Document:

EX-10.4

 

EXHIBIT 10.4

FEDERAL HOME LOAN BANK OF CINCINNATI

 

Executive Long-Term Incentive Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1, 2005

 

FEDERAL HOME LOAN BANK OF CINCINNATI

 

Executive Long-Term Incentive Plan

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	1.0	 	 	Plan Objectives
	 	 	1	 
	 	2.0	 	 	Definitions
	 	 	1	 
	 	3.0	 	 	Eligibility
	 	 	2	 
	 	4.0	 	 	Base Award Opportunity
	 	 	3	 
	 	5.0	 	 	Performance Measures
	 	 	3	 
	 	6.0	 	 	Final Award Determination
	 	 	4	 
	 	7.0	 	 	Administration Control
	 	 	4	 
	 	8.0	 	 	Miscellaneous Conditions
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	Appendix – 2005 – 2007 Performance Period	 	 	9	 
	 	 	 	 	Performance Period
	 	 	 	 
	 	 	 	 	Base Award Opportunity
	 	 	 	 
	 	 	 	 	Initial Value of Performance Unit
	 	 	 	 
	 	 	 	 	Performance Measures & Final Value of Performance Unit
	 	 	 	 
	 	 	 	 	Detailed Goals & Performance Measures
	 	 	 	 
	 	 	 	 	Participants
	 	 	 	 

 

 

FEDERAL HOME LOAN BANK OF CINCINNATI

 

Executive Long-Term Incentive Plan

PLAN DOCUMENT

	1.0	 	Plan Objectives

	 	1.1	 	The purpose of the Federal Home Loan Bank of Cincinnati Executive Long-Term
Incentive Plan (the “Plan”) is to achieve five objectives:

	 	1.1	 	Promote the achievement of the Bank’s long-term profitability and
business goals;
	 
	 	1.2	 	Link executive compensation to specific long-term performance
measures;
	 
	 	1.3	 	Provide a competitive reward structure for senior officers and
other key employees;
	 
	 	1.4	 	Provide a vehicle for closer Board involvement and communication
with management regarding the Bank’s long-term strategic plans; and
	 
	 	1.5	 	Promote loyalty and dedication to the Bank and its objectives.

	 	1.2	 	The Plan is a cash-based, long-term incentive plan which establishes individual
Base Award Opportunities related to achievement of Bank performance over certain
three-year Performance Periods.
	 
	 	1.3	 	The Participants, the Base Award Opportunity, Performance Measures, value of a
Performance Unit at the beginning and end of a Performance Period, and other relevant
information are set forth in the attached Appendices.

	2.0	 	Definitions

	 	2.1	 	When used in this Plan, the words and phrases below shall have the following
meanings:

	 	2.1.1	 	Bank means the Federal Home Loan Bank of Cincinnati;
	 
	 	2.1.2	 	Base Award Opportunity means the award that may be earned during
a Performance Period for achieving target performance levels under each
Performance Measure;
	 
	 	2.1.3	 	Board means the Bank’s Board of Directors;
	 
	 	2.1.4	 	Disabled means a Participant who (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable

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	 	 	 	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
(ii) 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 an accident and health
plan covering employees of the Bank.
	 
	 	2.1.5	 	Extraordinary Occurrences means those events that, in the
opinion and discretion of the Board, are outside the significant influence of
the Participants or the Bank and are likely to have a significant unanticipated
effect, whether positive or negative, on the Bank’s operating and/or financial
results, including, without limit, movement in interest rates, changes in
financial strategies, or policies or significant change in Bank membership.

	 	2.1.6	 	Final Award means the amount ultimately paid to a Participant
under the Plan for a Performance Period.
	 
	 	2.1.7	 	Performance Measure means each performance factor that is taken
into consideration under the Plan in determining the value of the Final Award.
	 
	 	2.1.8	 	Participant means an employee who participates in the Plan
pursuant to Section 3.1.
	 
	 	2.1.9	 	Performance Period means a certain three-year period over which
Bank performance is measured.
	 
	 	2.1.10	 	Performance Unit means a unit, the value of which shall be determined in
accordance with the applicable Appendix.
	 
	 	2.1.11	 	Personnel Committee or Committee means the Personnel Committee of the Board.
	 
	 	2.1.12	 	Plan means this Executive Long-Term Incentive Plan.
	 
	 	2.1.13	 	Plan Award means an amount that is provisionally determined at the end of the
Performance Period subject to adjustment as provided in Section 6.
	 
