Document:

ex10-5.htm

Exhibit 10.5

 

AMENDED AND RESTATED

KAISER FEDERAL BANK

2005 EXECUTIVE NONQUALIFIED RETIREMENT PLAN

 

Kaiser Federal Bank (the “Company”), originally established this 2005 Executive Nonqualified Retirement Plan (the “Plan”), effective January 1, 2005, for the purpose of attracting high quality executives and promoting in its key executives increased efficiency and an interest in the successful operation of the Company. This Plan is hereby amended and restated effective as of January 1, 2005, as set forth herein.

 

WITNESSETH:

 

WHEREAS, the Company wishes to sponsor a plan of deferred compensation for a select group of management and highly compensated employees as such term is defined in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”);

 

WHEREAS, the Company recognizes the valuable services heretofore performed for it by such executives and wishes to encourage their continued employment and to provide them with additional incentive to achieve corporate objectives;

 

WHEREAS, the Company wishes to provide the terms and conditions upon which the Company shall pay additional retirement benefits to the executives;

 

WHEREAS, the Company intends this Plan to be considered an unfunded arrangement, maintained primarily to provide supplemental retirement income for its executives, members of a select group of management or highly compensated employees of the Company, for tax purposes and for purposes of ERISA;

 

WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), requires that certain types of nonqualified deferred compensation arrangements comply with its terms or subject the recipients of such compensation to current taxes and penalties;

 

WHEREAS, the Plan was originally drafted in a manner intended to comply with Code Section 409A, and is now being amended and restated to conform to the final Treasury Regulations (as defined herein) that were promulgated under Code Section 409A on April, 10, 2007.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows:

 

ARTICLE 1

Definitions

 

1.1   Account shall mean the account or accounts established for a particular Participant pursuant to Article 3 of the Plan.

 

1.2   Administrator shall mean the person or persons appointed by the Board of Directors of the Company to administer the Plan pursuant to Article 10.1 of the Plan.

 

1.3   Base Compensation shall mean the Participant’s annual base rate of pay from the Company, excluding incentive and discretionary bonuses and other non-regular forms of compensation, before reductions for contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Company.

 

  

  

  

 

1.4   Beneficiary shall mean the person(s) or entity designated as such in accordance with Article 9.1 of the Plan.

 

1.5   Board or Board of Directors shall mean the Board of Directors of the Company.

 

1.6   Bonus shall mean amounts paid to the Participant by the Company annually in the form of discretionary or incentive compensation or any other bonus designated by the Administrator before reductions for contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Company.

 

1.7   Change in Control shall mean (1) a change in the ownership of the Company under paragraph (i) below, or (2) a change in effective control of the Company under paragraph (ii) below, or (3) a change in the ownership of a substantial portion of the assets of the Company under paragraph (iii) below:

 

	
  

	
(i)

	
Change in the ownership of the Company.  A change in the ownership of the Company shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation.

 

	
  

	
(ii)

	
Change in the effective control of the Company.  A change in the effective control of the Company shall occur on the date that either (A) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or (B) a majority of members of the Company’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s Board of Directors prior to the date of the appointment or election, provided that this sub-section (B) is inapplicable where a majority shareholder of the Company is another corporation.

 

	
  

	
(iii)

	
Change in the ownership of a substantial portion of the Company’s assets.  A change in the ownership of a substantial portion of the Company’s assets shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)(C)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition.  For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

	
  

	
(iv)

	
For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulation Section 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.  Notwithstanding anything herein to the contrary, the reorganization of the Company by way of a second step conversion shall not be considered a “Change in Control.”

 

  

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1.8   Code shall mean the Internal Revenue Code of 1986, as amended.

 

1.9   Company shall mean Kaiser Federal Bank.

 

1.10      Company Contributions shall mean contributions made by the Company to the Plan on behalf of the Participant pursuant to Article 2.3 of the Plan.

 

1.11      Company Contributions Account shall mean the Account established to hold Company Contributions on behalf of the Participant pursuant to Article 3.1 of the Plan.

 

1.12          Crediting Rate shall mean the notional gains and losses credited on the Participant’s Account balance which are based on the Participant’s choice among the investment alternatives made available by the Administrator pursuant to Article 3.2 of the Plan.

 

1.13          Deferral Contributions shall mean elective deferrals made by the Participant to the Plan pursuant to Article 2 of the Plan.

 

1.14          Deferral Contributions Account shall mean the Account established on behalf of the Participant to hold the Participant’s Deferral Contributions pursuant to Article 3 of the Plan.

 

1.15          Disability shall mean a finding that a Participant is “disabled” within the meaning of Section 409A of the Code.  For these purposes, a Participant will be considered “disabled” if the Participant:

 

(a)           is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

 

(b)           is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under and accident and health plan covering employees of the Participant’s employer; or

 

(c)           is determined to be disabled by the Social Security Administration.

 

1.16          Distribution Date shall mean the date by which a lump sum payment shall be made or the date by which installment payments shall commence. Unless otherwise specified herein, the Distribution Date shall be on or before the last day of the month following the month in which the event triggering the payout occurs, or with respect to distributions from a Scheduled Withdrawal Account, the last day of the first month of a Plan Year for which a distribution is elected.  Notwithstanding the foregoing, in the event of the Separation from Service of a “Specified Employee,” solely to the extent necessary to avoid penalties under Code Section 409A, the Distribution Date shall be the first day of the seventh (7th) month following the Specified Employee’s Separation from Service.  In the case of death, distributions shall commence within 30 days of the date the Administrator is provided with the documentation reasonably necessary to establish the fact of the Participant’s death.

 

  

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1.17          Eligible Executive shall mean a senior officer or other management or highly compensated executive of the Company selected by the Administrator to be eligible to participate in the Plan.

 

1.18          ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

1.19          Financial Hardship shall mean a financial hardship to the Participant arising as the result of an Unforeseeable Emergency.

 

1.20          Participant shall mean an Eligible Executive who has elected to participate and has completed a Participant Election Form pursuant to Article 2 of the Plan.

 

1.21          Participant Election Form shall mean the written agreement to make a deferral submitted by the Participant to the Administrator on a timely basis pursuant to Article 2 of the Plan.

 

1.22          Plan Year shall mean the calendar year.

 

1.23          Qualified Plan shall mean the Kaiser Federal Retirement Savings Plan as amended from time to time.

 

1.24          Retirement Eligibility Date shall mean the date on which the Participant attains age sixty (60).

 

1.25          Scheduled Withdrawal shall mean the distribution elected by the Participant pursuant to Article 6 of the Plan.

