Document:

Ex-10.7

 

EXHIBIT 10.7

January 29, 2004

Ms. Sandra E. Bell

20 Connor Court

Irvington, NY 10533

Dear Sandra,

The purpose of this letter is to confirm your recent discussions and offer of employment with David
H. Hehman, President/CEO of the Federal Home Loan Bank of Cincinnati. As discussed, the position
that has been tendered to you and which you have verbally accepted is entitled Executive Vice
President, Chief Financial Officer with a biweekly starting salary of $12,115.39 (converts to
$315,000 on an annual basis). Your designation as a Bank Officer is subject to the approval by the
Bank’s Board of Directors and will be presented at the February Board meeting. The Bank
anticipates you will begin employment on Thursday April 1, 2004 following your relocation to
Cincinnati.

As an Officer of the Bank, you will be eligible to participate in the Bank’s Executive Incentive
Compensation Plan (the Officers’ Incentive Plan). This plan will allow you to receive an incentive
payment of up to 55% of your base salary depending upon the Bank’s success in achieving its
corporate goals. This incentive program has been a major factor in the Bank achieving a majority
of its annual goals over the past several years. At its February meeting, the Bank’s Board of
Directors will be asked to approve your participation in the Officers’ Incentive Plan for the 2004
plan year.

Pursuant to your discussions with Mr. Hehman, in addition to being eligible to participate in the
Bank’s two IRS-qualified pension plans and the non-qualified Benefit Equalization Plan, the Bank
will also provide you with a supplemental retirement benefit equal to $250,000, plus applicable
interest earnings, which will be governed by a separate, non-qualified deferred compensation
agreement prepared by Bank counsel. As mutually agreed, you will be fully vested in this
non-qualified, supplemental benefit upon the fifth anniversary of your Bank employment. Please
refer to the enclosed, draft agreement for specific details regarding this supplemental retirement
benefit. Should you have any questions or require clarification of the draft agreement, please
don’t hesitate to contact me.

As further discussed, the Bank will reimburse your relocation expenses to Greater Cincinnati based
upon its current policy and, additionally agrees to provide the following enhanced relocation
benefits on a tax neutral basis (where applicable).

	 	1.	 	The Bank will provide reimbursement for decorating expenses associated with your new
home in Greater Cincinnati not to exceed $26,250 (equivalent to one month’s salary).

 

 

Ms. Sandra E. Bell
January 29, 2004
Page 2

	 	2.	 	The Bank will reimburse reasonable commuting expenses (including airfare) between
Cincinnati and your New York residence during the months of April, May and June of 2004.
	 
	 	3.	 	The Bank will provide an additional 90 days of duplicate housing assistance (for a
total not to exceed 150 days) to accommodate your commute during the months of April, May
and June of 2004.
	 
	 	4.	 	Finally, the Bank will provide reimbursement for the additional moving expenses
associated with the temporary storage of your household belongings while you reside in
temporary housing as well as the delivery, repacking and reshipment of the household
belongings used while residing in temporary housing, until your subsequent move to a
permanent residence in Greater Cincinnati.

The Bank offers an extensive fringe benefit package which is designed to provide our employees with
comprehensive options for planning their current and future security. As we discussed, the Bank
agrees to waive the three-month waiting period for enrollment and participation in the following
benefits, specifically its Medical, Dental, Vision, Flexible Spending Accounts, Life and Long Term
Disability programs.

Please note that the waiver of the waiting periods for the Bank’s medical, dental and vision
coverages is subject to the approval by the Bank’s insurance carrier, Anthem Blue Cross and Blue
Shield. Although we anticipate Anthem will approve our request, should these waiting periods not
be waived, the Bank agrees to reimburse the premium that you would be required to pay to continue
the coverages through your current employer (under the provisions of COBRA) until the Bank’s
waiting periods are completed. In general, COBRA is a federal regulation which requires employers
to extend terminating employees including those who voluntarily resign, the option to continue
their health insurance coverages for up to eighteen months by paying 102% of the premium for such
coverage.

Additionally, the Bank will provide a company car and monthly parking space for your use. However,
as mutually agreed, the Bank will defer procuring this vehicle until the lease term on your current
car has ended. Also enclosed please find a handbook which further describes the Bank’s fringe
benefit programs, including the Bank’s vacation and sick leave benefits.

On your first day of employment, you will be scheduled to attend an orientation session with the
Bank’s Human Resources Department. During this orientation, you will receive enrollment materials
regarding the Bank’s employee benefit programs and will also be asked to complete additional
paperwork required for employment. Please note that, in order to comply with federal laws which
require the Bank to verify your eligibility for employment, you will need to bring

 

 

Ms. Sandra E. Bell
January 29, 2004
Page 3

certain identification and eligibility documents, e.g., your driver’s license and social security
card.