	 	2.1.14	 	President means the President of the Bank.

	3.0	 	Eligibility

	 	3.1	 	A Bank employee who is nominated by the President and approved by the Board may
participate in the Plan.

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	 	3.2	 	Eligibility shall generally be limited to officers (i) whose functional
responsibilities encompass the establishment of strategic direction and tactical action
plans for the Bank, and (ii) who have received at least satisfactory rankings on annual
performance reviews over a Performance Period. Other employees may also be eligible to
participate as defined by competitive compensation practices within the Bank’s labor
market.
	 
	 	3.3	 	Due to its unique role for the Bank and reporting relationship to the Board,
the Director of Internal Audit will not be included as an eligible position under the
Plan, but will be eligible for a similar plan administered by the Audit Committee of
the Board.

	4.0	 	Base Award Opportunity

	 	4.1	 	At the beginning of each Performance Period, the Bank will provide a Base Award
Opportunity to Participants. The Base Award Opportunity is equal to a percentage of
each Participant’s annual base salary at the beginning of the Performance Period as
described in the applicable Appendix. Certain executive positions have a greater and
more direct impact than others on the annual success of the Bank; therefore, these
differences are recognized by varying award opportunities for each Participant level.
	 
	 	4.2	 	Each Participant in a Performance Period shall be granted a number of
Performance Units for that Performance Period determined by dividing the Base Award
Opportunity by the value of a Performance Unit at the beginning of a Performance Period
as described in the applicable Appendix.
	 
	 	4.3	 	There will be four levels of award opportunities:

	 	 	 	 	 
	 

	 	Level I:
	 	President
	 
	 	 	 	 
	 

	 	Level II:
	 	Executive Vice President
	 
	 	 	 	 
	 

	 	Level III:
	 	Senior Vice Presidents
	 
	 	 	 	 
	 

	 	Level IV:
	 	Vice Presidents

	5.0	 	Performance Measures

	 	5.1	 	Three achievement levels will be established for each Performance Measure:

	 	 	 	 	 
	 

	 	Threshold
	 	The minimum achievement level accepted for the Performance Measure.
	 
	 	 	 	 
	 

	 	Target
	 	The planned achievement level for the Performance Measure.

3

 

	 	 	 	 	 
	 

	 	Maximum
	 	The achievement level for the Performance Measure that substantially exceeds
the planned level of achievement.

	 	5.2	 	At the beginning of each Performance Period, Performance Measures for a
Performance Period and Performance Units and their initial values will be established
by the Personnel Committee with Board approval.
	 
	 	5.3	 	When establishing Performance Measures, the Threshold level should reflect a 90
percent success rate; the Target level should reflect a 75-80 percent success rate; and
the Maximum level should reflect a 10 to 15 percent success rate.

	6.0	 	Final Award Determination

	 	6.1	 	Plan Awards will be based on the achievement level for each of the three-year
Performance Measures. However, if the Bank fails to achieve the Threshold level for a
Performance Measure other than the Mission Goal, no award will be payable for that
specific Performance Measure. If the Bank fails to achieve the Threshold level for the
Mission Goal Performance Measure, no award will be payable under the Plan for the
Performance Period.
	 
	 	6.2	 	A Participant’s Plan Award for a Performance Period equals the number of his or
her Performance Units for that Performance Period multiplied by the value of a
Performance Unit at the end of the Performance Period as determined in accordance with
the applicable Appendix.
	 
	 	6.3	 	In the event that a Federal Housing Finance Board (FHFB) examination identifies
an unsafe or unsound practice or condition in a Participant’s area of responsibility,
the Participant will not be eligible for an award under the Plan for the Performance
Period in which the unsafe and unsound condition existed. However, the Participant may
receive an award under the Plan provided that the finding of an unsafe or unsound
practice or condition is subsequently resolved in favor of the Bank by the FHFB.
	 
	 	6.4	 	Promptly after a Performance Period, Plan Awards for the Performance Period
shall be determined by the Board in its sole discretion based upon the Plan Award
determined pursuant to Section 6.2.
	 
	 	6.5	 	President’s Award. In addition to the Plan Award, in determining a
Participant’s Final Award, the Executive Vice President, Senior Vice Presidents, Vice
Presidents and other employees (e.g., new hires and highly valued existing employees)
may be nominated by the President for a discretionary allocation of Performance Units,
to be approved by the Board, to recognize extraordinary performance and/or to address
competitive compensation practices within the Bank’s labor market (the “President’s
Award”).