 

1.26          Scheduled Withdrawal Account shall mean the Account established pursuant to Article 3 to hold amounts subject to a Scheduled Withdrawal election pursuant to Article 6 of the Plan.

 

1.27          Separation from Service means the Participant’s death, retirement or other termination of employment with the Company within the meaning of Code Section 409A.  No Separation from Service shall be deemed to occur due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months or, if longer, so long as the Participant’s right to reemployment is provided by law or contract.  If the leave exceeds six months and the Participant’s right to reemployment is not provided by law or by contact, then the Participant shall have a Separation from Service on the first date immediately following such six-month period.

 

Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36 months (or such lesser period of time in which the Participant has provided services for the Company).

 

  

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1.28         Specified Employee means an employee of the Company who is also a “key employee” as such term is defined in Section 416(i) of the Code, without regard to Paragraph 5 thereof, but only so long as the Company is publicly-traded.

 

1.29        Treasury Regulations means the regulations issued by the Treasury Department and/or other guidance issued by the Treasury Department or Internal Revenue Service under Code Section 409A.

 

1.30         Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary or a dependent (as defined in Internal Revenue Code Section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

 

1.31         Valuation Date shall mean the date through which earnings are credited and shall be the last day of the month coinciding with or immediately preceding the month in which the payout or other event triggering the valuation occurs.

 

1.32         Year of Service shall mean any Plan Year during which an individual completed at least 1,000 hours of employment, or satisfies any alternative requirement, as determined by the Administrator in accordance with any applicable regulations issued by the Department of Labor or the Internal Revenue Service.  For these purposes, all years of service with the Company, including years of service prior to adoption of the Plan, shall be credited to the Participant.

 

ARTICLE 2

Participation

 

2.1   Elective Deferral.  Each year, a Participant may elect to defer a whole percentage of Base Compensation and/or Bonus earned during the Plan Year up to a maximum percentage established by the Administrator for such Plan Year. The Administrator may further limit the maximum or the minimum amount of deferrals by any Participant or group of Participants in its sole discretion.

 

2.2   Participant Election Form.  In order to make a deferral, an Eligible Executive must submit a Participant Election Form to the Administrator during the enrollment period established by the Administrator prior to the beginning of the Plan Year during which the Base Compensation or Bonus is earned.  For Eligible Executives hired or promoted to eligibility during a Plan Year, the Administrator shall permit such persons to submit a Participant Election Form within thirty (30) days of first becoming eligible to participate and such election shall relate only to deferrals of Base Compensation or Bonus earned during the balance of such Plan Year after such enrollment period.  Each Participant shall be required to submit a new Participant Election Form on a timely basis (i.e., prior to the beginning of the Plan Year) in order to change the Participant’s deferral election for such Plan Year.  If no Participant Election Form is filed during the prescribed enrollment period, the Participant’s election for the prior Plan Year shall continue in force for the next Plan Year.

 

2.3   Discretionary Company Matching Contributions.  On or before the first day of each Plan Year, the Company, in its sole discretion, may choose to match Participant deferrals for such Plan Year under terms and conditions specified by the Administrator. If the Company elects to match Participant deferrals for a particular Plan Year, such matching contributions may be credited to the Participant’s Company Contribution Account at any time on or before the last day of January following such Plan Year, in the complete and sole discretion of the Administrator.

 

  

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ARTICLE 3

Accounts

 

3.1   Participant Accounts.  Solely for recordkeeping purposes, one or more Accounts shall be maintained for each Participant: a Deferral Contributions Account, a Company Contributions Account and one or more Scheduled Withdrawal Accounts. The Participant’s elective deferrals under Section 2.1 shall be credited to the Deferral Contributions Account or a Scheduled Withdrawal Account as directed by the Participant at the time such amounts would otherwise have been paid to the Participant.  The Company Contribution Account shall be credited with Company Contributions as directed by the Administrator pursuant to Section 2.3. Accounts shall be deemed to be credited with notional gains or losses as provided in Section 3.2 from the date the deferral is credited to the Account through the Valuation Date.

 

3.2   Crediting Rate.  The Crediting Rate on amounts in a Participant’s Account shall be based on the Participant’s choice among the investment alternatives made available from time to time by the Administrator. The Administrator shall establish a procedure by which a Participant may elect to have the Crediting Rate based on one or more investment alternatives. Such procedure shall allow Participants to change investment elections at least quarterly and to elect to have Accounts automatically rebalanced according to investment elections at least quarterly. The Participant’s Account balance shall reflect the investments selected by the Participant. If an investment selected by a Participant sustains a loss, the Participant’s Account shall be reduced to reflect such loss. The Participant’s choice among investments shall be solely for purposes of calculation of the Crediting Rate. If the Participant fails to elect an investment alternative, the Crediting Rate shall be based on the investment alternative selected for this purpose by the Administrator. The Company shall have no obligation to set aside or invest funds as directed by the Participant and, if the Company elects to invest funds as directed by the Participant, the Participant shall have no more right to such investments than any other unsecured general creditor. During payout, the Participant’s Account shall continue to be credited at the Crediting Rate selected by the Participant from among the investment alternatives or rates made available by the Administrator for such purpose. Installment payments shall be recalculated annually by dividing the account balance by the number of payments remaining without regard to anticipated earnings or in any other reasonable manner as may be determined from time to time by the Administrator.

 

  

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3.3   Vesting of Accounts.  The balances of the Participant’s Deferral Contributions Account and Scheduled Withdrawal Account shall be fully vested at all times. The balance of the Participant’s Company Contributions Account shall be vested based on the Participant’s Year of Service according to the following schedule:

 

	
Completed Years

of Service

	 	
Percentage of

Crediting Rating

	 
	 	 	 	 
	
Less than 2

	 	0%	 
	 	 	 	 
	
2 but less than 3

	 	20%	 
	 	 	 	 
	
3 but less than 4

	 	40%	 
	 	 	 	 
	
4 but less than 5

	 	60%	 
	 	 	 	 
	
5 but less than 6

	 	80%	 
	 	 	 	 
	
6 or more

	 	100%	 

 

Notwithstanding the foregoing, the Participant’s Company Contributions Account shall be fully vested in the event of the Participant’s Separation from Service following the Participant’s Retirement Eligibility Date, Disability or death.  In the event of the Participant’s Separation from Service prior to completion of six (6) Years of Service, the Participant shall forfeit to the Company the unvested balance of the Participant’s Company Contributions Account.

