
floors, ordinary wear and. tear, fire, flood, earthquake, windstorm or other
casualty.

 

10. WARRANTY: Lessor
represents and warrants that Lessor has the authority to enter into this Lease
as Lessor. Lessee represents and warrants that Lessee has the authority
to enter into this Lease as Lessee.

 

11. FIRE CLAUSE: In the
event the Building or the Demised Premises shall be damaged by fire, flood,
windstorm, earthquake or any other casualty to such an extent that, in the
written opinion (certified as such) of a mutually acceptable licensed
architect, they cannot be restored to as good a condition as they were prior to
such damage within one hundred fifty (150) days after the date of such
casualty, Lessor and Lessee shall each have the right to cancel and terminate this Lease by
delivering written notice of such termination to the other party within thirty
(30) days after receipt of such architect’s opinion (with the rental obligation
being reduced from the
date of such damage to the date of such termination in such proportion
as will compensate Lessee for any space not usable by Lessee).  If Lessor or Lessee does not exercise such
right to cancel this Lease within such thirty (30) day period or if such
architect shall have certified that such repairs can be made within a period of
one hundred fifty (150) days, Lessor agrees to repair the Building and the Demised
Premises with due diligence and, in the meantime, the rent shall be reduced in
such proportion as will compensate Lessee for the space not in proper condition
during such repair period. 
Notwithstanding any terms to the contrary in this Lease, Lessor and
Lessee may each terminate this Lease if the damage is not covered by the
insurance policies that Landlord must maintain, pursuant to Paragraph
24 of this Lease.

 

It is further
provided that in the event the Demised Premises is substantially destroyed by
fire, flood, windstorm, earthquake or any other casualty within one (1) year
prior to the expiration or earlier termination of the lease term, both Lessor
and Lessee shall have the mutual right to terminate this Lease as of the date
of such damage with written notice to the other party.

 

12. EMINENT DOMAIN: In
the event the entire Building is acquired by the exercise of the power of
eminent domain, Lessee shall be relieved, after possession is required to be
surrendered, of all rent payments and other obligations provided for herein and
any rent which has been paid in  advance
shall be prorated and a refund made by Lessor for any unexpired period for
which Lessee does not have possession and for which rent has been
paid in advance.

 

In the event only a portion of
the Building or Demised Premises (including parking area which Lessee has the
right to use hereunder) is acquired by the exercise of the power of eminent
domain but, in the reasonable opinion of Lessee, Lessee can no longer
satisfactorily operate its business in the space and/or with the amount of
parking area
remaining, Lessee shall have the right to terminate and cancel this
Lease effective at the time possession of such portion of the Building or
Demised Premises must be surrendered. To exercise its right to cancel under
this paragraph, Lessee must notify Lessor by written notice, mailed to Lessor
at the address designated for the forwarding of rent payments due hereunder,
not later than fifteen (15) days prior to the time when possession must be surrendered.
In the
event Lessee elects to remain, after the taking of a portion of the Building or
Demised Premises through the power of eminent domain, Lessor
agrees to make promptly all necessary alterations, changes and repairs needed
for Lessee’s continued occupancy (but only to the extent funds designated
therefore are received by Lessor

 

 

from the condemning
authority) and the rent due hereunder is to be reduced pro rata in proportion
to the ratio of the number of square feet of space taken to the original number
of square feet.

 

The rights of Lessee, as set
forth in this paragraph, shall in no way prejudice or interfere with any claim
which Lessee may have against the authority exercising the power of eminent
domain for damages or otherwise and Lessee specifically reserves its right to
damages against the authority exercising the power of eminent
domain.

 

13. VACATION: In the event
Lessee vacates the Demised Premises before the expiration of the term of this
Lease or any extension thereof, which Lessee shall have the right to do, Lessee
shall not thereby be relieved from the payment of rent or any other of its
duties or obligations under this Lease during the remaining term or any
extension thereof.

 

14. HOLDING OVER: In the
event Lessee shall hold over after the expiration or termination of the term of
this Lease or any extension thereof with prior written consent from Lessor,
said holding over shall not be deemed to be a renewal or extension of this
Lease or any extension thereof or the exercise of any option to extend or renew
this Lease, but said holding over shall be deemed a tenancy from calendar month
to calendar month at a monthly rent equal to the rent for the last month under
this Lease.  A month to month tenancy
arising by holding over under this paragraph may be terminated
by either Lessor or Lessee giving written notice thirty (30)
days in advance to the other party hereto.

 

15. QUIET ENJOYMENT:
Lessor covenants and agrees that Lessee, on payment of the rent and the
performance of all of the covenants and agreements of this Lease, shall and may
peaceably and quietly have, hold and enjoy the Demised
Premises.

 

16. RULES OF PUBLIC OFFICERS:
Lessee agrees to comply with the rules, regulations, orders, laws, statutes and
ordinances of the duly constituted public authorities
governing the use and occupancy of the Demised Premises, but Lessee shall not
be required to make any repairs, alterations, changes and/or improvements to
the Demised Premises or the appurtenances thereto because of any requirements
of the public authorities (unless such repairs, alterations, changes and/or
improvements are required as a result of or in connection with any business
conducted by Lessee on the Demised Premises or any alterations, changes or
improvements which Lessee elects to make to the Demised Premises).  In the event of such requirements by the
public authorities, which, under this paragraph, are the responsibility of
Lessor, Lessor agrees to make promptly, at its cost, such required repairs,
alterations, changes and/or improvements.

 

17. LESSEE’S BREACH OF
COVENANT: In the event Lessee shall: (a) fail to make any payment of rent
as herein provided when it becomes due, which failure continues uncorrected for a
period of ten (10) days or more after written notice thereof from Lessor
to Lessee; or (b) fails to perform or otherwise violates any of the covenants,
agreements and conditions of this Lease, which violation continues uncorrected
for a period of thirty (30) days or more after notice thereof from Lessor to
Lessee (unless such failure or violation, if it is curable, requires work to be
performed or acts to be done or remedies which by their nature cannot be
performed, done or remedied  within such
thirty (30) day period and Lessee shall continue to pursue such cure, it shall
have such additional period of time as may be reasonably necessary to cure same), then in either of
such events, Lessor shall have the right, in addition to all other rights
and remedies available to Lessor at law or in equity, to re-enter the Demised
Premises, repossess said Demised Premises, evict Lessee and/or others therein,
remove the property of Lessee and others therein  and in the discretion of Lessor, relet the Demised Premises.  Repossession made by Lessor, as provided for
in this paragraph, shall not relieve Lessee from the payment of
rent during the unexpired portion of the term of this Lease or the unexpired
portion of any extension thereof, but in the event Lessor

 

 

relets the Demised Premises after such
repossession and prior to the expiration of this Lease or any extension
thereof, Lessee’s liability for rent under this paragraph shall be credited
monthly (except Lessee shall receive no surplus over and above its liability
for rent) with all rent received by Lessor from said reletting (after deducting
from such rent all reasonable costs and expenses incurred by Lessor in
connection with such reletting) from the time of reletting to the expiration of
this Lease or any extension thereof.

 

Unpaid installments of rent and
other unpaid monetary obligations of Lessee under this Lease shall bear
interest from the date due at a rate equal to the lesser of twelve percent
(12%) per annum or the maximum rate then allowable by law. In addition to the
payment of such interest, if any installment of rent or any other sum due from
Lessee is not received by Lessor within ten (10) days after written notice
thereof from Lessor to Lessee that such amount is due, then Lessee shall pay to
Lessor a late charge equal to five percent (5%) of such overdue amount.

 

18. LESSOR’S BREACH OF
COVENANT: In the event Lessor shall fail to perform the covenants and/or
agreements of this Lease which are required to be performed by Lessor and/or
there is a breach of any express warranty made herein by Lessor, then Lessee
may require Lessor to remedy said default or defaults by the service of written
notice on Lessor or Lessor’s agent at the address to which rent payments due
under this Lease are forwarded and, if at the expiration of thirty (30) days
from the receipt of said notice from Lessee to Lessor (unless such failure or
violation, if it is curable, requires work to be performed or acts to be done
or remedies which by their nature cannot be performed, done or remedied within
such thirty (30) day
period and Lessor shall continue to pursue such cure, it shall have such
additional period of time as may be reasonably necessary to cure same), then in
either of such events, Lessee, in addition to its rights under state and local
laws, shall have the right to remedy said breach of covenants, agreements,
and/or warranties and the cost of such action shall be deducted by Lessee from
the unpaid rents, which shall accrue under the unexpired term of this Lease or
any extension
thereof.