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	 	6.6	 	The value of a Performance Unit under the President’s Award will be equal to
the value of a Performance Unit under the Base Award Opportunity.
	 
	 	6.7	 	For a Performance Period, the total value of Performance Units granted under
the President’s Award shall not exceed ten (10) percent of the total Performance Units
granted under the Base Award Opportunity.
	 
	 	6.8	 	The Board may also authorize the President to receive a discretionary
allocation of Performance Units to recognize extraordinary performance and/or to
address competitive compensation practices within the Bank’s labor market. Any
discretionary allocation of Performance Units granted to the President under this
section will not exceed ten (10) percent of the total Performance Units granted to the
President under the Base Award Opportunity.
	 
	 	6.9	 	A Participant’s Final Award will consist of his or her Plan Award plus any
additional discretionary award granted under Section 6.5 or 6.8.

	7.0	 	Administrative Control

	 	7.1	 	The Bank’s Human Resources Department will assist, as requested, the President
and the Committee in the administration of the Plan, however, the Board will have the
ultimate authority over the Plan.
	 
	 	7.2	 	In addition to the authority expressly provided in the Plan, the Board shall
have such authority in its sole discretion to control and manage the operation and
administration of the Plan and shall have all authority necessary to accomplish these
purposes, including, but not limited to, the authority to interpret the terms of the
Plan, and to decide questions regarding the Plan and the eligibility of any person to
participate in the Plan and to receive benefits under the Plan. The Board’s
determinations and interpretations regarding the Plan shall be final, binding, and
conclusive.

	8.0	 	Miscellaneous Conditions

	 	8.1	 	Except as provided in Section 8.4, Participants must be employed by the Bank on
the last day of the Performance Period in order to become eligible to receive a Final
Award. A Participant will not become vested in an award under this Plan until the date
the Board authorizes the payment of the Participant’s Final Award.
	 
	 	8.2	 	In the event a Participant voluntarily or involuntarily terminates employment
during the Performance Period, no award will be made to the Participant, except as
provided in Section 8.4 below.
	 
	 	8.3	 	Employees of the Bank who are hired, transferred, or promoted into an eligible
position during a Performance Period may be nominated for participation in the

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	 	 	 	Plan in accordance with Section 3.1, and receive a prorated Base Award Opportunity.

	 	8.4	 	A Participant who retires, dies or becomes Disabled during the Performance
Period may receive a prorated Plan Award, but only if the President nominates and the
Board approves such action. For purposes of this Section, the term “retires” means the
Participant has (i) been employed with the Bank for at least five (5) years and (ii)
reached at least age 62 when he or she retires from his or her Bank employment. If a
Participant becomes vested to receive a prorated award under this Section, the prorated
Final Award will be paid to the Participant no later than 2 1/2 months following the
calendar year in which such vesting occurred. If a Participant terminates service with
the Bank for any reason other than retirement, death, or disability during the
Performance Period, the Participant will not be eligible to receive an award under the
Plan.
	 
	 	8.5	 	The amount of any prorated award will be determined by dividing the number of
months the Participant was employed by the Bank during the Performance Period by 36 and
multiplying such quotient by the Plan Award.
	 
	 	8.6	 	If a Participant ceases employment after the Performance Period but before the
Board approves the Final Award for that Performance Period, the President may nominate
and the Board may approve that the Participant receive an award. However, if the
President fails to make such a recommendation or the Board fails to approve such
action, the Participant will not be entitled to an award.
	 
	 	8.7	 	Notwithstanding any Plan provision to the contrary, mere participation in the
Plan will not entitle a Participant to an award.
	 
	 	8.8	 	The designation of an employee as a Participant in the Plan does not guarantee
employment. Nothing in this Plan shall be deemed (i) to give any employee or
Participant any legal or equitable rights against the Bank, except as expressly

provided herein or provided by law; or (ii) to create a contract of employment with any
employee or Participant, to obligate the Bank to continue the service of any employee
or Participant, or to affect or modify any employee’s or Participant’s term of
employment in any way.
	 
	 	8.9	 	The right of the Bank to discipline or discharge a Participant shall not be
affected by reason of any provision of this Plan.
	 
	 	8.10	 	All Final Awards will be paid out in cash and will be subject to applicable
payroll tax withholdings.
	 
	 	8.11	 	No Final Award received by a Participant shall be considered as compensation
under any employee benefit plan of the Bank, except as otherwise determined by the
Bank.