 

3.4   Statement of Accounts.  The Administrator shall provide each Participant with statements at least annually setting forth the Participant’s Account balance as of the end of each year.

 

ARTICLE 4

Benefits

 

4.1   Retirement Benefits.  Subject to the provisions of Section 3.3 hereof (concerning vesting of Company Contributions), in the event of the Participant’s Separation from Service the Participant shall be entitled to receive an amount equal to the total balance of the Participant’s Account credited with notional earnings as provided in Article 3 through the Valuation Date.  The benefits shall be paid in a lump sum, or in annual installments over a specified period of not more than fifteen (15) years in accordance with the timely election of the Participant on the Transition Year Election Form attached hereto as Exhibit A.  Payments shall begin on the Distribution Date following the Participant’s Separation from Service.

 

4.2   Disability Benefit.  Upon the Participant’s Disability, the Participant shall be entitled to receive an amount equal to the total balance of the Participant’s Account credited with notional earnings as provided in Article 3 through the Valuation Date.  Benefits payable due to Disability shall be paid in a single lump sum unless the Participant makes a timely election (i.e., before December 31, 2008, or if later, the expiration of the 409A transition period) to have the benefits paid in annual installments over a specified period of not more than fifteen (15) years.  Payments shall begin on the Distribution Date following the final determination of the Participant’s Disability.

 

4.3   Change in Control Benefit.  In the event of a Change in Control of the Company, the Participants’ vested Account balance shall be paid to the Participants in a lump sum at the time of the Change in Control, unless a Participant has selected an alternative form of distribution upon a Change in Control pursuant to the Transition Year Election Form.  Such an election, if made, will be made by a Participant not later than December 31, 2008, or if later, the expiration of the 409A transition period.

 

  

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ARTICLE 5

Death Benefits

 

5.1   Survivor Benefit Before Benefits Commence.  If the Participant dies prior to commencement of benefits under Article 4, the Company shall pay to the Participant’s Beneficiary a death benefit equal to the total balance of the Participant’s Account credited with notional earnings as provided in Article 3 through the Valuation Date.  The death benefit shall be paid in a single lump sum on the Distribution Date following the date the Participant’s death is established by reasonable documentation.

 

5.2   Survivor Benefit After Benefits Commence.  If the Participant dies after benefits have commenced under Article 4, the Company shall pay to the Participant’s Beneficiary an amount equal to the remaining benefits payable to the Participant under the Plan over the same period such benefits would have been paid to the Participant.

 

ARTICLE 6

Scheduled Withdrawal

 

6.1   Election.  The Participant may make an irrevocable election on the Participant Election Form or the Transition Year Election Form (Exhibit A hereto) at the time of making a deferral to take a Scheduled Withdrawal from the Scheduled Withdrawal Account established for such purpose, including any earnings credited thereon. The Participant may elect to receive the Scheduled Withdrawal in any Plan Year on or after the third Plan Year following the enrollment period in which such Scheduled Withdrawal is elected and may elect to have the Scheduled Withdrawal distributed in annual installments over a period of up to fifteen (15) years.  Except as otherwise permitted in accordance with Section 6.3 hereof, the Participant may not change the Scheduled Withdrawal date for an Account containing previously deferred amounts. The Participant may establish separate Scheduled Withdrawal Accounts with different payout dates with respect to separate Plan Years hereunder.

 

6.2   Timing of Scheduled Withdrawal.  The Scheduled Withdrawal shall be paid by the Company to the Participant commencing on the Distribution Date of the Plan Year elected and continuing over the period elected by the Participant.  Notwithstanding the foregoing, in the event of a Participant’s Separation from Service, Disability or death prior to the date elected for the Scheduled Withdrawal, the Scheduled Withdrawal shall be paid in the form provided in Articles 4 or 5 of the Plan applicable to such termination of service.

 

6.3   Changes in Distribution Option.

 

(i)           Notwithstanding anything herein to the contrary, a Participant may change his distribution option hereunder through December 31, 2008 (or if later, the end of the 409A transition period), provided, however, that in 2008 a Participant cannot change payment elections with respect to payments that the Participant would otherwise receive in 2008, or cause payments to be made in 2008.  Any transition period changes shall be made on such forms as are provided by the Administrator and shall be filed with the Administrator during the applicable transition period.

 

(ii)          In the event a Participant wishes to modify the time or form of payment of his distribution option after December 31, 2008 (or if later, the end of the 409A transition period) with respect to payments on Separation from Service (i.e., from installments to lump sum or vice versa), the Participant may do so by filing a written election with the Administrator, provided that:

 

  

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(1)           the subsequent election shall not be effective for at least 12 months after the date on which the subsequent election is made; and

 

(2)           other than with respect to distributions on account of the Participant’s death or Disability, or due to an Unforeseeable Emergency, the first payment for which the subsequent election is made shall be deferred for a period of not less than 5 years from the date on which such payment would otherwise have been made; and

 

(3)           with respect to payments made from a Scheduled Withdrawal Account, such election must be made at least 12 months before the date the first payment is otherwise scheduled to be made from such Account.

 

ARTICLE 7

Financial Hardship Distribution

 

Financial Hardship Distribution.  Upon a finding that the Participant (or, after the Participant’s death, a Beneficiary) has suffered a Financial Hardship, the Administrator may authorize a distribution in an amount necessary to relieve the Financial Hardship.  The distribution may include amounts reasonably necessary to cover any taxes due on the Financial Hardship distribution.  Such distributions shall be subject to the guidance set forth in Treasury Regulations issued under Code Section 409A.  After a distribution based on Financial Hardship from either this Plan or the Qualified Plan, a Participant’s deferrals under this Plan shall cease and the Participant shall not be allowed to make a new deferral election until the enrollment period following one full calendar year from the date of such Financial Hardship distribution.

 

ARTICLE 8

Amendment and Termination of Plan

 

8.1           General Rule.  The Company may, at any time, direct the Administrator to amend or terminate the Plan, except that no such amendment or termination may reduce a Participant’s Account balance.