 

19. INSPECTION BY LESSOR:
Lessor and Lessor’s agents, servants and employees shall have the right to
enter the Demised Premises at all reasonable times to inspect and examine the
Demised Premises and to make alterations, changes or repairs to the Demised
Premises and/or to make repairs for the preservation or maintenance of the
Demised Premises. During the last ninety (90) days of the term of this Lease or
any extension thereof, Lessor shall have the right to post “For Rent” and/or
“For Sale” signs on the Demised Premises and, during said period, Lessor and
Lessor’s agents, servants and employees shall have the right to show the
Demised Premises to prospective tenants or purchasers at all reasonable times.

 

20. ZONING: In the event,
during the term of this Lease or any extension thereof, the Demised Premises
may not be used for the operation of the business which is conducted by Lessee
on the Demised Premises on the date of the execution of this Lease due to
zoning changes, Lessee shall have the right to terminate this Lease by giving
Lessor at least ten (10) days written notice of its election so to do, the
notice to set forth the termination date selected by Lessee.

 

21. TAXES: Lessee shall
pay all taxes assessed against or by reason of property which it owns and has
the right to remove from the Demised Premises and all licenses and other fees
charged against it by reason of its business conducted in the Demised Premises (including,
without limitation, any service fees imposed by any local governing
authority).  In addition, Lessee shall
pay all real estate taxes assessed against the subject property.

 

 

22. UTILITIES: Lessee
agrees to pay for all gas, water, sewerage, electricity, telephone and other
utilities and services used and consumed by Lessee in the Demised Premises.
Lessor, at its sole cost, shall be responsible for utility service
modifications necessary and shall provide metered billing for Lessee. In the
event Lessee should install outside of the Demised Premises an approved
addition, alteration, change, improvement or a sign that serves the Demised
Premises, as provided for in Paragraphs 8 and 6 respectively, Lessee shall be
responsible for all costs associated with any additional utility service
necessary to service the addition, alteration, change, improvement or sign.

 

23. INSURANCE AND INDEMNITY:

 

(a) Lessee’s
Insurance - Lessee shall, at its sole cost and expense, procure and keep in
full force and effect during the term of this Lease: (i) comprehensive general
liability insurance with respect to the Demised Premises and the operations of
or on behalf of Lessee in, on or about the Demised Premises, which policies
shall be written on an “occurrence” basis and for not less than Two Million
Dollars ($2,000,000) combined single limit per occurrence for bodily injury, death, and property
damage liability, or the current limit of liability carried by Lessee,
whichever is greater (subject to such increases in amounts as may be deemed
reasonable and appropriate under the circumstances within the insurance
industry); (ii) workers’ compensation insurance coverage as required by law,
together with employers’ liability insurance coverage; and (iii) insurance
against fire,
vandalism, malicious mischief and such other additional perils as may be
included in a standard “all risk” form in general use in Wheeling,
West Virginia, insuring Lessee’s furniture, fixtures, equipment, improvements
and personal property in an amount equal to not less than ninety percent (90%)
of their actual replacement cost. In no event shall the limits of any policy be
considered as limiting the liability of Lessee under this Lease.

 

(b) Policy
Requirements - All policies of insurance required to be carried by Lessee
pursuant to this paragraph shall be written by 
responsible insurance companies authorized to do business in the State
of West Virginia and shall be reasonably acceptable to Lessor. Lessee shall
provide Lessor with a certificate of insurance evidencing such coverage
provided for herein, together with satisfactory evidence of renewal at least
thirty-days (30) prior to the expiration of coverage. Each insurance policy
required to be carried by Lessee pursuant to this Lease shall contain the
following provisions and/or clauses: (i) a provision that the policy and the
coverage provided shall be primary and that any coverage carried by Lessor
shall be noncontributory with respect to any policies carried by Lessee; (ii) a
provision including Lessor and any other parties in interest designated by
Lessor as an additional insured, except as to workers, compensation insurance;
(iii) a waiver by the insurer of any right to subrogation against Lessor, its
shareholders, directors, officers, employees, agents and representatives which
arises or might arise by reason of any payment under the policy or by reason of
any act or omission of Lessor, its shareholders, directors, officers,
employees, agents or representatives; and (iv) a provision that the insurer
will not cancel or change the coverage provided by the policy without first
giving Lessor thirty (30) days prior written notice.

 

(c) Indemnity
- Lessee shall indemnify, defend, protect and hold harmless Lessor and Lessor’s
shareholders, directors, officers, employees, agents and representatives
(individually referred to as an “Indemnitee”) from and against any and all
claims, demands, liabilities, damages, losses, costs and expenses, collectively
referred to as “Claims” (including, without limitation, attorneys’ fees) ,
arising from or relating to (i) any accident, injury or damage occurring on or
about the Demised Premises; (ii) any accident, injury or damage occurring on or
about any other portions of the Building when such accident, injury or damage
has been caused by any act or omission of Lessee or any of Lessee’s officers,
employees, agents, representatives, contractors, licensees, invitees or
subtenants; (iii) the conduct of Lessee’s business or Lessee’s use or occupancy
of the Demised Premises or the Building; (iv) any activity, work or thing done,

 

 

permitted or suffered by Lessee
in or about the Demised Premises or the Building; or (v) any default by Lessee
under the terms of this Lease. The preceding indemnity shall not apply to any
Claims arising from Lessor’s sole negligent acts or Lessor’s failure to perform
any of its obligations under this Lease. In the event that any action
or proceeding is brought against an Indemnitee for a matter covered
by this indemnity, Lessee, at the request of such Indemnitee, shall defend such
action or proceeding by counsel reasonably satisfactory to such Indemnitee. The
provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.

 

24. GENERAL LIABILITY AND
FIRE AND EXTENDED COVERAGE: Lessor agrees to carry fire and extended
coverage insurance on the Building, including the Demised Premises, in an amount
not less than ninety percent (90%) of the replacement value of said Building
and Demised Premises in some good and solvent insurance company, and Lessor
will pay all premiums on said insurance policy or policies when due. In
addition, Lessor shall maintain comprehensive general liability insurance with
respect to the portion of the building and parking occasioned by Lessor. Said
policy shall be written on a per occurrence basis and for not less than Two
Million Dollars ($2,000,000.00) combined single limit per occurrence. Lessor
shall furnish to Lessee a certificate of insurance evidencing the coverage as
provided for herein. Lessor’s insurance shall not cover Lessee’s furniture,
fixtures, equipment, improvements and/or personal property.

 

25. ESTOPPEL CERTIFICATE:
Both Lessor and Lessee each agree that at any time and from time-to-time, upon
not less than ten (10) days prior written request by the other party to this
Lease Agreement, to execute, acknowledge and deliver to the requesting party an
estoppel certificate. It is  intended
that any statements made in such estoppel certificate may be relied upon by any
lender of either Lessor or Lessee, or such lender’s successors or assigns, or
by any transferee or assignee of Lessor or Lessee’s interest (or any part
thereof) in the Building or the Demised Premises or by any other party
providing any form of financing (including by sale of stock, debt, or
otherwise) to either Lessor or Lessee.

 

26. COMMON AREA MAINTENANCE:
Lessee agrees to maintain at all times during the term of this Lease or any
extension thereof, the common areas located adjacent to the Building, including
parking areas, driveways, sidewalks and landscaped areas, in good repair,
serviceable, clean, neat and sanitary by the maintenance of a reasonably smooth
all weather surface on all paved areas and the 
removal of snow, ice, dirt and trash from parking areas, driveways and
sidewalks.

 

27. ATTORNMENT/NON-DISTURBANCE:
RIGHT TO CURE LESSOR DEFAULTS:  This
Lease is and shall be subject and subordinate to the lien of any existing deed
of trust or mortgage (collectively called the “Mortgage”) or any future
Mortgage placed upon the Demised Premises provided that, in each such case the
mortgagee shall have executed and delivered to Lessee, in recordable form, a
non-disturbance agreement which provides that, so long as Lessee is not in
default under this Lease beyond any applicable cure period, no default under
the Mortgage and no proceeding to foreclose the same, deed in lieu of
foreclosure, or the exercise or attempted exercise of any right or remedy under
the Mortgage will disturb Lessee’s possession or other rights under the Lease
(including any right of Lessee to renew or extend the term thereof) and the
Lease will not be affected or cut off thereby. Lessee shall execute from time
to time such subordination, attornment and other agreements as Lessor or any
mortgagee may reasonably require to effectuate the terms of this  paragraph (which agreements may contain terms
and conditions customarily required by institutional lenders), subject to the
reasonable approval of Lessee.