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	 	8.12	 	Final awards will be made as soon as practical following the end of the
Performance Period, but in any event no later than 2 1/2 months following the calendar
year which the Participant became vested in the Final Award.
	 
	 	8.13	 	The Board has the right to revise, modify, or terminate the Plan in whole or in
part at any time or for any reason, and the right to modify any recommended award
amount (including the determination of a lesser award or no award), for any reason,
without the consent of any Participant.
	 
	 	8.14	 	Since no employee has a guaranteed right to any award under this Plan, any
attempt by an employee to sell, transfer, assign, pledge, or otherwise encumber any
anticipated award shall be void, and the Bank shall not be liable in any manner for or
subject to the debts, contracts, liabilities, engagements or torts of any person who
might anticipate an award under this program.
	 
	 	8.15	 	This Plan shall at all times be entirely unfunded and no provision shall at any
time be made with respect to segregating assets of the Bank for payment of any award
under this program.
	 
	 	8.16	 	The Plan shall be construed, regulated and administered in accordance with the
laws of the state of Ohio, unless otherwise preempted by the laws of the United States.
	 
	 	8.17	 	If any provision of the Plan is held invalid or unenforceable, its invalidity
or unenforceability shall not affect any other provision of the Plan, and the Plan
shall be construed and enforced as if such provision had not been included herein.
	 
	 	8.18	 	If a Participant dies before receiving his or her award, any amounts determined
to be paid under this Plan shall be paid to the Participant’s surviving spouse, if any,
or if none, to the Participant’s estate. The Bank’s determination as to the identity
of the proper payee of any amount under this Plan shall be binding and conclusive and
payment in accordance with such determination shall constitute a complete discharge of
all obligations on account of such amount.
	 
	 	8.19	 	Claims and Appeals Procedures. A Participant (such Participant being
referred to below as a “Claimant”) may deliver to the Personnel Committee a written
claim for a determination with respect to any claim as to which the Personnel Committee
has jurisdiction under this Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60) days after such
notice was received by the Claimant. The claim must state with particularity the
determination desired by the Claimant.
	 
	 	 	 	The Personnel Committee shall consider a Claimant’s claim within a reasonable time,
but no later than ninety (90) days after receiving the claim. If the Personnel
Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall

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	 	 	 	be furnished to the Claimant prior to the termination of the initial ninety (90) day
period. Upon reaching its decision, the Personnel Committee shall notify the
Claimant in writing.
	 
	 	 	 	On or before sixty (60) days after receiving a notice from the Personnel Committee
that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly
authorized representative) may file with the Committee a written request for a review
of the denial of the claim. The Committee shall render its decision on review
promptly, in writing, and deliver it to the Claimant no later than sixty (60) days
after it receives the Claimant’s written request for a review of the denial of the
claim.
	 
	 	8.20	 	Any agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter of this Plan which are not contained herein will have no
effect or enforceability.

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FEDERAL HOME LOAN BANK OF CINCINNATI

 

Executive Long-Term Incentive Plan

APPENDIX

2005 – 2007 Performance Period

     Performance Period

The Performance Period described in this Appendix shall be January 1, 2005 through December 31,
2007.

     Base Award Opportunity

The Base Award Opportunity (as a percentage of January 1, 2005 base salary) for Levels I, II, III,
and IV are:

	 	 	 	 	 	 	 	 
	 
	 	Level	 	 	 	 	 	 
	 	I
	 	 	 	30.0	%	 
	 	II
	 	 	 	25.0	%	 
	 	III
	 	 	 	20.0	%	 
	 	IV
	 	 	 	15.0	%	 
	 

     Initial Value of Performance Unit

The value of a Performance Unit at the beginning of this Performance Period equals $100.

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     Performance Measures

	 	1.	 	After the Performance Period ends, evaluate actual Bank performance against the
Performance Measures stated below.
	 
	 	2.	 	Determine the value of the Performance Unit based on the minimum, target, and
maximum awards for the Profitability and Market Penetration Achievements according to
the following table:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Minimum	 	 	 	Threshold	 	 	 	Target	 	 	 	Maximum	 	 
	 	Profitability(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Dollar Value at Hurdles
	 	 	 	0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Weight
	 	 	 	0.5	 	 	 	 	0.5	 	 	 	 	0.5	 	 	 	 	0.5	 	 
	 	Profitability Value
	 	 	$	0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Market Penetration(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Dollar Value at Hurdles
	 	 	 	0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Weight
	 	 	 	0.5	 	 	 	 	0.5	 	 	 	 	0.5	 	 	 	 	0.5	 	 
	 	Market Penetration Value
	 	 	$	0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Total Value
	 	 	$	0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