 

8.2           Payment Upon Plan Termination.  Subject to the requirements of Code Section 409A, in the event of complete termination of the Plan, the Plan shall cease to operate and the Company shall pay out to each Participant his vested benefit in a lump sum payment as if the Participant had terminated service as of the effective date of the complete termination.  Notwithstanding the foregoing, such complete termination of the Plan shall occur only under the following circumstances and conditions:

 

	
  

	
(a)

	
The Board may terminate the Plan within 12 months of a corporate dissolution taxed under Code Section 331, or with approval of a Bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of (i) the calendar year in which the Plan terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

 

  

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(b)

	
The Board may terminate the Plan by Board action taken within the 30 days preceding a Change in Control (but not following a Change in Control), provided that the Plan shall only be treated as terminated if all substantially similar arrangements sponsored by the Company are terminated so that the Participants and all participants under substantially similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months of the date of the termination of the arrangements.

 

	
  

	
(c)

	
The Board may terminate the Plan at any time provided that (i) all arrangements sponsored by the Company that would be aggregated with this Plan under Treasury Regulations Section 1.409A-1(c) if the Participant covered by this Plan was also covered by any of those other arrangements are also terminated; (ii) no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement; (iii) all payments are made within 24 months of the termination of the arrangements; and (iv) the Company does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations Section 1.409A-1(c) if the Participant participated in both arrangements, at any time within three years following the date of termination of the arrangement.

 

ARTICLE 9

Beneficiaries

 

9.1   Beneficiary Designation.  The Participant shall have the right, at any time, to designate any person or persons as Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant’s death. The Beneficiary designation shall be effective when it is submitted in writing to and acknowledged by the Administrator during the Participant’s lifetime on a form prescribed by the Administrator.

 

9.2   Revision of Designation.  The submission of a new Beneficiary designation shall cancel all prior Beneficiary designations.

 

9.3   Successor Beneficiary.  If the primary Beneficiary dies prior to complete distribution of the benefits provided in Article 5, the remaining Account balance shall be paid to the contingent Beneficiary elected by the Participant in the form of a lump sum payable no later than the last day of the month following the month in which the primary Beneficiary’s death is established.

 

9.4   Absence of Valid Designation.  If a Participant fails to designate a Beneficiary as provided above, or if every person designated as Beneficiary predeceases the Participant or dies prior to complete distribution of the Participant’s benefits, then the Administrator shall direct the distribution of such benefits to the Participant’s estate.

 

  

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ARTICLE 10

Administration/Claims Procedures

 

10.1          Administration.  The Plan shall be administered by the Administrator, which shall have the exclusive right and full discretion (i) to interpret the Plan, (ii) to decide any and all matters arising hereunder (including the right to remedy possible ambiguities, inconsistencies, or admissions), (iii) to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan and (iv) to make all other determinations necessary or advisable for the administration of the Plan, including determinations regarding eligibility for benefits payable under the Plan.  All interpretations of the Administrator with respect to any matter hereunder shall be final, conclusive and binding on all persons affected thereby.  No member of the Administrator shall be liable for any determination, decision, or action made in good faith with respect to the Plan.  The Company will indemnify and hold harmless the members of the Administrator from and against any and all liabilities, costs, and expenses incurred by such persons as a result of any act, or omission, in connection with the performance of such persons’ duties, responsibilities, and obligations under the Plan, other than such liabilities, costs, and expenses as may result from the bad faith, willful misconduct, or criminal acts of such persons.

 

10.2          Claims Procedure.  Any Participant, former Participant or Beneficiary may file a written claim with the Administrator setting forth the nature of the benefit claimed, the amount thereof, and the basis for claiming entitlement to such benefit. The Administrator shall determine the validity of the claim and communicate a decision to the claimant promptly and, in any event, not later than ninety (90) days after the date of the claim. The claim may be deemed by the claimant to have been denied for purposes of further review described below in the event a decision is not furnished to the claimant within such ninety (90) day period. If additional information is necessary to make a determination on a claim, the claimant shall be advised of the need for such additional information within forty-five (45) days after the date of the claim. The claimant shall have up to one hundred and eighty (180) days to supplement the claim information, and the claimant shall be advised of the decision on the claim within forty-five (45) days after the earlier of the date the supplemental information is supplied or the end of the one hundred and eighty (180) day period. Every claim for benefits which is denied shall be denied by written notice setting forth in a manner calculated to be understood by the claimant (i) the specific reason or reasons for the denial, (ii) specific reference to any provisions of the Plan (including any internal rules, guidelines, protocols, criteria, etc.) on which the denial is based, (iii) description of any additional material or information that is necessary to process the claim, and (iv) an explanation of the procedure for further reviewing the denial of the claim.

 

10.3          Review Procedures.  Within sixty (60) days after the receipt of a denial on a claim, a claimant or his/her authorized representative may file a written request for review of such denial. Such review shall be undertaken by the Administrator and shall be a full and fair review. The claimant shall have the right to review all pertinent documents. The Administrator shall issue a decision not later than sixty (60) days after receipt of a request for review from a claimant unless special circumstances, such as the need to hold a hearing, require a longer period of time, in which case a decision shall be rendered as soon as possible but not later than one hundred twenty (120) days after receipt of the claimant’s request for review. The decision on review shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the claimant with specific reference to any provisions of the Plan on which the decision is based and shall include an explanation of the claimant’s right to submit the claim for binding arbitration pursuant to Section 12.11.

 

ARTICLE 11

Conditions Related to Benefits

 

11.1          Nonassignability.  The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by any person, at any time, or to any person whatsoever. Those benefits shall be exempt from the claims of creditors or other claimants of the Participant or Beneficiary and from all orders, decrees, levies, garnishment or executions to the fullest extent allowed by law.

 

  

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11.2          No Right to Company Assets.  The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participant and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder.

 

11.3          Protective Provisions.  The Participant shall cooperate with the Company by furnishing any and all information requested by the Administrator, in order to facilitate the payment of benefits hereunder, and taking such other actions as may be requested by the Administrator. If the Participant refuses to so cooperate, the Company shall have no further obligation to the Participant under the Plan. In the event of the Participant’s suicide during the first two (2) years in the Plan, or if the Participant makes any material misstatement of information, then no benefits shall be payable to the Participant under the Plan, except that benefits may be payable in a reduced amount in the sole discretion of the Administrator.

 

11.4          Withholding.  The Participant shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and employment tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required, including, without limitation, by the reduction of other amounts payable to the Participant.

 

11.5          Assumptions and Methodology.  The Administrator shall establish the actuarial assumptions and method of calculation used in determining the present or future value of benefits, earnings, payments, fees, expenses or any other amounts required to be calculated under the terms of the Plan. The Administrator shall also establish reasonable procedures regarding the form and timing of installment payments.