 

28. [PURPOSEFULLY OMITTED]

 

 

29. CANCELLATION BY LESSOR:
In the event that Lessor requires the space contained in the Demised Premises
for the purpose of expanding its business operation or the business operation
of any affiliated company of Lessor or partnership in which Lessor is a partner, then Lessor shall have,
at any time after the expiration of the primary term hereof, the
option to terminate the remaining primary term of the Lease or any renewal
period as the case may be, by providing Lessee with one (1) year prior written
notice of Lessor’s election to do so.

 

30. HAZARDOUS SUBSTANCES:
As
used herein “Environmental Laws” means the Resource Conservation Recovery Act,
the Comprehensive Environmental Responsibility Compensation and Liability Act,
the Superfund Amendments and Reauthorization Act, the Toxic Substances Control
Act, the Hazardous Materials Transportation Act, the Clean Air Act, the Clean
Water Act, and other similar federal, state and local laws, as amended,
together with all regulations issued or promulgated thereunder, relating to
pollution, the protection of the environment or the health and safety of
workers or the general public.  As used
herein “Hazardous Substance” means any hazardous substance, hazardous or toxic
waste, hazardous material, pollutant or contaminant, as those or similar terms
are used in the Environmental Laws, including, without limitation, asbestos and
asbestos-related products, chlorofluorocarbons, oils or petroleum derived
compounds, polychlorinated biphenyls, pesticides and radon.  Lessee shall not, without the prior’
written consent of Lessor, use, store, manufacture, release, generate, dispose
of or transport any Hazardous Substance on, under, about or near the Demised
Premises or the Building. Any Hazardous Substance used, stored, manufactured,
released, generated, disposed of or transported on, under, about or near the
Demised Premises or the Building by Lessee shall be done so in
accordance with all Environmental Laws as well as any other applicable laws,
statutes, codes, ordinances, rules and regulations. In the event Lessee causes
any contamination of the Demised Premises or the Building, or has caused any
such contamination since Lessee first occupied the Demised Premises or the
Building, even before the commencement of this Lease, Lessee shall, upon demand
of Lessor and at Lessee’s sole cost and expense, promptly take all actions
reasonably required by Lessor to remedy any such contamination. Lessee shall
indemnify, defend (with counsel reasonably acceptable to Lessor), protect and
hold harmless Lessor (and Lessor’s directors, officers, shareholders, partners,
affiliates, employees, attorneys, agents and representatives, the foregoing being
collectively referred to as “Lessor’s Representatives”) from and against any
and all costs of remediation as well as any and all other claims, demands,
liabilities, obligations, damages, causes of action, judgments, losses,
penalties, fines, costs and expenses (including, without limitation, reasonable
attorneys’ fees and expert witness fees) which Lessor or any of Lessor’s
Representatives may incur or suffer by reason of or in connection with any use,
storage, manufacture, release, generation, disposal or transport of any
Hazardous Substance on, under, about or near the Demised Premises or the
Building by Lessee or any of Lessee’s officers, employees, agents,
representatives, contractors, licensees, invitees or subtenants. The provisions
of this paragraph shall survive the expiration or earlier termination of this
Lease.

 

31. TIME OF ESSENCE: Time
is of the essence with respect to the performance of all obligations to be
performed or observed by the parties under this Lease.

 

32. CUMULATIVE REMEDIES:
No remedy or election hereunder shall be deemed exclusive but shall, whenever
possible, be cumulative with all other remedies at law or in
equity.

 

33. ATTORNEYS’ FEES: If
either party brings an action or a proceeding to enforce the terms
hereof or declare the rights hereunder, the prevailing party shall
be entitled to reasonable attorneys’ fees. Lessor shall be entitled to
reasonable attorneys’ fees, costs and expenses incurred in the preparation and
service of any notices of default for payment of rent, whether or not a legal
action is subsequently commenced.

 

 

34. NOTICE: By the terms
of this Lease, whenever notice shall or may be given either to Lessor or
Lessee, such notice shall be in writing and shall be delivered in hand or sent
by Certified Mail, Return Receipt Requested, postage prepaid:

 

If intended for Lessor,
addressed to it at the then current address for making rental payments or at
such other address as may from time to time be designated by Lessor by like
notice; and

 

	
  If intended for Lessee, addressed to:

  	
   

  	
  TROY GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2331 South Pullman Street

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Santa Ana, California 92705

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
  Chief Financial Officer

  
				

 

or at such
other addresses as may from time to time be designated by Lessee by like
notice.

 

35. SUCCESSORS: Subject
to the terms of Paragraph 5 of this Lease, the covenants, agreements, terms,
conditions and warranties of this Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective heirs, executors,
administrators, successors and assigns.

 

IN WITNESS WHEREOF, the parties
hereto have signed and sealed the foregoing Lease Agreement on the day and year
first written above.

 

 

	
   

  	
   

  	
  DIRK INVESTMENTS,
  INC. (Lessor)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     Suzanne Anderson

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Title):

  	
     Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Title)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TROY GROUP, INC. (Lessee)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     James Klingler

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Title)

  	
     Chief Financial
  Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  
						

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )  SS.

  
	
  COUNTY OF ORANGE )

  	
   

  

 

On the
          day of
                          ,
2002, before me personally appeared Suzanne Anderson, to me personally known,
who, being by me duly sworn, says that she is a duly authorized officer of Dirk
Investments, Inc., that one of the seals affixed to the foregoing instrument is
the corporate seal of said corporation, that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors and
she acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.

 

 

	
  SEAL

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  	
   

  

 

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )  SS.

  
	
  COUNTY OF ORANGE )

  	
   

  

 

 

On the
          day of
                          ,
2002, before me personally appeared James Klingler, to me personally known,
who, being by me duly sworn, says that he is a duly authorized officer of Troy
Group, Inc., that one of the seals affixed to the foregoing instrument is the
corporate seal of said corporation, that said instrument was signed and sealed
on behalf of said corporation by authority of its Board of Directors and he
acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.

 

 

	
  SEAL

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  	
   

  

 

 

EXHIBIT “B”

 

FIRST

 

ALL that certain tract of
land situate on the westerly side of the Greggsville, Clinton and Potomac Road,
partially in the City of Wheeling and partially in Richland - Washington
District (formerly Richland District), Ohio County, West Virginia, and being
more particularly bounded and described as follows:

 

BEGINNING
at a point in the Greggsville, Clinton and Potomac Road at a common corner to
Lot No.1, Map of Washington Acres, said map being recorded in the Office of the
Clerk of the County Court of Ohio County, West Virginia, in  Deed Book Volume 309, page 118, and the
most southerly corner of the 14 and 111/1000 acre tract of land which was
conveyed by Lawrence Washington Farms, Inc., to John E. Griffith and Norma V.
Griffith, by deed dated October 30, 1978 and recorded in said County Clerk’s
Office in Deed Book Volume 586, page 399; thence from said beginning point with
said Greggsville, Clinton and Potomac Road, South 21 degrees 46 minutes 40
seconds West 325 and 72/100 feet to a point at the most easterly corner of the
3 and 276/1000 acre tract of land that was conveyed by Emma Landmyer to the
Wheeling Dollar Savings and Trust Company by deed dated June 15, 1960 and
recorded in said County Clerk’s Office in Deed Book Volume 418, page 440;
thence leaving said road and with lines of the said 3 and 276/1000 acre tract
the following three (3) bearings and distances: North 71 degrees 51 minutes 40
seconds West 334 and 91/100 feet to a point; thence North 71 degrees 47 minutes
West 146 and 17/100 feet to a point; thence North 67 degrees 27 minutes West
722 and 61/100 feet to a point in lands now or formerly owned by August
Schafer; thence with said Schafer tract the following six (6) bearings and
distances: North 86 degrees 14 minutes 20 seconds East 391 and 42/100 feet to a
point; thence North 29 degrees 36 minutes 20 seconds West 403 and 75/100 feet
to a point; thence North 19 degrees 41 minutes West 214 and 5/10 feet to a
point: thence North 11 degrees 11 minutes West 1567 feet to a point; thence
North 09 degrees 19 minutes East 560 feet to a point; thence South 81 degrees
41 minutes East 165 feet to a point in lines of Lawrence Washington Farms,
Inc.: thence with said Lawrence Washington Farms, Inc., the following two (2)
bearings and distances: South 11 degrees 55 minutes 10 seconds East 412 and
5/10 feet to a point; thence South 21 degrees 55 minutes 10 seconds East (at
550 feet passing the most westerly corner of the 50 and 671/1000 acre tract of
land which was conveyed by Lawrence Washington Farms, Inc., to County Estates,
Inc., by deed dated April 12, 1979 and recorded in said County Clerk’s Office
in Deed Book Volume 589, page 273, and 2,162 and 1/100 feet passing the
division line between the said 50 and 671/1000 acre tract of land and the 14
and 111/1000 acre tract of land) 2,442 feet to a point: thence continuing with
said 14 and 111/1000 acre tract. South 39 degrees 25 minutes 10 seconds East
257 and 4/100 feet to the place of beginning, containing 42,037 acres, more or
less, and as shown on the map prepared by Stegman and Schellhase, Inc., Civil
Engineers and Surveyors, dated February 24, 1981.