The matrix below illustrates possible award values derived from the Profitability and
Market Penetration Achievements.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	Profitability Achievement	 
	 	 	 	 	 	 	 	 	 	 	Minimum	 	 	Threshold	 	 	Target	 	 	Maximum	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Market
 Penetration
Achievement

	 	 	Maximum
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Target	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Threshold	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Minimum	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	3.	 	The value of the Performance Unit at the end of the Performance Period equals (a)
the dollar value determined by achievement of the Profitability and Market Penetration
(illustrated on the previous page) multiplied by (b) a “Mission” goal multiplier (i.e.,
Percent of Participating Members using one or more HCI Programs:

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Percent of Participating Members Using One or More	 	 	 	 
	 	HCI Programs	 	 	Multiplier	 
	 	Maximum

	 	 	 	 	 	 	1.1	 	 
	 	Target

	 	 	 	 	 	 	1.0	 	 
	 	Threshold

	 	 	 	 	 	 	0.9	 	 
	 	Minimum

	 	 	 	 	 	 	0.0	 	 
	 

 

	(1)	 	Adjusted Net Income equal to Average Three-Month LIBOR plus Basis Points Spread

	 
	(2)	 	Ratio of Member Advances to Member Assets

Detailed descriptions of the performance measures are included on the following page.

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Detailed Goals & Performance Measures

	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Performance Measures	 	 	Threshold	 	 	Target	 	 	Maximum	 
	 	PROFITABILITY — Incentive Weight: 50%

Adjusted Net Income equal to Average Three-month LIBOR plus Basis Points
Spread1
	 	 	 	 	 	 	 	 	 	 
	 	MARKET PENETRATION — Incentive Weight: 50%

Ratio of Member Advances to Member Assets2
	 	 	 	 	 	 	 	 	 	 
	 	AFFORDABLE HOUSING/COMMUNITY INVESTMENT — Incentive Multiplier: +/- 10%

Percent of Participating Members using one or more HCI Programs3
	 	 	 	 	 	 	 	 	 	 
	 

 

1 The Profitability goal is defined in terms of
the FHLBank’s Adjusted Net Income (GAPP net income) adjusted for the following
items: prepayment fees and amortization of prepayment fees, the net income
effect of SFAS 133 fair market value adjustments and SFAS 150 dividend/interest
expense adjustments net of the effect on REFCORP and AHP. This goal will
utilize the calendar-day daily average of the three-month London InterBank
Offered Rate (LIBOR). The Adjusted Net Income for calendar years 2005, 2006
and 2007 will be calculated and each year’s results will then be summed and
divided by three to determine the average basis points spread over LIBOR.

2 The Market Penetration goal is designed to
enhance the franchise value of FHLBank membership by demonstrating the extent
to which Advances serve as a valuable, competitive source of funding for all
Members. This goal will be calculated by dividing each Member’s month-end
Advances during 2005, 2006 and 2007 by the Member’s total assets from the
previous year-end (2004, 2005 and 2006 respectively). A month end Advances to
Assets ratio will be produced for each Member and these monthly ratios will
then be summed and divided by the total number of Members to determine an
average Advances to Assets ratio. Monthly averages will be summed and divided
by the 36 month performance period to determine the final results. This
calculation provides equal weighting for each Member’s monthly Advances to
Asset ratio.

3 The Affordable Housing/Community Investment
goal is intended to increase participation in the FHLBank’s Housing and
Community Investment (HCI) programs. For this goal, a Participating Member is
defined as a Member who submits an application to participate in any HCI
program (AHP, Welcome Home, American Dream, CIP, EDA, ZIF or any new HCI
programs) and will be counted only once per calendar year. The percent of
participation will be calculated by dividing the actual number of Participating
Members in 2005, 2006 and 2007 by the total number of Members from the previous
year-end (2004, 2005 and 2006 respectively). The average for each calendar
year will then be summed and divided by three to determine the final average.