 

11.6          Trust.  The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company’s creditors. Benefits paid to the Participant from any such trust or trusts shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. Notwithstanding the foregoing, upon a Change of Control of the Company, the Company shall make a contribution to an irrevocable “rabbi” trust to provide for payment of benefit previously accrued under the Plan equal to the following:

 

(a)   one hundred and ten percent (110%) of the present value of all vested and unvested accrued benefits payable to Participants or beneficiaries under the Plan on a pre-tax basis; plus

 

(b)   the present value of all reasonably anticipated fees and expenses (including reasonably anticipated legal expenses) of the Trust for the duration of the Trust, which shall be presumed to be at least two percent (2%) of the amount in paragraph (a) unless the Trustee determines that a greater number is appropriate; less

 

  

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(c)   the current fair market value of all the assets held in the Trust immediately before such contribution.

 

11.7          Accelerated Distributions.  Except as specifically permitted herein or in other sections of this Plan, no acceleration of the time or schedule of any payment may be made hereunder.  Notwithstanding the foregoing, payments may be accelerated hereunder by the Company, in accordance with the provisions of Treasury Regulation Section 1.409A-3(j)(4) and any subsequent guidance issued by the United States Treasury Department.  Accordingly, payments may be accelerated, in accordance with requirements and conditions of the Treasury Regulations (or subsequent guidance) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the Federal government; (iii) in compliance with ethics laws or conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the limit under Code Section 402(g)(1)(B)); (v) in the case of certain distributions to avoid a non-allocation year under Code Section 409(p); (vi) to apply certain offsets in satisfaction of a debt of the Participant to the Company; (vii) in satisfaction of certain bona fide disputes between the Participant and the Company; or (viii) for any other purpose set forth in the Treasury Regulations and subsequent guidance.

 

ARTICLE 12

Miscellaneous

 

12.1          Successors of the Company.  The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

 

12.2          Employment Not Guaranteed.  Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company.

 

12.3          Gender, Singular and Plural.  All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

 

12.4          Captions.  The captions of the articles, paragraphs and sections of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

 

12.5          Validity.  In the event any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan.

 

12.6          Waiver of Breach.  The waiver by the Company of any breach of any provision of the Plan shall not operate or be construed as a waiver of any subsequent breach by that Participant or any other Participant.

 

12.7          Notice.  Any notice or filing required or permitted to be given to the Company or the Participant under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, in the case of the Company, to the principal office of the Company, directed to the attention of the Administrator, and in the case of the Participant, to the last known address of the Participant indicated on the employment records of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Notices to the Company may be permitted by electronic communication according to specifications established by the Administrator.

 

  

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12.8          Errors in Benefit Statement or Distributions.  In the event an error is made in a benefit statement, such error shall be corrected on the next benefit statement following the date such error is discovered.  In the event of an error in a distribution, the Participant’s Account shall, immediately upon the discovery of such error, be adjusted to reflect such under or over payment and, if possible, the next distribution shall be adjusted upward or downward to correct such prior error. If the remaining balance of a Participant’s Account is insufficient to cover an erroneous overpayment, the Company may, at its discretion, offset other amounts payable to the Participant from the Company (including but not limited to salary, bonuses, expense reimbursements, severance benefits or other employee compensation benefit arrangements, as allowed by law) to recoup the amount of such overpayment(s).

 

12.9          ERISA Plan.  The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA.

 

12.10        Applicable Law.  In the event any provision of, or legal issue relating to, this Plan is not fully preempted by ERISA, such issue or provision shall be governed by the laws of the State of California, without regard to conflict of law provisions.

 

12.11        Arbitration.  Any claim, dispute or other matter in question of any kind relating to this Plan which is not resolved by the claims procedures under Article 10 shall be settled by arbitration in accordance with the applicable Employment Dispute Resolution Rules of the American Arbitration Association. Notice of demand for arbitration shall be made in writing to the opposing party and to the American Arbitration Association within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrators shall be final and may be enforced in any court of competent jurisdiction.

 

[signature page follows]

 

  

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IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of the 17th day of December 2008.

 

	 	
KAISER FEDERAL BANK

	 
	 	 	 
	 	/s/ Jeanne Thompson 	 
	 	By: 	 
	 	Its:  Assistant Secretary	 

 

 

15ex10-6.htm

Exhibit 10.6

 

EMPLOYMENT AGREEMENT

 

This Agreement (“Agreement”) is made effective as of the _______ day of _______________, 2010 (the “Effective Date”), by and among KAISER FEDERAL BANK (the “Bank”), a federally chartered stock savings bank, with its principal administrative office at 1359 N. Grand Ave., Covina, California 91724 and KAY M. HOVELAND (“Executive”).  Any reference to the “Company” herein shall mean KAISER FEDERAL FINANCIAL GROUP, INC., the holding company of the Bank.  The Company is a party to this Agreement for the sole purpose of guaranteeing the payments required hereunder, except as otherwise provided herein.

 

WHEREAS, Executive is currently employed as the President and Chief Executive Officer of the Bank; and

 

WHEREAS, the Bank desires to assure itself of the continued services of Executive pursuant to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

 

	
1.  

	
POSITION AND RESPONSIBILITIES

 

During the period of her employment hereunder, Executive agrees to serve as President and Chief Executive Officer of the Bank.  During said period, Executive also agrees to serve, if elected, as an officer and director of any subsidiary or affiliate of the Bank or the Company.

 

	
2.  

	
TERMS AND DUTIES

 

(a) The term of this Agreement and the period of Executive’s employment hereunder shall begin as of the date first above written and shall continue for thirty-six (36) full calendar months thereafter.  Commencing on the Effective Date and continuing on each anniversary date thereafter (the “Anniversary Date”), this Agreement shall renew for an additional year such that the remaining term shall be thirty-six (36) months, provided, however, that in order for the Agreement to renew, the disinterested members of the Board of Directors of the Bank (the “Board”) must take the following actions prior to each non-renewal notice period (as described in the next sentence): (i) at least sixty (60) days prior to the Anniversary Date, conduct a comprehensive performance evaluation and review of Executive for purposes of determining whether to extend the Agreement; and (ii) affirmatively approve the renewal or non-renewal of the Agreement, which decision shall be included in the minutes of the Board’s meeting.  If the decision of such disinterested members of the Board is not to renew the Agreement, then the Board shall provide the Executive with a written notice of non-renewal (“Non-Renewal Notice”) at least thirty (30) days and not more than sixty (60) days prior to any Anniversary Date, such that this Agreement shall terminate at the end of thirty-six (36) months following such Anniversary Date.