Please confirm your acceptance of this offer by signing the space provided below, and returning the
signed letter to me in the enclosed, postage paid envelope no later than Friday, February 27, 2004.
A copy of this letter is enclosed for your personal records.

As referenced above, enclosed for your review are two copies of the draft non-qualified deferred
compensation agreement which will govern your supplemental retirement benefit. If this draft
agreement is acceptable to you, please sign and return both copies of the agreement in the envelope
provided. Once all signatures are obtained, a copy of the executed agreement will be returned to
you for your records.

On behalf of the Bank and Mr. Hehman, let me welcome you to our organization. I am confident that
with your management experience and leadership capabilities, we will be able to continue with our
efforts to enhance and improve the Bank’s operations.

Again, welcome, and should you have any questions before you begin at the Bank, please feel free to
contact me at (513) 852-5704.

	 	 	 	 	 
	 

	 	Cordially yours,
	 	 
	 
	 	 	 	 
	 

	 	/s/ Richard T. Fitzpatric	 	 
	 

	 	 	 	 
	 

	 	Richard T. Fitzpatric	 	 
	 

	 	Vice President	 	 
	 

	 	Human Resources & Administration	 	 

Enclosures (4)

Cc: David H. Hehman

Offer of employment with the Federal Home Loan Bank of Cincinnati is hereby accepted.

	 	 	 	 	 	 	 
	                     /s/ Sandra E. Bell

	 	 	 	          2/18/04
	 	 
	 

	 	 	 	 	 	 
	                    Ms. Sandra E. Bell

	 	 	 	           DateEx-10.8

 

EXHIBIT 10.8

FEDERAL HOME LOAN BANK OF CINCINNATI

DEFERRED COMPENSATION AGREEMENT

FOR

SANDRA E. BELL

          THIS AGREEMENT is entered into as of the 25th day of February, 2004, by and
between FEDERAL HOME LOAN BANK OF CINCINNATI (the “Bank”) and SANDRA E. BELL (the “Executive”).

W I T N E S S E T H:

          WHEREAS, the Bank is desiring to employ Executive and Executive desires to accept employment
with the Bank; and

          WHEREAS, in order to provide retirement benefits for its employees, the Bank established and
currently maintains the Comprehensive Retirement Program of the Financial Institutions Retirement
Fund, a qualified, defined benefit pension plan (the “Pension Plan”), the Financial Institutions
Thrift Plan, a qualified defined contribution pension plan (the “Thrift Plan”), and the Federal
Home Loan Bank of Cincinnati Benefit Equalization Plan, a nonqualified deferred compensation plan
that provides defined benefit and defined contribution pension benefits (the “BEP”); and

          WHEREAS, in order to induce Executive to accept employment, the Bank and Executive desire to
enter into an agreement embodying the terms and conditions of a nonqualified deferred compensation
arrangement agreed upon during the recruitment of the Executive, which benefits are in addition to
the benefits, if any, that may be provided to the Executive under the Pension Plan, the Thrift
Plan, and the BEP.

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          NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this
Agreement, the parties agree as follows:

     1. Retirement Benefit. (a) To the extent vested pursuant to Paragraph 3 below, and
not otherwise forfeited by Executive, the Executive shall be entitled to the retirement benefit
provided under this Agreement (the “Retirement Benefit”). The Retirement Benefit shall be an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000.00), plus the return on investment on
such amount as determined in accordance with Paragraph 1(b) below.

          (b) From time to time, the Bank shall credit on the balance of the Retirement Benefit an
amount equal to the return on investment that would be ordinarily credited on such balance if the
Retirement Benefit were benefits provided under the thrift plan component of the BEP.

     2. Form of Benefit. The vested portion of the Retirement Benefit shall be paid to the
Executive at the time, in the form, and under the same terms and conditions as benefits provided
under the thrift plan component of the BEP to a participant who terminates employment with the Bank
other than on account of the participant’s death or Disability (as defined in Paragraph 5 below).

     3. Vesting. (a) The Executive will vest in the Retirement Benefit according to the
following schedule:

	 	 	 	 	 
	Years of Service	 	Vested Percentage	 
	Less than 5
	 	 	0	%
	5 or more
	 	 	100	%

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     For purposes of this Paragraph 3, the term “Years of Service” shall mean the Executive’s
actual years of service (as such term is used in the Pension Plan for purposes of determining a
participant’s years of vesting service).

          (b) Notwithstanding the vesting schedule provided in Paragraph 3(a) above, and subject to
Paragraph 3(c) below, in the event the Bank terminates the employment of the Executive before she
becomes fully vested in the Retirement Benefit in accordance with Paragraph 3(a) above, and such
termination of employment is without “Cause” (as defined in Paragraph 3(d) below), the Executive
shall fully vest in the Retirement Benefit on the date of such termination.