 

SECOND ALL that certain tract of land
situate in Richland District, Ohio County, and State of West Virginia, being
more particularly bounded and described as follows:

 

BEGINNING at a point in
the Greggsville, Clinton and Potomac Road at the most easterly corner of the 3
and 276/1000 acre tract of land that was conveyed by Emma Landmyer to the
Wheeling Dollar Savings & Trust Company by deed dated June 15, 1960 and
recorded in the office of the Clerk of the County Court of Ohio County, West
Virginia, in Deed Book 418, at page 440; thence from said beginning point and
with said road. South 23 degrees 38’ 20” West, 100 and 46/100 feet to a point;
thence leaving said road and with the northerly lines of D.M. Alexander’s
Second Addition, a copy of said plat being on file in said Clerk’s office in
Plat Book 1, at page 86 and the easterly and westerly extensions of same the
following two (2) bearings and distances: North 71 degrees 51’ 40” West, 329
and 12/100 feet to a point; thence North 71 degrees 47’ West, 146 and 28/100 feet to a point;
thence crossing through said 3 and 276/1000 acre tract, North 18 degrees 13’
East, 100 feet to a concrete monument in a northerly line of said 3 and

 

 

276/1000
acre tract; thence with same the following two (2) bearings and distances:
South 71 degrees 47’ East, 146 and 17/100 feet to an iron pin; thence South 71
degrees 51’ 40” East, (at 271 and 69/100 feet passing an iron pin) 338 and
68/100 feet to the place of beginning, containing 1 1/10 acres, more or less,
as compiled from surveys by Stegman & Schellhase, Inc., Civil Engineers and
Surveyors.Exhibit 10.1

 

Community First

 

2002 Annual Incentive Plan (AIP)

 

EXECUTIVE SUMMARY

 

I.                   Participants

 

	
   

  	
   

  	
  Incentive - % of Salary

  	
   

  
	
  A.

  	
  Group

  	
   

  	
  Target

  	
   

  	
  Maximum

  	
   

  
	
   

  	
  CEO

  	
   

  	
  50

  	
  % 

  	
  100

  	
  %

  
	
   

  	
  COO

  	
   

  	
  40

  	
  %

  	
  80

  	
  %

  
	
   

  	
  EVP

  	
   

  	
  30

  	
  %

  	
  60

  	
  %

  
	
   

  	
  SVP

  	
   

  	
  25

  	
  %

  	
  50

  	
  %

  
	
   

  	
  VP

  	
   

  	
  15

  	
  %

  	
  30

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
  Other

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

II.               Measures / Weighting

 

	
  A.

  	
  Internal (Earnings Per
  Share (EPS))

  	
   

  	
  37.5

  	
  %(1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
  External (Return
  on Equity (ROE))

  (Total Shareholder Return (TSR))

  	
   

  	
  37.5

  	
  %(1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
  Balanced Scorecard

  	
   

  	
  25

  	
  %(2)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total

  	
   

  	
  100

  	
  %

  

 

(1)  Division / CFC Presidents = 25%

(2)  Division / CFC Presidents = 50%

 

III.           Internal Measure – Earnings Per Share (EPS)

 

Based on performance
versus 2002 profit plan

No award is less
than 91% of plan

Rounded up a .5
(plan) and down at <.5

 

 

IV.         External Measure – Return on Equity (ROE) / Total Shareholder Return (TSR)

 

Compares CFB
performance in 2002 on Return on Equity (ROE) and Total Shareholder Return
(TSR) to SNL peer group (30 banks).

 

Percentile ROE

 

	
  85th or
  higher

  	
   

  	
  100

  	
  %

  	
  150

  	
  %

  	
  200

  	
  %

  
	
  50th

  	
   

  	
  50

  	
  %

  	
  100

  	
  %

  	
  150

  	
  %

  
	
  49th or
  lower

  	
   

  	
  0

  	
  %

  	
  50

  	
  %

  	
  100

  	
  %

  
	
   

  	
   

  	
  49th or
  lower

  	
   

  	
  50th 

  	
  *

  	
  85th or
  higher

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Percentile TSR

  

 

*  Award will be prorated from 50th%
to 85th%.

 

V.               Balanced Scorecard Measure

 

A.                      The Balanced Scorecard measures
three (3) factors in the AIP:

1)              Sales

2)              Financial

3)              Credit

 

B.                        Sales Measures include three key
indicators:

1)              Number of sales per FTE per week
– see attached list of qualifying products

2)              New customer cross-sell ratio

3)              Campaign Performance

 

C.                        Financial Measures include four
key indicators:

1)              Net Controllable Revenue per FTE

2)              Controllable Non-Interest Income
per FTE

3)              Loan fees as percent of profit
plan

4)              Investment product sales as
percent of profit plan

 

D.                       Credit Quality Measures include:

1)              Credit Goal Scoring

 

E.                         Balanced Scorecard Target
Incentive:

 

	
  1)

  	
  Group

  	
   

  	
  %

  	
   

  
	
   

  	
  CEO

  	
   

  	
  100

  	
  %

  
	
   

  	
  COO

  	
   

  	
  100

  	
  %

  
	
   

  	
  EVP

  	
   

  	
  75

  	
  %

  
	
   

  	
  SVP

  	
   

  	
  60

  	
  %

  
	
   

  	
  VP

  	
   

  	
  40

  	
  %

  

 

2

 

VI.         Plan Administration

 

1.               Eligibility Requirements  - All
Community First designated Vice Presidents, Senior Vice Presidents, Executive
Vice Presidents, COO & CEO are eligible for the Corporate AIP.

 

2.               Award Potential  - There is no
cap on the amount of AIP you are eligible to earn.  AIP is determined as a % of your year-end annual salary.  This award is based on achievement of all
designated measures.

 

3.           Incentive
Payment Schedule - The
AIP will be calculated and paid annually at the end of the plan year, and is
typically paid with the first full pay period in March of the year following
the incentive period.  The AIP plan year
is defined as CFB’s fiscal year, which is also the calendar year.  To consider any incentive earned and
payable, the employee must be an active employee of CFB at the time incentive
payment is paid.

 

4.               Communication  - The AIP
actual vs. measure results are anticipated to be communicated quarterly.  You are encouraged to track the measures on
an on-going basis.

 

5.             New Hires
- Employees hired into eligible positions between January 1 and June 30 of the
plan year are eligible for the plan and may receive a pro-rata award.  For example:  someone hired in May will be paid for seven months of earned
incentive.  Employees hired after June
30 may be eligible to participate in the plan and receive a pro-rata award at
the discretion of President/CEO and Director of Human Resources.

 

6.               Promotions - Employees promoted into AIP eligible positions would be
covered under the same provisions as a new hire.

 

7.               Voluntary Resignation, Involuntary Resignation or Termination prior to the end of the plan
year – Potential incentive payment is forfeited.  Voluntary Demotion  –
Payment may be made at the discretion and approval of the President/CEO and
Director of Human Resources.