 

(b) During the period of her employment hereunder, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence, Executive shall faithfully perform her duties hereunder including activities and services related to the organization, operation and management of the Bank.

 

  

  

  

 

	
3.  

	
COMPENSATION AND REIMBURSEMENT

 

(a) The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 2(b).  The Bank shall pay Executive as compensation a salary of not less than $364,000 per year (“Base Salary”).  Such Base Salary shall be payable  in accordance with the customary payroll practices of the Bank.  During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually.  Such review shall be conducted by a committee designated by the Board (the “Committee”), and the Board may increase, but not decrease, Executive’s Base Salary (any increase in Base Salary shall become the “Base Salary” for purposes of this Agreement).  In addition to the Base Salary provided in this Section 3(a), the Bank shall provide Executive at no cost to Executive with all such other benefits as are provided uniformly to permanent full-time employees of the Bank.

 

(b) The Bank will provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving benefit from immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder, except for amendments that are generally applicable to all employees.  Without limiting the generality of the foregoing provisions of this Section 3(b), Executive will be entitled to participate in or receive benefits under any employee benefit plans including but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.  Executive will be entitled to incentive compensation and bonuses as provided in any plan of the Bank in which Executive is eligible to participate (and she shall be entitled to a pro rata distribution under any incentive compensation or bonus plan as to any year in which a termination of employment occurs, other than Termination for Cause).  Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

 

(c) In addition to the Base Salary provided for by Section 3(a), the Bank shall pay or reimburse Executive for all reasonable travel and other reasonable expenses incurred by Executive in performing her obligations under this Agreement and may provide such additional compensation in such form and such amounts as the Board may from time to time determine.  All reimbursements pursuant to this Section 3(c) shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred. 

 

	
4.  

	
OUTSIDE ACTIVITIES

 

Executive may serve as a member of the board of directors of business, community and charitable organizations subject to the approval of the Board, provided that in each case such service shall not materially interfere with the performance of her duties under this Agreement or present any conflict of interest.  Such service to and participation in outside organizations shall be presumed for these purposes to be for the benefit of the Bank, and the Bank shall reimburse Executive her reasonable expenses associated therewith.  Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred.

 

  

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5.  

	
WORKING FACILITIES AND EXPENSES

 

Executive’s principal place of employment shall be at the Bank’s principal executive offices.  The Bank shall provide Executive, at her principal place of employment, with a private office, stenographic services and other support services and facilities suitable to her position with the Bank and necessary or appropriate in connection with the performance of her duties under this Agreement.  The Bank shall reimburse Executive for her ordinary and necessary business expenses incurred in connection with the performance of her duties under this Agreement, including, without limitation, fees for memberships in such clubs and organizations that Executive and the Board mutually agree are necessary and appropriate to further the business of the Bank, and travel and reasonable entertainment expenses.  Reimbursement of such expenses shall be made upon presentation to the Bank of an itemized account of the expenses in such form as the Bank may reasonably require.  Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred.

 

	
6.  

	
PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

 

(a) The provisions of this Section 6 shall apply upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement.  As used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following:

 

(i)   the involuntary termination by the Bank of Executive’s full-time employment hereunder for any reason other than (A) Retirement, death or Disability, as defined in Section 7 below, or (B) Termination for Cause as defined in Section 8 hereof.

 

(ii)          Executive’s voluntary resignation from the Bank’s employ for “Good Reason.”  Good Reason shall mean:

 

(A)         a material diminution in Executive’s base compensation;

 

(B)         a material diminution in Executive’s authority duties or responsibilities;

 

(C)        a requirement that Executive must report to a corporate officer or employee instead of reporting directly to the Board;

 

(D)        a material diminution in the budget over which Executive retains authority;

 

  

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(E)    a change in the geographic location at which Executive must perform her duties that is more than twenty-five (25) miles from the location of Executive’s principal workplace on the date of this Agreement; or

 

(F)    any other action or inaction that constitutes a material breach by the Bank of this Agreement.

 

Upon the occurrence of any event described above that constitutes Good Reason, Executive shall have the right to elect to terminate her employment under this Agreement by resignation within ninety (90) days following an event constituting Good Reason, provided, however that the Bank shall have at least thirty (30) days to cure such condition.  Notwithstanding the preceding sentence, in the event of a continuing breach of this Agreement by the Bank, Executive, after giving due notice within the prescribed time frame of an initial event specified above, shall not waive any of her rights solely under this Agreement and this Section 6 by virtue of the fact that Executive has submitted her resignation but has remained in the employment of the Bank and is engaged in good faith discussions to resolve any occurrence of an event constituting Good Reason.

 

(iii)   (A) Executive’s involuntary termination by the Bank (other than Termination for Cause) on the effective date of, or at any time following, a Change in Control, or (B) Executive’s resignation from employment with the Bank or the Company (or any successor thereto) following a Change in Control for Good Reason.  For these purposes, a Change in Control of the Bank or the Company shall mean a change in control of a nature that: (i) would be required to be reported in response to Item 5.01 of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the Company within the meaning of the Home Owners’ Loan Act, as amended, and applicable rules and regulations promulgated thereunder (collectively, the “HOLA”) as in effect at the time of the Change in Control; or (iii) without limitation such a Change in Control shall be deemed to have occurred at such time as (a) any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company’s outstanding securities, except for any securities purchased by the Bank’s employee stock ownership plan or trust; or (b) individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (b), considered as though he or she were a member of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Company or similar transaction in which the Bank or Company is not the surviving institution occurs or is effected; or (d) a proxy statement soliciting proxies from stockholders of the Company, by someone other than the current management of the Company is distributed, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are exchanged for or converted into cash or property or securities not issued by the Company; or (e) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror.

 

  

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(b) Upon the occurrence of an Event of Termination within thirty (30) days after the Date of Termination, as defined in Section 9(b), the Bank shall pay Executive, or, in the event of her subsequent death, her beneficiary or beneficiaries, or her estate, as the case may be, as severance pay or liquidated damages, or both, a sum equal to (i) the Executive’s earned but unpaid Base Salary and benefits, plus (ii) three (3) times the sum of (A) annualized Base Salary and (B) the highest rate of bonus awarded to Executive during the three (3) years immediately prior to the year in which the Executive’s Date of Termination occurs.