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     Plan Participants:

The Level I, II, and III , and IV Participants for this Performance Period are:

Level                     Name                                         Title

12EX-10.5

 

EXHIBIT 10.5

THE FEDERAL HOME LOAN BANK OF CINCINNATI

BENEFIT EQUALIZATION PLAN

(2002 Restatement)

(As Amended through October 2002)

     Effective January 1, 2002, THE FEDERAL HOME LOAN BANK OF CINCINNATI (the “Bank”) hereby amends
and completely restates its Benefit Equalization Plan as follows.

INTRODUCTION

     The purpose of this Benefit Equalization Plan (the “Plan”) is to provide to a certain select
group of management and highly compensated employees of the Bank the benefits which would have been
payable under the Comprehensive Retirement Program of the Financial Institutions Retirement Fund,
and benefits equivalent to the matching contributions and 401(k) contributions which would have
been available under the Financial Institutions Thrift Plan, but for the limitations placed on
benefits and matching contributions for such employees by Sections 401(a)(17), 401(k)(3)(A)(ii),
401(m), 402(g) and 415 of the Internal Revenue Code of 1986.

     This Plan is unfunded and all benefits payable under this Plan shall be paid solely out of the
general assets of the Bank. No benefits under this Plan shall be payable by the Financial
Institutions Retirement Fund or its assets or by the Financial Institutions Thrift Plan or its
assets.

ARTICLE I. DEFINITIONS

     For purposes of the Plan, these terms shall have the following meanings:

     1.01 “Actuary” means the independent consulting actuary retained by the Bank to assist the
Committee in its administration of the Plan.

     1.02 “Bank” means THE FEDERAL HOME LOAN BANK OF CINCINNATI and each subsidiary or affiliated
company thereof which participates in the Plan.

     1.03 “Beneficiary” means the beneficiary or beneficiaries designated in accordance with
Article VI of the Plan to receive the benefit, if any, payable upon the death of a Member of the
Plan.

     1.04 “Board of Directors” means the Board of Directors of the Bank.

     1.05 “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor thereto.

     1.06 “Code Limitations” mean the cap on compensation taken into account by a plan under
Code Section 401(a)(17), the limitations on 401(k) contributions necessary to meet the

 

 

average deferral percentage (“ADP”) test under Code Section 401(k)(3)(A)(ii), the limitations
on employee and matching contributions necessary to meet the average contribution percentage
(“ACP”) test under Code Section 401(m), the dollar limitations on elective deferrals under Code
Section 402(g), and the overall limitations on contributions and benefits imposed on qualified
plans by Code Section 415, as such provisions may be amended from time to time, and any similar
successor provisions of federal tax law.

     1.07 “Committee” means the Personnel Committee of the Board of Directors, which is authorized
to administer the Plan, or other persons or sub-committees as it may appoint from time to time to
supervise certain administrative functions of the Plan.

     1.08 “Disabled” means either (i) to have been determined by the Social Security Administration
to be eligible for disability benefits under Title II of the Federal Social Security Act, (ii) to
be eligible for disability benefits under the Bank’s long-term disability plan, or (iii) to be
eligible for disability retirement benefits under the Thrift Plan or the Retirement Fund.

     1.09 “Member” means any person included in the membership of the Plan as provided in Article
II.

     1.10 “Retirement Fund” means the Comprehensive Retirement Program of the Financial
Institutions Retirement Fund, a qualified and tax-exempt defined benefit pension plan and trust
under Sections 401(a) and 501(a) of the Code, as adopted by the Bank.

     1.11 “Plan” means The Federal Home Loan Bank of Cincinnati Benefit Equalization Plan, as set
forth herein or as it may be amended or restated from time to time.

     1.12 “Thrift Plan” means the Financial Institutions Thrift Plan, a qualified and tax-exempt
defined contribution plan and trust under Sections 401(a) and 501(a) of the Code, as adopted by the
Bank.

ARTICLE II. MEMBERSHIP

     2.01 Each employee of the Bank who is included in the membership of the Retirement Fund shall
become a Member of the Plan on the earliest date on which he, or his beneficiary, would have been
entitled to receive a benefit under Section 3.01 of the Plan had he become a retirant of the
Retirement Fund, or died or become Disabled while in active service on such date. If on the date
that payment of a Member’s benefit from the Retirement Fund commences, the employee who is a Member
under this Section is not entitled under Section 3.01 of the Plan to receive a benefit under the
Plan, his membership in the Plan shall terminate on such date.

     2.02 Each employee of the Bank who is included in the membership of the Thrift Plan shall
become a Member of the Plan on the earliest date on which he is credited with an elective
contribution addition or makeup contribution addition under Section 4.01 or 4.02 of the Plan.