 

8.               Transfers –
If the employee transfers out of an eligible position, an award may be
pro-rated.  If an employee transfers to
a different size location, the AIP calculation will be pro-rated to reflect the
appropriate time worked in each location during the plan year.

 

9.               Medical or Unpaid Medical Leave of Absence – Will be reviewed on a case by
case basis.

 

10.         Overall Performance Requirements  – To emphasize that achievement of the incentive plan goals
must not come at the expense of other responsibilities, no incentive awards
will be made to participants whose overall performance for the year receives a
rating of less than “Meets Expectations”.

 

11.         Periodic Review  – Periodically
the effectiveness of the plan will be reviewed to assure the plan supports
CFB’s strategic direction.  Each year
the plan will be reviewed to determine participant eligibility and whether it
will be continued for the next fiscal year.

 

12.         Reserved Right - Community First reserves the right to change any and all
terms of the Balanced Scorecard Annual Incentive Plan, up to and including
termination of the plan, at any time.

 

3

 

 

2002

Community
First

Balanced
Scorecard

 

Regional Financial Centers

Community
Financial Centers

 

Annual
Incentive Plan

 

 

Presidents/Managers

 

4

 

Regional Financial
Centers

Community Financial Centers

Presidents/Managers

 

Table of Contents

 

	
  Cover

  
	
   

  
	
  Table
  of Contents

  
	
   

  
	
  Message from Mark Anderson

  
	
   

  
	
  Annual Incentive Plan Overview

  
	
   

  
	
  Plan Administration

  
	
   

  
	
  Performance Measure Definitions

  
	
   

  
	
  2002 Qualifying Products

  
	
   

  
	
  Performance Measurement Schedule

  
	
   

  
	
  Performance Measure Score – RFC

  
	
   

  
	
  Incentive
  Calculation Format – RFC

  
	
   

  
	
  Performance Measure Score – CFC

  
	
   

  
	
  Incentive
  Calculation Format – CFC

  
	
   

  
	
  Designated Participants

  

 

5

 

 

A Message from Mark Anderson

 

 

Great News!!!!

 

The Balanced Scorecard has been very effective in impacting our
performance and actions in 2001. 
Excellent progress in virtually all components of the scorecard has been
made.  And, additional insights have
been learned during the year.  This
added knowledge we have gained, along with some additional analysis, is leading
to some important improvements for 2002.

 

As you work through the material we have attached, you will see these
enhancements.  Several of the important
changes are:

 

1.                                       The Sales/FTE/Week measure has
been changed from an annual measurement to a quarterly measurement and
scorecard impact.  This will not only
recognize the sales level reached, but also the progress during the year.

2.                                       The New Customer Cross-Sell
measure has also been moved to a quarterly evaluation time frame and we believe
this will help all of us benefit from our efforts during the year.

3.                                       The Credit Score ranges have
been modified to better match our performance expectations. Earlier
communication of our retroactive treatment impact should have been seen with
your October results.

4.                                       “Bonus points” for outperforming
the performance levels that correspond with the 100% payout level has also been
added.  This opens up the “upside”
tremendously.

5.                                       Finally, another significant
positive.  In addition to a 90% actual
to profit plan “Knockout”, we have added an ROE “Knock In” that will reward the
highest ROE performers who may have missed 90% of an aggressive profit plan.

 

We are excited about the scorecard performance we have seen so far in
2001 and the tremendous progress.  With
these changes, there is greater opportunity for superior performance.

 

6

 

In fact, special 2001 retroactive treatment not only for the credit
scorecard, but also Sales/FTE/Week and New Customer Cross-Sell of your
scorecard will be given.  And going one
step better, for 2001 only, your scorecard will benefit from the better of the
yearly level or the quarterly results for Sales/FTE/Week and New Customer
Cross/Sell.

 

Thank you for all of the attention and support you have put into the
scorecard.  Every one of these
enhancements will better evaluate your growth and performance and provides a
reward for your success.

 

Best wishes.

 

7

 

2002
Balanced Scorecard 

Regional Financial
Centers/Community Financial Centers

Annual Incentive Plan for President/Manager - Overview

 

Introduction

As we approach 2002 with new challenges and opportunities by offering
our customers quality financial service, it is important that our compensation
package rewards outstanding performance in meeting our sales, financial and
credit quality goals.

 

Plan Objectives

The President/Manager Balanced Scorecard Annual Incentive Plan (AIP),
whether Regional Financial Center (RFC) or Community Financial Center (CFC),
has been designed to motivate superior performance and create additional
shareholder value.  The goals stated for
each president/branch manager are intended to emphasize behaviors over which
they have control and will lead to increased profitability in the future.

 

Eligibility
Requirements

All RFC Bank Presidents and CFC Branch Managers are
eligible for the AIP.

 

Award Potential

There is no cap on the amount of AIP you are eligible
to earn.  AIP is determined as a % of
your year-end annual salary.  This award
is based on achievement of all balanced scorecard performance measures and
profit plan goals.

 

Incentive Payment
Schedule

The AIP will be calculated and paid annually at the
end of the plan year, and is typically paid during with the first full pay
period in March of the year following the incentive period. The AIP plan year
is defined as the CFB’s fiscal year, which is also the calendar year. To
consider any incentive earned and payable, the employee must be an active
employee of CFB at the time incentive payment is paid.

 

Performance Measures

There are three measurement factors included in the AIP.

 

1.                                       Sales

2.                                       Financial

3.                                       Credit

 

Sales Measures include three key indicators:

•                  Number of sales per FTE per week
- see attached list of qualifying products

•                  New client cross-sell ratio

•                  Campaign Performance

 

Financial Measures include four key indicators:

•                  Net Controllable Revenue per FTE

•                  Controllable Non-interest Income
per FTE

•                  Loan fees as percent of profit
plan

•                  Investment product sales as
percent of profit plan

 

8

 

Credit Quality
Measure
includes:

 

•                  Credit Goal Scoring

 

9

 

In addition to these measures, the bank's performance against profit
plan is an important indicator of success and is included in the AIP.  The Profit plan is based on historical
performance but is designed to drive higher level performance.

 

If the RFC/CFC’s actual performance is less than 90% of profit plan,
unless a ROE of 30% is achieved, no AIP will be awarded.  Where actual performance exceeds the profit
plan, a higher AIP will be paid to reward bank presidents/managers (see page
11, item B).

 

Those employees who establish aggressive profit plans, with higher
levels of performance over the previous year, and exceed those plans, will
receive a bonus incentive (see page 11, item F).

 

 

Calculating
the AIP Award

•                  The Sales, Financial and Credit
scores are assigned based on actual performance and multiplied by the weight
assigned to each set of measurements. 
These weighted scores are added to obtain the Balanced Scorecard Points.  Bonus points have been added to the Sales
and Financial measures.  This will allow
rewards for performance above and beyond expectations.  Also, a special bonus is included on
sales/FTE/Week measure.  Locations that
have a 20% increase over their 2001 average will move into the next higher
level.  This will reward substantial
growth performance.

 

•                  The Bank’s actual Performance
vs. Profit Plan is then computed. 
If it is less than 90%, unless the specified ROE is achieved, no AIP
will be awarded.

 

•                  The Balanced Scorecard Performance Points
number is computed by multiplying the Total Performance Points in Part A by the
Bank’s Performance vs. Profit Plan from Part B.  This provides for a higher incentive when the bank’s performance
exceeds plan.

 

•                  The Target Incentive for each
bank is based on a grid showing the Bank’s Net Controllable Revenue per FTE vs.
Annualized Pretax Adjusted Earnings. 
This target incentive takes into account bank earnings and efficiency,
rewarding banks that achieve higher earnings and greater efficiency.

 

•                  The Base Balanced Incentive is
computed by multiplying the Target Incentive (D) by the Balance Performance
Index (C).  This is the percent of base
salary to be paid as the AIP.

 

•                  A Bonus Incentive is added to
the AIP if the bank’s Balanced Scorecard Points (A) are greater than 50 and the
bank’s performance vs. Profit Plan exceeds 100%.  The bonus incentive is based on a schedule reflecting the
percentage increase in the 2002 Profit Plan over the 2001 actual
performance.  This is intended to
provide higher rewards for Presidents/Managers who set aggressive plans and
exceed them.

 

•                  The Total Balance Incentive Percentage
equals the Base Balanced Incentive plus the Bonus Incentive, if
applicable.  This is the total
percentage of the Bank President/Managers salary to be paid out as the AIP.