 

(c) Upon the occurrence of an Event of Termination, the Bank will cause to be continued, at the Bank’s expense, life insurance coverage and non-taxable medical and dental insurance coverage, if any, substantially identical to the coverage maintained by the Bank for Executive prior to her termination, provided, however, such medical coverage shall cease upon the earlier of (i)  thirty-six (36) months from the Date of Termination or (ii) the date Executive becomes eligible for Medicare coverage, provided further, that if Executive is covered by family coverage or coverage for herself and a spouse, then the Executive’s family or spouse shall continue to be covered for the remainder of the thirty-six (36) month period or, in the case of the spouse, until the spouse becomes eligible for Medicare coverage or obtains healthcare coverage elsewhere, whichever period is less.

 

(d) Within thirty (30) days of Executive’s Date of Termination  in connection with an Event of Termination, the Bank shall pay Executive a lump sum equal to the present value of the Bank’s contributions that would have been made on her behalf under each of the Bank’s 401(k) Plan and Employee Stock Ownership Plan (and any other tax-qualified defined contribution plan maintained by the Bank in which Executive participates) as if she had continued working for the Bank for a thirty-six (36) month period following her Date of Termination earning her actual final rate of Base Salary as of the Date of Termination and as if she had made the maximum amount of employee contributions permitted, if any, under such plan or plans.  Such present values are to be determined using a discount rate equal to the short-term Internal Revenue Service’s “applicable federal rate” for the month before the Date of Termination, compounded annually.

 

(e)  Notwithstanding anything to the contrary herein, Executive’s voluntary resignation for any reason other than for Good Reason shall not entitle Executive to any payments under Section 6 of this Agreement.

 

  

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7.  

	
TERMINATION UPON RETIREMENT, DISABILITY OR DEATH

 

(a) Retirement.  For purposes of this Agreement, termination by the Bank of Executive’s employment based on “Retirement” shall mean termination of Executive’s employment by the Board upon Executive’s attainment of age 65, or such later date as determined by the Board.  Upon termination of Executive’s employment because of Retirement, Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party, but Executive shall not be entitled to the termination benefits specified in Section 6.

 

(b) Disability.  In the event Executive is unable to perform her duties under this Agreement on a full-time basis for a period of six (6) consecutive months by reason of “Disability” within the meaning of Code Section 409A, the Bank may terminate this Agreement, provided that the Bank shall continue to be obligated to pay Executive her Base Salary at the rate in effect at the Date of Termination for the remaining term of the Agreement, or one year, whichever is the longer period of time, and provided further that any amounts actually paid to Executive pursuant to any disability insurance or other similar such program which the Bank has provided or may provide on behalf of its employees or pursuant to any workman’s or Social Security disability program shall reduce the Base Salary to be paid to Executive pursuant to this paragraph.

 

(c) Death.  In the event of Executive’s death during the term of the Agreement, her estate, legal representatives or named beneficiaries (as directed by Executive in writing) shall be paid Executive’s Base Salary at the rate in effect at the time Executive’s death for a period of one (1) year from the date of Executive’s death, and the Bank will continue to provide non-taxable medical and dental and other benefits normally provided for an Executive’s family for one (1) year after Executive’s death.

 

	
8.  

	
TERMINATION FOR CAUSE

 

The term “Termination for Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than minor traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.  In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the savings institutions industry.  Executive shall not have the right to receive Base Salary or other compensation for any period after Termination for Cause.  Any stock options or other incentives granted to Executive under any plan of the Bank, the Company or any subsidiary or affiliate thereof (whether vested or unvested), shall become null and void effective upon Executive’s receipt of Notice of Termination for Cause pursuant to Section 9 hereof.

 

	
9.  

	
NOTICE

 

(a) Any purported termination by the Bank or by Executive shall be communicated by Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

  

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(b) “Date of Termination” shall mean (A) if Executive’s employment is terminated for Disability, thirty (30) days after a Notice of Termination is given (provided that she shall not have returned to the performance of her duties on a full-time basis during such thirty (30) day period), and (B) if her employment is terminated for any other reason, the date specified in the Notice of Termination.

 

(c) If the party receiving a Notice of Termination desires to dispute or contest the basis or reasons for termination, the party receiving the Notice of Termination must notify the other party within thirty (30) days after receiving the Notice of Termination that such a dispute exists, and shall pursue the resolution of such dispute in good faith and with reasonable diligence pursuant to Section 20 of this Agreement.  During the pendency of any such dispute, neither the Company nor the Bank shall be obligated to pay Executive Base Salary or other compensation beyond the Date of Termination.  Any amounts paid to Executive upon resolution of such dispute under this Section shall be offset against or reduce any other amounts due under this Agreement.

 

	
10.  

	
POST-TERMINATION OBLIGATIONS

 

(a) All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with paragraph (b) of this Section and Section 11 during the term of this Agreement and for one (1) full year after the expiration or termination hereof.

 

(b) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank as may reasonably be required by the Bank in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party.

 

	
11.  

	
NON-COMPETITION AND NON-SOLICITATION

 

(a) Non-Compete/Non-Solicitation.  Upon any termination of Executive’s employment hereunder, other than a termination, (whether voluntary or involuntary) in connection with a Change in Control, as a result of which the Bank is paying Executive benefits under Section 6 of this Agreement, Executive agrees not to compete with the Bank and/or the Company for a period of one (1) year following such termination within twenty-five (25) miles of any existing branch of the Bank or any subsidiary of the Company or within twenty-five (25) miles of any office for which the Bank, the Company or a Bank subsidiary of the Company has filed an application for regulatory  approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board.  Executive agrees that during such period and within said area, cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Bank and/or the Company. The parties hereto, recognizing that irreparable injury will result to the Bank and/or the Company, its business and property in the event of Executive’s breach of this Subsection 11(a) agree that in the event of any such breach by Executive, the Bank and/or the Company will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employers, employees and all persons acting for or with Executive.  Executive represents and admits that Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank and/or the Company, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood.  Nothing herein will be construed as prohibiting the Bank and/or the Company from pursuing any other remedies available to the Bank and/or the Company for such breach or threatened breach, including the recovery of damages from Executive.

 

  

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In addition, upon any termination of Executive’s employment hereunder, other than a termination (whether voluntary or involuntary) in connection with a Change Control, as a result of which the Bank is paying Executive benefits under Section 6 of this Agreement, Executive agrees not to solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank or its affiliates to terminate an existing business or commercial relationship with the Bank.