          (c) The Executive shall forfeit the Retirement Benefit in the event that (i) the Bank
terminates the employment of the Executive for “Cause” before the Executive becomes fully vested in
the Retirement Benefit in accordance with Paragraph 3(a) above, or (ii) the Executive voluntarily
resigns from her employment with the Bank without “Good Reason” before she becomes fully vested in
the Retirement Benefit in accordance with Paragraph 3(a) above. If Executive voluntarily resigns
from her employment with the Bank for “Good Reason,” and she has not otherwise forfeited her right
to receive the Retirement Benefit, in lieu of the Retirement Benefit the Executive shall be
entitled to a reduced benefit under this Agreement that shall equal the Accrued Percentage of the
Retirement Benefit, as defined in Paragraph 4(a) below. The Accrued Percentage of the Retirement
Benefit shall be paid pursuant to the form of payment elected pursuant to Paragraph 2 above. For
purposes of this Section, the term “Good Reason” shall mean and be limited to (i) a significant,
material and adverse diminution in the Executive’s job duties, responsibilities and authority, or
organizational

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reporting relationship to the President of the Bank, (ii) a diminution in the Executive’s annual
base salary and a reduction of not less than 25% in the Executive’s incentive opportunity, where
such reductions are measured from the annual base salary and incentive opportunity provided to
Executive in the calendar year immediately preceding such diminutions, or (iii) a failure or
refusal to execute any financial statements of the Bank that unfairly and grossly inaccurately
represent the Bank’s financial position.

          (d) For purposes of this Agreement, “Cause” shall mean termination based upon (i) the
Executive’s indictment for, conviction of, or plea of guilty or nolo contendre to any felony or any
crime involving fraud, dishonesty, or moral turpitude, (ii) commission of any theft, fraud,
embezzlement by the Executive which results in, or is intended to result in, the Executive’s gain
or enrichment at the Bank’s expense, (iii) the Executive’s failure to follow lawful instructions,
which are material to the Executive’s employment duties, of the President of the Bank or the Board
of Directors of the Bank, (iv) the inability to perform the material duties and responsibilities of
the Executive’s employment with the Bank as a result of the use of or addiction to alcohol or
drugs, or (v) the willful or reckless engaging by the Executive in conduct which is materially
injurious to the Bank, monetarily or otherwise.

     4. Death Benefit. (a) If the Executive dies before receiving the entire balance of
the vested Retirement Benefit, and the Executive has not otherwise forfeited her right to receive
the Retirement Benefit, in lieu of the Retirement Benefit the Executive’s designated beneficiary
shall be entitled to a death benefit (the “Death Benefit”). The amount of the Death Benefit shall
equal the remaining balance of the vested Retirement Benefit. If the Executive dies while in the
employment of the Bank

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and prior to becoming fully vested in the Retirement Benefit, the Death Benefit shall equal the
Accrued Percentage of the Retirement Benefit. The “Accrued Percentage” is the percentage
determined by the following fraction:

Years of Service credited as of the Executive’s date of termination

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For example, if the Executive died after being credited with two (2) Years of Service, the Death
Benefit would be equal to 40% of the Retirement Benefit. Any partial Year of Service shall be
calculated on a monthly pro-rata basis. The Death Benefit shall be paid in substantially equal
annual installments over a period of 10 years or such shorter period of time as determined by the
Bank.

          (b) The Executive shall have the right to designate a beneficiary to receive the Death
Benefit, if any, due under this Agreement. The designation shall be made in the same manner and
under the same terms and conditions as described in the BEP.

     5. Disability Benefit. If the Executive ceases employment with the Bank on account
of becoming Disabled before the commencement of the payment of the vested portion of the Retirement
Benefit, files an application for disability benefits with the Bank within thirteen months (13) of
the date she became Disabled, and has not otherwise forfeited her right to receive the Retirement
Benefit, in lieu of the Retirement Benefit the Executive shall be entitled to a disability benefit
(the “Disability Benefit”). The amount, if any, of the Disability Benefit under this Agreement
shall be equal to the Retirement Benefit, except that if the Executive becomes Disabled before
becoming fully vested in the Retirement Benefit, the Disability Benefit shall equal the Accrued
Percentage of the Retirement Benefit. The Disability Benefit shall be paid pursuant to the form of
payment

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elected pursuant to Paragraph 2 above. For purposes of this Agreement, the Executive shall be
“Disabled” upon the occurrence of any of the following: (i) the Executive is determined by the
Social Security Administration to be eligible for disability benefits under Title II of the Federal
Social Security Act, or (ii) the Executive becomes eligible for disability benefits under the
Pension Plan.