- 2 -

 

     2.03 A benefit shall be payable under the Plan to or on account of a Member only upon the
Member’s retirement, death, disability or other termination of employment with the Bank.

ARTICLE III. AMOUNT AND PAYMENT OF PENSION BENEFITS

     3.01 The amount, if any, of the annual pension benefit payable to or on account of a Member
pursuant to the Plan shall equal the excess of (i) over (ii), as determined by the Committee,
where:

	 	“(i)”	 	 is the annual pension benefit (as calculated by the Retirement Fund on the
basis of the form of payment elected under it by the Member) that would otherwise be
payable to or on account of the Member by the Retirement Fund if its provisions were
administered without regard to the Code Limitations and on the basis of salary
unreduced by the amount of any elective contributions under Article IV of this Plan;
and
	 
	 	“(ii)”	 	 is the annual pension benefit (as calculated by the Retirement Fund on the basis of
the form of payment elected under it by the Member) that is payable to or on account of
the Member by the Retirement Fund under the Regulation after giving effect to any
reduction of such benefit required by the Code Limitations and on the basis of salary
reduced by the amount of any elective contributions under Article IV of this Plan.

For purposes of this Section 3.01, “annual pension benefit” includes any “Active Service Death
Benefit,” “Disability Retirement Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and
“Single Purchase Fixed Percentage Adjustment” which the Bank elected to provide its employees under
the Retirement Fund.

     3.02 Unless the Member elects an optional form of payment under the Plan pursuant to Section
3.03 below, the annual pension benefit, if any, payable to or on account of a Member under Section
3.01 above, shall be converted by the Actuary and shall be payable to or on account of the member
in the “Regular Form” of payment, utilizing for that purpose the same actuarial factors and
assumptions then used by the Retirement Fund to determine actuarial equivalence. For purposes of
the Plan, the “Regular Form” of payment means an annual pension benefit payable for the Member’s
lifetime and the death benefit described in Section 3.04 below.

     3.03 (a) A Member may, with the consent of the Committee, elect in writing to have the annual
pension benefit, if any, payable to or on account of a Member under Section 3.02 above converted by
the Actuary to any optional form of payment then permitted under the Retirement Fund or to an
annuity for 5, 10, or 15 years. The Actuary shall utilize for the purpose of that conversion the
same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial
equivalence.

- 3 -

 

          (b) If a Member who had elected an optional form of payment under this Section 3.03 dies after
the date his benefit payments under the Plan had commenced, the only death benefit, if any, payable
under the Plan in respect of said Member shall be the amount, if any, payable under the optional
form of payment which the Member had elected under the Plan. If a Member who had elected an
optional form of payment under this Section 3.03 dies before the date his benefit payments under
the Plan commence, his election of an optional form of benefit shall be inoperative and the death
benefit described below in Section 3.04 shall be payable to the Member’s beneficiary.

          (c) An election of an optional form of payment under this Section 3.03 may be made only on a
form prescribed by the Committee, filed by the Member with the Committee, and consented to by the
Committee prior to the commencement of payment of his benefit.

     3.04 Upon the death of a Member who had not elected an optional form of payment under Section
3.03 above or who died before the date the benefit payments under his elected optional form of
payment commenced, a death benefit shall be paid to the Member’s beneficiary in annual installments
over a period of 10 years, or such shorter period as the Member’s beneficiary may elect with the
consent of the Committee in the same manner as provided in Section 3.03(c), above, for a Member’s
option election. The benefit under this Section is equal to the excess, if any, of (i) over (ii),
where

	 	“(i)”	 	 is an amount equal to 12 times the annual pension benefit, if any, payable
under Section 3.02 above, and
	 
	 	“(ii)”	 	 is the sum of the benefit payments, if any, which the member had received under the
Plan.

     3.05 If a Member to whom an annual pension benefit is payable under the Plan dies before
commencement of the payment of his benefit, the death benefit payable under Section 3.04 (and
referred to in Section 3.02) shall be payable to the Member’s beneficiary beginning no later than
April 1 of the calendar year following the calendar year in which the Member died.

     3.06 If a Member to whom an annual pension benefit is payable under the Plan becomes Disabled
before the commencement of the payment of his benefit, and he files an application for benefits
with the Plan within 13 months of the date he became Disabled, a Disability Retirement Benefit
equal to the annual pension benefit earned by the Member pursuant to Section 3.01 as of the date
the Member terminated employment with the Bank shall be payable to the Member. For purposes of the
Plan, unless the Member selects an optional form of benefit under the Plan before the date he
became Disabled, the Disability Retirement Benefit will be made in the “Regular Form” of payment.