 

Plan Administration

 

1.                      New Hires – Employees
hired into eligible positions after January 1 but before June 30 of the plan
year may receive a pro-rata award.  For
example: someone hired in May, may be paid for seven 

 

10

 

months
of earned incentive.  Employees hired
after June 30 may be eligible to participate in that plan year and receive a
pro-rata award.  Eligibility for those
individuals would be made at the discretion and approval of the Division
President and Human Resources.

 

2.                      Promotions – Employees
promoted into AIP eligible positions would be covered under the same provisions
as a new hire.

 

3.                      Voluntary Resignation,
Involuntary Resignation or Termination prior to the end of the plan year –
Potential incentive payment is forfeited. 
Voluntary
Demotion – Payment may be made at the discretion and approval of the Division
President and Human Resources.

 

4.                      Transfers – If the
employee transfers out of an eligible position, an award may be pro-rated.  If an employee transfers to a different size
location, the AIP calculation will be pro-rated to reflect the appropriate time
worked in each location during the plan year.

 

5.                      Medical or Unpaid Medical Leave of Absence – Will be
reviewed on a case by case basis.

 

6.                      Overall Performance Requirements – To
emphasize that achievement of the incentive plan goals must not come at the
expense of other responsibilities, no incentive awards will be made to
participants whose overall performance for the year receives a rating of less
than “Meets Expectations”.

 

7.                      Periodic Review –
Periodically the effectiveness of the plan will be reviewed to assure the plan
supports CFB’s strategic direction. 
Each year the plan will be reviewed to determine participation
eligibility and whether it will be continued for the next fiscal year.

 

8.                      Reserved Right - Community
First Bankshares, Inc. reserves the right to change any and all terms of the
Balanced Scorecard Annual Incentive Plan, up to and including termination of
the plan, at any time.

 

The achievement of the
Sales, Financial and Credit goals as stated in the Balanced Scorecard will
contribute not only to higher profitability for the bank but also to greater
financial rewards for Presidents/Managers.

 

The following pages illustrate how the AIP
scoring and calculations are determined:

 

1.                                                         Performance Measure Definitions

2.                                                         2002 Qualifying Products

3.                                                         Performance Measure Schedule
that shows the assigned goal and scoring tiers

4.                                                         Examples

•                  RFC Performance Measurement
Score & Incentive Calculation Format

•                  CFC Performance Measurement
Score & Incentive Calculation Format

 

 

11

 

2002 CFB Balanced Scorecard - 

Regional Financial Centers/Community Financial Centers

Performance Measurement Definitions - President/Manager

(Changes made from the 2001 scorecard to the 2002 scorecard
are highlighted in blue)

 

Sales Measurements

1. Number of
Sales/FTE/Week*

Sales   = # of qualifying products
sold.  A list of qualifying products is
attached and is available in the Public Folders.

FTE    = Full-time equivalents, on an
actual hours worked basis, as reported on the Ceridian Payroll System.

The calculation for incentive purposes
will use the monthly FTE.  Bank, Trust,
..30 Insurance and Investment Sales FTE will be included in the calculation.

Week  = # of weeks in the period being
reported.

The
calculation for incentive purposes will be based on Quarterly performance
divided by four quarters for the year.

 

*
Special Credit:  a 20% increase over
2001 average will allow a move to the next higher payout level

 

2. New Customer
Cross-Sell Ratio

Sales    = # of qualifying products sold to new customers.  A listing of qualifying products is
available on the Intranet.

New Customers    = # of new customers for the period being
reported.

The calculation for incentive purposes
will be based on Quarterly performance divided by four quarters for the year.

 

3. Campaign
Performance 

The
bank will receive a score  (per the
Performance Measurement Schedule) for each campaign based on % of goal
attainment.  The calculation for
incentive purposes will add the scores for each of the campaigns and divided by
the # of campaigns.

 

Financial Measurements

1. Net Controllable
Revenue/FTE 

Net
Controllable Revenue 
   = (Net Interest Income +
Total Non-Interest Income(incl. loan fees+JV Soft Dollar fees) - Security Gains
- BOLI Benefit - Undistributed Income from subsidiaries).

FTE    = Full-time equivalents, on an actual
hours worked basis, as reported on the Ceridian Payroll System.

The calculation for incentive purposes
will use the monthly FTE.  Bank, Trust,
..30 Insurance and Investment Sales FTE will be included in the calculation

 

The calculation will be based on
year-to-date annualized performance.

 

2. Controllable
NII/FTE

NII      = (Total Non-Interest Income (incl. loan
fees+JV Soft Dollar fees) - Security Gain - BOLI Benefit - Undistributed
Income)

FTE    =
Full-time equivalents, on an actual hours worked basis, as reported on the
Ceridian Payroll System.

The calculation for incentive purposes
will use the monthly FTE.  Bank, Trust,
..30 Insurance and Investment Sales FTE will be included in the calculation

 

The calculation will be based on
year-to-date annualized performance.

 

3. Loan Fees as %
Plan

Loan Fees   = Total loan fees line from Variance
Reports + JV Soft Dollar fees

The calculation is based on actual
year-to-date loan fees as a % of year-to-date planned loan fees.

 

4. Investment Sales
as % Plan 

Investment
Sales   = Security Sales
Income line as reported on Variance Reports

The
calculation is based on actual year-to-date sales of investment products as a %
of year-to-date planned sales of investment products.

 

Credit Measurements 

1. Credit Goal
Scoring 

This is the Credit Goal Score as
reported in the Credit Goal Report prepared by Loan Accounting.

 

Other Definitions

Pretax Adjusted
Earnings = income b/4 tax + corp directed training + corp directed
advertising + CFSC data processing + goodwill + intangibles + mgmt fee -
undistributed income from subsidiaries - securities gains

 

12

 

2002 CFB Balanced Scorecard

Regional
Financial Centers/Community Financial Centers

2002 Qualifying Products for Sales Measurements

 

(Changes made from
the 2001 scorecard to the 2002 scorecard are highlighted in blue.)

 

Sales Measurements

	
  Number of Sales/FTE/Week

  	
   

  	
  New Customer X-Sell
  Ratio

  
	
   

  	
   

  	
   

  
	
  Qualifying
  Products

  	
   

  	
  Qualifying
  Products

  
	
  •             Checking (Retail and Business)

  	
   

  	
  •             Checking (Retail and Business)

  
	
  •             Savings (Retail and Business)

  	
   

  	
  •             Savings (Retail and Business)

  
	
  •             Certificate of Deposit (Retail
  and Business)

  	
   

  	
  •             Certificate of Deposit (Retail
  and Business)

  
	
  •             Retirement Accounts (Savings
  and Certificates)

  	
   

  	
  •             Retirement Accounts (Savings
  and Certificates)

  
	
  •             Loans/Lines

  	
   

  	
  •             Loans/Lines

  
	
  •                       Consumer

  	
   

  	
  •                       Consumer (direct loans only)

  
	
  •                       Ready Credit

  	
   

  	
  •                       Ready Credit

  
	
  •                       Mortgage (non-JV)

  	
   

  	
  •                       Mortgage (non-JV)

  
	
  •                       Home Equity Loans & Lines

  	
   

  	
  •                       Home Equity Loans & Lines

  
	
  •                       Agricultural

  	
   

  	
  •                       Agricultural

  
	
  •                       Commercial

  	
   

  	
  •                       Commercial

  
	
  •                       Tax Exempt Loans

  	
   

  	
  •                       Tax Exempt Loans

  
	
  •                       Commercial Revolving Credit

  	
   

  	
  •                       Commercial Revolving Credit

  
	
  •                       Letters of Credit

  	
   

  	
  •                       Letters of Credit

  
	
  •                       Direct Leases

  	
   

  	
  •                       Direct Leases

  
	
  •             ATM/Debit Cards

  	
   

  	
  •             ATM/Debit Cards

  
	
  •             Elan Credit Cards

  	
   

  	
  •             Elan Credit Cards

  
	
  •             Investments

  	
   

  	
  •             Investments

  
	
  •             Credit Life and Disability
  (CGLI)

  	
   

  	
  •             Credit Life and Disability
  (CGLI)

  
	
  •                       Single Life

  	
   

  	
  •                       Single Life

  
	
  •                       Joint Life

  	
   

  	
  •                       Joint Life

  
	