 

(b) Confidentiality.  Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Bank and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Bank.  Executive will not, during or after the term of her employment, disclose any knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to any federal banking agency with jurisdiction over the Bank or Executive).  Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank, and Executive may disclose any information regarding the Bank or the Company which is otherwise publicly available.  In the event of a breach or threatened breach by Executive of the provisions of this Section, the Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed.  Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from Executive.

 

	
12.  

	
SOURCE OF PAYMENTS

 

All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank.  The Company, however, guarantees payment and provision of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company.

 

  

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13.  

	
NO EFFECT ON EMPLOYEE BENEFITS PLANS OR PROGRAMS

 

The Board may terminate Executive’s employment at any time, but, any termination of Executive’s employment, other than Termination for Cause shall have no effect on or prejudice the vested rights of Executive under the Company’s or the Bank’s qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or other employee benefit plans or programs, or compensation plans or programs in which Executive was a participant.  Executive shall not have the right to receive any Base Salary or other compensation for any period after Termination for Cause as defined in Section 8, except as otherwise required by applicable law.

 

	
14.  

	
REQUIRED REGULATORY PROVISIONS

 

(a) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) (12 U.S.C. §1818(e)(3)) or 8(g)(1) (12 U.S.C. §1818(g)(1)) of the Federal Deposit Insurance Act (“FDIA”), as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the Base Salary or other compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

 

(b) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) (12 U.S.C. §1818(e)(4)) or 8(g)(1) (12 U.S.C. §1818(g)(1)) of the FDIA, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

 

(c) If the Bank is in default as defined in Section 3(x)(1) (12 U.S.C. §1813(x)(1)) of the FDIA, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

 

(d) All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the Director of the Office of Thrift Supervision (“OTS”) or a designee, at the time the Federal Deposit Insurance Corporation (“FDIC”) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) (12 U.S.C. §1823(c)) of the FDIA; or (ii) by the Director of OTS or a designee at the time the Director of OTS or a designee approves a supervisory merger to resolve problems related to operations of the Bank or when the Bank is determined by the Director of OTS or a designee to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.

 

(e) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA, 12 U.S.C. § 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

 

  

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(f) Notwithstanding anything herein to the contrary, payments to or for the benefit of Executive hereunder shall not exceed three times Executive’s annual average compensation for the five most recent taxable years, within the meaning of Section 310 of the Office of Thrift Supervision Examination Handbook.

 

(g) Notwithstanding anything else in this Agreement to the contrary, Executive’s employment shall not be deemed to have been terminated unless and until Executive has a Separation from Service within the meaning of Code Section 409A.  For purposes of this Agreement, a “Separation from Service” shall have occurred if the Bank and Executive reasonably anticipate that either no further services will be performed by Executive after the Date of Termination (whether as an employee or as an independent contractor) or the level of further services performed is less than 50% of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination.  For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii).

 

(h) Notwithstanding the foregoing, in the event the Executive is a Specified Employee (as defined herein), then, solely, to the extent required to avoid penalties under Code Section 409A, the Executive’s payments shall be delayed until the first day of the seventh month following the Executive’s Separation from Service.  A “Specified Employee” shall be interpreted to comply with Code Section 409A and shall mean a key employee within the meaning of Code Section 416(i) (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Bank or Company is or becomes a publicly traded company.

 

	
15.  

	
NO ATTACHMENT

 

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

 

(b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank and the Company and their respective successors and assigns.

 

	
16.  

	
ENTIRE AGREEMENT; MODIFICATION AND WAIVER

 

(a) This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supercedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof, except that the parties acknowledge that this Agreement shall not affect any of the rights and obligations of the parties  under any agreement or plan entered into with or by the Bank or the Company pursuant to which the Executive may receive Base Salary or other compensation except as set forth in Section 12 hereof.  No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

 

  

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(b) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

 

(c) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

 

	
17.  

	
SEVERABILITY

 

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

 

	
18.  

	
HEADINGS FOR REFERENCE ONLY

 

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

	
19.  

	
GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of California but only to the extent not superseded by federal law.

 

	
20.  

	
ARBITRATION

 

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators, one of whom shall be selected by the Bank, one of whom shall be selected by Executive and the third of whom shall be selected by the other two arbitrators.  The panel shall sit in a location within fifty (50) miles from the location of the Bank, in accordance with the rules of the Judicial Mediation and Arbitration Systems (JAMS) then in effect.  Judgment may be entered on the arbitrators award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of her right to be paid Base Salary and other compensation until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

 

	
21.  

	
PAYMENT OF LEGAL FEES

 

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank, provided that the dispute or interpretation has been settled by Executive and the Bank or resolved in Executive’s favor and provided that such payment or reimbursement shall be made not later than two and one-half (2 1⁄2) months after the end of the taxable year in which such fees were incurred.

 

  

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22.  

	
INDEMNIFICATION

 

The Bank shall provide Executive (including her heirs, executors and administrators) with coverage under a standard directors and officers liability insurance policy at its expense.  Subject to 12 C.F.R. §545.121, the Bank or the Company, shall indemnify Executive (and her heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by her in connection with or arising out of any action, suit or proceeding in which she may be involved by reason of having been a director or officer of the Bank or the Company (whether or not she continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys fees and the cost of reasonable settlements (such settlements must be approved by the Board of Directors of the Bank or the Company).  If such action, suit or proceeding is brought against Executive in her capacity as an officer or director of the Bank, however, such indemnification shall not extend to matters as to which Executive is finally adjudged to be liable for willful misconduct in the performance of her duties.

 

	
23.  

	
SUCCESSORS AND ASSIGNS

 

The Bank and/or the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank’s and the Company’s obligations under this Agreement, in the same manner and to the same extent that the Bank and/or the Company would be required to perform if no such succession or assignment had taken place.

 

[Signature Page Follows]

  

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SIGNATURES

 

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and their seals to be affixed hereunto by their duly authorized officers, and Executive has signed this Agreement, as of the day and date first above written.

 

	
ATTEST:

	 	
KAISER FEDERAL BANK

	 	 	 
	 	 	
By:

	
 

	 	 	 	Name
	 	 	 	Title
	 	 	 
	
ATTEST:

	 	
KAISER FEDERAL FINANCIAL GROUP, INC.

	 	 	 
	 	 	By: 	 
	 	 	 	Name
	 	 	 	Title
	 	 	 	 
	WITNESS:	 	EXECUTIVE
	 	 	 
	 	 	Kay M. Hoveland

 

 

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