     6. Funding of Benefits. (a) The obligation to pay any benefits under this Agreement
shall at all times be an unfunded and unsecured obligation of the Bank. The Bank shall not be
obligated to establish any trust, escrow arrangement or other fiduciary relationship for the
purpose of segregating funds for the payment of any benefits under this Agreement. Executive shall
be required to look solely and exclusively to the general assets of the Bank for the payment of any
benefits under this Agreement. With respect to the Bank’s obligations under this Agreement,
Executive shall merely have an unsecured claim against the Bank and neither Executive nor any
person claiming under or through Executive shall have any interest in any specific asset or assets
owned or held by the Bank or a related entity by reason of this Agreement.

          (b) All property and rights purchased with any amounts held to assist the Bank in satisfying
its obligations under this Agreement, and all income attributable to such amounts, property or
rights, shall remain (until made available to Executive or her designated beneficiary) solely the
property and rights of the Bank subject only to the claims of the Bank’s general creditors.
Nothing contained in this Agreement shall in any way limit the Bank’s right to make any investment
it may wish in order to accumulate funds to assist it in the satisfaction of its obligations under
this Agreement.

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     7. Claims and Appeals Procedures. All claims for benefits under the Agreement and
appeals regarding any such denied claims shall be made and administered in the same manner and
under the same terms and conditions as described in the BEP.

     8. Prohibition Against Assignment. To the extent permitted by law, none of the
benefits payable under this Agreement shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of
Executive or Executive’s beneficiary or beneficiaries, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, attach or garnish such benefits shall be void.

     9. Successors and Assigns. This Agreement shall inure to the benefit of, and be
binding upon the Bank, its successors and assigns, and the Executive and her heirs.

     10. Amendment and Termination. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto, or their respective
successors and may not otherwise be terminated except as provided herein.

     11. Right to Discharge Executive. Neither the establishment of this Agreement, nor
any amendment or revision thereof, nor the payment of any amounts thereunder shall be construed:
(i) as giving Executive or any other person any right of employment with the Bank, unless such
right is specifically provided by this Agreement, or (ii) as giving Executive the right to be
retained in the service of the Bank in her current capacity or in any other capacity. Executive
shall remain subject to discharge to the same extent as if this Agreement had never been entered
into. It is therefore

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expressly understood by the parties that this Agreement relates exclusively to deferred
compensation for the Executive’s services and is not intended or shall be construed as an
employment contract.

     12. Payment to Incompetent, Etc. If the Bank finds that any person to whom amounts
are payable under this Agreement is unable to care for his or her affairs because of illness or
injury, or is a minor, any payment due (unless a prior claim shall have been made by a duly
appointed guardian or other legal representative) may be paid to the spouse, a child, a parent, a
sibling, or otherwise for the benefit of such person, in the Bank’s discretion.

     13. Determination of Proper Payee. The Bank’s determination as to the identity of the
proper payee of any amount under this Agreement and the amount properly payable shall be binding
and conclusive on all parties having or claiming to have an interest under this Agreement; and
payment in accordance with such determination shall constitute a complete discharge of all
obligations on account of such amount.

     14. Interpretation of Agreement. The Bank shall have sole and exclusive authority to
interpret the terms of this Agreement. Such interpretation shall be final and conclusive on all
parties having or claiming to have an interest under this Agreement.

     15. Enforceability. If any provision of this Agreement, or any part thereof, is held
invalid or unenforceable, this Agreement shall be interpreted as if such provision or part thereof
was not contained herein, and the same shall in no way affect the validity or enforceability of any
other provision in this Agreement.

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     16. Exclusivity of Agreement. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter of this Agreement have been made by either
party which are not expressly contained herein and this Agreement shall supercede all prior
agreements, negotiations, correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof. This Agreement shall not affect any other
agreement by and between the Bank and Executive, unless expressly provided in such other agreement.

     17. Governing Law. This Agreement shall be construed and administered in accordance
with and governed by the laws of the State of Ohio.

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          IN WITNESS WHEREOF, THE FEDERAL HOME LOAN BANK OF CINCINNATI and SANDRA E. BELL have executed
this Agreement this
25th day of February, 2004.

	 	 	 	 	 
	 	FEDERAL HOME LOAN BANK OF CINCINNATI

 	 
	 	By:  	/s/ David H. Hehman
 	 
	 	Print Name:  David H. Hehman 	 
	 	Title:  
President & Chief Executive Officer 	 
	 
	 	By:  	     /s/ Richard T. Fitzpatric
 	 
	 	Print Name:  
Richard T. Fitzpatric 	 
	 	Title:  
VP, Human Resources & Administration 	 
	 
	 	SANDRA E. BELL

 	 
	 	By:  	/s/ Sandra E. Bell
 	 

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