  •                       Disability

  	
   

  	
  •                       Disability

  
	
  •                       Single Life/Disability

  	
   

  	
  •                       Single Life/Disability

  
	
  •                       Joint Life/Disability

  	
   

  	
  •                       Joint Life/Disability

  
	
  •             Online Banking

  	
   

  	
  •             Online Banking

  
	
  •             Online Bill Pay

  	
   

  	
  •             Online Bill Pay

  
	
  •             Online Business Banking*

  	
   

  	
  •             Online Business Banking*

  
	
  •             Safe Deposit Box

  	
   

  	
  •             Safe deposit Box*

  
	
  •             Insurance Policies*

  	
   

  	
   

  
	
  •             Trust Accounts*

  	
   

  	
   

  
	
  •             Mortgage JV Sales*

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Products
  NOT Qualifying:

  	
   

  	
  Products
  NOT Qualifying:

  
	
  •

  	
   

  	
  •             Indirect loans

  
	
   

  	
   

  	
   

  
	
  Additional
  NON-Qualifying Components:

  	
   

  	
  Additional
  NON-Qualifying Components:

  
	
  •             Accounts opened and closed in
  the same month

  	
   

  	
  •             Accounts opened and closed in
  the same month

  
	
  •             Checking and savings account
  upgrades

  	
   

  	
  •             Checking and savings account
  upgrades

  
	
  •             Back-dated accounts not put on
  the books prior to month end

  	
   

  	
  •             Back-dated accounts not put on
  the books prior to month end

  
	
  •             Loan and certificates
  automatically renewed

  	
   

  	
  •             Loan and certificates
  automatically renewed

  

 

* In development

 

13

 

2002
CFB Balanced Scorecard

Regional
Financial Centers/Community Financial Centers

Performance Measurement Schedule – President/Manager

 

(Changes made from
the 2001 scorecard to the 2002 scorecard are highlighted in blue.)

 

	
  2002 Measurements

  	
   

  	
  Regional Financial Center (Weight)

  	
   

  	
  Community Financial Center
  (Weight)

  	
   

  
	
  A.  Sales

  	
   

  	
  40

  	
  %

  	
  45

  	
  %

  
	
  B.  Financial

  	
   

  	
  40

  	
  %

  	
  45

  	
  %

  
	
  C.  Credit

  	
   

  	
  20

  	
  %

  	
  10

  	
  %

  

 

 

	
  A.  SALES

  	
   

  	
  Payout Scale

  	
   

  	
  Score

  	
   

  	
  Bonus

  	
   

  
	
  1.  Number of Sales/FTE/Week (40%)

  	
   

  	
  <3.00

  	
   

  	
  0.0

  	
   

  	
  Add one point for each .05 increase in
  performance above 5.50

  	
   

  
	
   

  	
   

  	
  3.00-3.64

  	
   

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  3.65-4.34

  	
   

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  4.35-4.99

  	
   

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  5.00-5.50

  	
   

  	
  100.0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.  New Customer Cross-sell Ratio (30%)

  	
   

  	
  <1.50

  	
   

  	
  0.0

  	
   

  	
  Add one point for each .02 increase in
  performance above 2.80

  	
   

  
	
   

  	
   

  	
  1.50-1.84

  	
   

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  1.85-2.19

  	
   

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  2.20-2.49

  	
   

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  2.50-2.80

  	
   

  	
  100.0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.  Campaign Performance (30%)

  	
   

  	
  <90.0

  	
  %

  	
  0.0

  	
   

  	
  Add one point for each 5% increase in
  performance above 150%

  	
   

  
	
   

  	
   

  	
  90.0-99.9

  	
  %

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  100.0-109.9

  	
  %

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  110.0-119.9

  	
  %

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  120-150

  	
  %

  	
  100.0

  	
   

  	
   

  

 

	
  B.  FINANCIAL

  	
   

  	
   

  	
   

  	
  Score

  	
   

  	
  Bonus

  	
   

  
	
  1.  Net Controllable Revenue/FTE (30%)

  	
   

  	
  <$200,000

  	
   

  	
  0.0

  	
   

  	
  Add one point for each $1,000 increment
  over $280,000

  	
   

  
	
   

  	
   

  	
  $200,000-221,999

  	
   

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  $222,000-243,999

  	
   

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  $244,000-264,999

  	
   

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  $265,000-280,000

  	
   

  	
  100.0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.  Controllable NII/FTE (20%)

  	
   

  	
  <$45,000

  	
   

  	
  0.0

  	
   

  	
  Add one point for each $1,000 increment
  over $70,000

  	
   

  
	
   

  	
   

  	
  $45,000-49,999

  	
   

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  $50,000-54,999

  	
   

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  $55,000-59,999

  	
   

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  $60,000-70,000

  	
   

  	
  100.0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.  Loan Fees as % Plan (20%)

  	
   

  	
  <90.0

  	
  %

  	
  0.0

  	
   

  	
  Add one point for each 1% increment over
  130%

  	
   

  
	
   

  	
   

  	
  90.0-99.9

  	
  %

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  100.0-109.9

  	
  %

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  110.0-119.9

  	
  %

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  120-130.00

  	
  %

  	
  100.0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.  Investment Sales as % of Plan (30%)

  	
   

  	
  <90.0

  	
  %

  	
  0.0

  	
   

  	
  Add one point for
  each 1% 

  increment over 150% 

  Extra Bonus:  Add one point for each .1% increment above +5% of deposits&
  repos

  	
   

  
	
   

  	
   

  	
  90.0-99.9

  	
  %

  	
  25.0

  	
   

  	
   

  
	
   

  	
   

  	
  100.0-109.9

  	
  %

  	
  50.0

  	
   

  	
   

  
	
   

  	
   

  	
  110.0-119.9

  	
  %

  	
  75.0

  	
   

  	
   

  
	
   

  	
   

  	
  120-150

  	
  %

  	
  100.0

  	
   

  	
   

  

 

	
  C.  CREDIT

  	
   

  	
   

  	
   

  	
  Score

  	
   

  	
  Bonus- N/A

  	
   

  
	
  1.  Credit Goal Scoring

  	
   

  	
  >3.50

  	
  %

  	
  0.0

  	
   

  	
   

  	
   

  
	
  RFC (20%)

  	
   

  	
  3.01 - 3.50

  	
  %

  	
  25.0

  	
   

  	
   

  	
   

  
	
  CFC (10%)

  	
   

  	
  2.51 - 3.00

  	
  %

  	
  50.0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.01
  - 2.50

  	
  %

  	
  75.0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  <=2.00

  	
  %

  	
  100.0

  	
   

  	
   

  	
   

  

 

14

 

2002 CFB Balanced Scorecard

Regional Financial Centers/Community Financial Centers

Performance Measurement Score - President/Manager

 

(Changes made from the 2001 scorecard to the
2002 scorecard are highlighted in blue.)

 

RFC President/Manager
Example

 

	
  Sales Measurements (Weight 40%):

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.  Number of Sales/FTE/Week

  	
   

  	
  57.3

  	
   

  	
  40

  	
  %

  	
  22.9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 1 avg score was 2.95 =
  0 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 2 avg score was 3.65 =
  50 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 3 avg score was 4.50 =
  75 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 4 avg score was 5.70 =
  100 points + 4 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Performance =
  [(0+50+75+104)/4 = 57.25]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.  New Customer Cross-Sell Ratio

  	
   

  	
  57.0

  	
   

  	
  30

  	
  %

  	
  17.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 1 avg score was 1.50 = 25
  points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 2 avg score was 1.65 = 25
  points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 3 avg score was 2.86 = 100
  points + 3 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 4 avg score was 2.20 = 75
  points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Performance =
  [(25+25+103+75)/4 = 57]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.  Campaign Performance

  	
   

  	
  77.0

  	
   

  	
  30

  	
  %

  	
  23.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 1 was 95% of goal = 25
  points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 2 was 130% of goal = 100
  points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 3 was 180% of goal = 100
  points + 6 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign Performance =
  [(25+100+106)/3=77]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  SALES MEASUREMENT SCORE

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  63.1

  	
   

  

 

	
  Financial
  Measurements (Weight 40%):

  	
   

  	
  Actual

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.  Net Controllable Revenue/FTE

  	
   

  	
  $

  	
  290,000

  	
   

  	
  110.0

  	
   

  	
  30

  	
  %

  	
  33.0

  	
   

  
	
  = 100 points + 10 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.  Controllable NII/FTE

  	
   

  	
  $

  	
  51,000

  	
   

  	
  50.0

  	
   

  	
  20

  	
  %

  	
  10.0

  	
   

  
	
  3.  Loan Fee as % Plan

  	
   

  	
  135.0

  	
  %

  	
  105.0

  	
   

  	
  20

  	
  %

  	
  21.0

  	
   

  
	
  = 100 points + 5 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.  Investment Product Sales as % Plan

  	
   

  	
  85.0

  	
  %

  	
  0.0

  	
   

  	
  30

  	
  %

  	
  0.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL FINANCIAL MEAUREMENT SCORE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  64.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit
  Measurements (Weight 20%):

  	
   

  	
  Actual

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.  CFB Credit Goal

  	
   

  	
  1.35

  	
   

  	
  100.0

  	
   

  	
  100

  	
  %

  	
  100.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL CREDIT MEASUREMENT SCORE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  100.0

  	
   

  

 

15

 

2002 CFB Balanced
Scorecard

Regional Financial Centers/Community Financial Centers

AIP Calculation - President/Manager

(Changes made from the 2001 scorecard to the 2002 scorecard
are highlighted in blue.)

 

RFC President/Manager Example

 

	
   

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Points

  	
   

  	 

	
  A. Balanced
  Scorecard Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Sales
  Measurement Score

  	
   

  	
  63.1

  	
   

  	
  40

  	
  %

  	
  25.2

  	
   

  	 

	
  Financial Measurement Score

  	
   

  	
  64.0

  	
   

  	
  40

  	
  %

  	
  25.6

  	
   

  	 

	
  Credit Measurement Score

  	
   

  	
  100.0

  	
   

  	
  20

  	
  %

  	
  20.0

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  TOTAL
  PERFORMANCE POINTS

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  70.8

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  B.
  Performance vs. Profit Plan [Pretax Adjusted Earnings]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  % Actual  to Plan

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  105.0

  	
  %

  	 

	
  Knockout < 90% Unless ROE
  of "X"

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  (To be determined after
  budgets are final)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  C. Balanced
  Performance Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Index (A x B)

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  74.4

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  D. Target
  Incentive [40%-70%]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Target Incentive

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  60.0

  	
  %

  	 

	
  Target Incentive is bank
  specific and is determined based on a combination of Pretax Adjusted Earnings
  and Net Controllable Revenue/FTE.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  E. Base
  Balanced Incentive

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  (D x C) / 100

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  44.6

  	
  %

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  F. Bonus
  Incentive (if A >= 50 and B>= 100%)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  % increase in 2001 plan vs
  2000 actual Pretax Adjusted Earnings

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  10.0

  	
  %

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  0.0-2.9% growth =                                                0%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  3.0-5.9% growth =                                                5%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  6.0-8.9% growth =                                              10%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  > 9% growth =                                                                15%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  G. Total
  Balanced Incentive Percentage

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  54.6

  	
  %

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  TOTAL
  INCENTIVE PAYOUT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Base Salary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  Total Balances Incentive
  Percentage

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  54.6

  	
  %

  	 

	
  Total Payout

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  54,629

  	
   

  
											

 

16

 

2002 CFB Balanced
Scorecard

Regional Financial
Centers/Community Financial Centers

Performance Measurement Score - President/Manager

 

(Changes made from the 2001 scorecard to the 2002 scorecard
are highlighted in blue.)

 

CFC
President/Manager Example

 

	
  Sales
  Measurements (Weight 45%):

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1. Number of
  Sales/FTE/Week

  	
   

  	
  57.3

  	
   

  	
  40

  	
  %

  	
  22.9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 1 avg score was 2.95 =
  0 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 2 avg score was 3.65 =
  50 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 3 avg score was 4.50 =
  75 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 4 avg score was 5.70 =
  100 points + 4 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Performance =
  [(0+50+75+104)/4 = 57.25]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2. New Customer
  Cross-Sell Ratio

  	
   

  	
  57.0

  	
   

  	
  30

  	
  %

  	
  17.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 1 avg score was 1.50 =
  25 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 2 avg score was 1.65 =
  25 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 3 avg score was 2.86 =
  100 points + 3 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarter 4 avg score was 2.20 =
  75 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Performance =
  [(25+25+103+75)/4 = 57]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3. Campaign
  Performance

  	
   

  	
  77.0

  	
   

  	
  30

  	
  %

  	
  23.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 1 was 95% of goal =
  25 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 2 was 130% of goal
  = 100 points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign # 3 was 180% of goal
  = 100 points + 6 Bonus Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Campaign Performance =
  [(25+100+106)/3=77]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL SALES MEASUREMENT SCORE

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  63.1

  	
   

  

 

	
  Financial
  Measurements (Weight 45%):

  	
   

  	
  Actual

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1. Net
  Controllable Revenue/FTE 

  = 100 points + 10 Bonus
  Points

  	
   

  	
  $

  	
  290,000

  	
   

  	
  110.0

  	
   

  	
  30

  	
  %

  	
  33.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.
  Controllable NII/FTE

  	
   

  	
  $

  	
  51,000

  	
   

  	
  50.0

  	
   

  	
  20

  	
  %

  	
  10.0

  	
   

  
	
  3. Loan Fee
  as % Plan 

  = 100 points + 5 Bonus
  Points

  	
   

  	
  135.0

  	
  %

  	
  105.0

  	
   

  	
  20

  	
  %

  	
  21.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4. Investment
  Product Sales as % Plan

  	
   

  	
  85.0

  	
  %

  	
  0.0

  	
   

  	
  30

  	
  %

  	
  0.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL FINANCIAL MEAUREMENT SCORE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  64.0

  	
   

  

 

	
  Credit
  Measurements (Weight 10%):

  	
   

  	
  Actual

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Weighted

  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8. CFB Credit
  Goal

  	
   

  	
  1.35

  	
   

  	
  100.0

  	
   

  	
  100

  	
  %

  	
  100.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL CREDIT MEASUREMENT SCORE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100

  	
  %

  	
  100.0

  	
   

  

 

17

 

2002 CFB Balanced
Scorecard

Regional Financial
Centers/Community Financial Centers

AIP Calculation - 
President/Manager

 

(Changes made from the 2001 scorecard to the 2002 scorecard
are highlighted in blue.)

CFC
President/Manager Example

 

	
   

  	
   

  	
  Score

  	
   

  	
  Weight

  	
   

  	
  Points

  	
   

  
	
  A.  Balanced Scorecard Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sales Measurement Score

  	
   

  	
  63.1

  	
   

  	
  45

  	
  %

  	
  28.4

  	
   

  
	
  Financial Measurement Score

  	
   

  	
  64.0

  	
   

  	
  45

  	
  %

  	
  28.8

  	
   

  
	
  Credit Measurement Score

  	
   

  	
  100.0

  	
   

  	
  10

  	
  %

  	
  10.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  PERFORMANCE POINTS

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  67.2

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.  Performance vs. Profit Plan [Pretax
  Adjusted Earnings

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Actual  to Plan

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  105.0

  	
  %

  
	
  Knockout < 90% Unless ROE
  of "X"

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (To be determined after
  budgets are final)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.  Balanced Performance Points

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Index (A x B)

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  70.6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.  Target Incentive [40%-70%]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Target Incentive

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  60.0

  	
  %

  
	
  Target Incentive is bank specific and
  is determined based on a combination of Pretax Adjusted Earnings and Net
  Controllable Revenue/FTE.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.  Base Balanced Incentive

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (D x C) / 100

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  42.3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.  Bonus Incentive (if A >= 50 and B>=
  100%)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % increase in 2001 plan vs
  2000 actual Pretax Adjusted Earnings

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  10.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.0-2.9% growth =                        0%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.0-5.9% growth =                        5%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.0-8.9% growth =                  10%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  > 9% growth =                                    15%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.  Total Balanced Incentive Percentage

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
  52.3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  INCENTIVE PAYOUT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Salary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  Total Balances Incentive
  Percentage

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  52.3

  	
  %

  
	
  Total Payout

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  52,333

  	
   

  

 

18

 

2002 Balanced
Scorecard

Regional Financial
Centers/Community Financial Centers

Designated Participants

 

	
  Location

  	
   

  	
  Name

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}]]