     3.07 If a Member is restored to employment with the Bank after payment of his benefit under
the Plan has commenced, all payments under the Plan shall thereupon be discontinued. In the
Member’s subsequent retirement or other termination of employment with the Bank, his

- 4 -

 

benefit under the Plan shall be recomputed in accordance with Sections 3.01 and 3.02 and shall
be paid to such Member in accordance with the provisions of the Plan.

     3.08 Notwithstanding any contrary provision of the Plan, if on the date payment under
the Plan would otherwise commence, the lump sum settlement value of a Member’s total Plan benefit
(i.e., Pension benefits and Thrift benefits combined) determined by the Actuary does not exceed
$20,000, then such Member’s benefit may be paid in the form of a lump sum settlement at the
discretion of the Committee.

     3.09 All annual pension benefits under the Plan shall be paid in monthly, quarterly, or annual
installments, as determined by the Committee in its discretion. Benefits shall commence as soon as
practicable following the Member’s retirement date under the Retirement Fund or as soon as
practicable following the date the Member became Disabled and properly applied for benefits under
the Plan, except that no benefits shall be paid prior to the date that benefits under the Plan can
be definitely determined by the Committee.

ARTICLE IV. AMOUNT AND PAYMENT OF THRIFT BENEFITS

     4.01 If the employee’s contributions under the Thrift Plan for such year have reached the
maximum permitted by the Code Limitations as determined by the Committee, and if the employee is
one of a select group of management and highly compensated employees designated by the Committee,
and if the employee elects to reduce his compensation for the current calendar year by delivering a
written election to the Committee prior to the date such compensation is earned on such form as the
Committee may designate, then such employee shall be credited with an elective contribution
addition under this Plan equal to the reduction in his compensation made in accordance with such
election; provided, however, that the sum of all such elective contribution additions for an
employee with respect to any single calendar year shall not be greater than the excess of (i) over
(ii), where

	 	“(i)”	 	 is the maximum amount of compensation (as defined by the
Thrift Plan if its provisions were administered without regard to the Code
Limitations) permitted to be deferred by the employee under the Thrift Plan
without regard to any limitation or reduction on elective contributions
required by the Code Limitations; and
	 
	 	“(ii)”	 	 is an amount equal to his regular account and 401(k) account contributions
actually made under the Thrift Plan for the calendar year after giving effect
to any limitation or reduction on elective contributions required by the Code
Limitations.

If the reduction in an employee’s compensation under such election is determined to exceed the
maximum allowable elective contribution additions for such year, the excess and any related
earnings credited under Section 4.03 of the Plan shall be paid to such employee within the first
two and one-half months of the succeeding calendar year.

- 5 -

 

     4.02 If a portion of an employee’s regular account contribution or 401(k) account
contribution to the Thrift Plan for the preceding year is returned to an employee after the end of
such preceding year on account of the Code Limitations, and if the employee is one of a select
group of management and highly compensated employees designated by the Committee, and if the
employee elects to reduce his compensation for the current year by an amount up to the sum of
Thrift Plan contributions and related earnings returned to him for the preceding year by delivering
a written election to the Committee prior to the date such compensation is earned on such form as
the Committee may designate, then such employee shall be credited with a makeup contribution
addition under this Plan equal to the reduction in his compensation made in accordance with such
election.

     4.03 For each elective contribution addition credited to an employee under Section 4.01, such
employee shall also be credited with a matching contribution addition under this Plan equal to the
matching contribution, if any, that would be credited under the Thrift Plan with respect to such
amount if contributed to the Thrift Plan, determined as if the provisions of the Thrift Plan were
administered without regard to the Code Limitations and determined after taking into account the
employee’s actual contributions to and actual matching contributions under the Thrift Plan. For
each makeup contribution addition credited to an employee under Section 4.02, such employee shall
also be credited with a matching contribution addition under this Plan equal to the matching
contribution, if any, that was lost under the Thrift Plan with respect to the contributions
returned for the preceding calendar year.

     4.04 The Committee shall maintain a thrift benefit account on the books and records of the
Bank for each employee who is a Member by reason of amounts credited under Section 4.01 or 4.02.
The elective contribution additions, makeup contribution additions and matching contribution
additions of a Member under Sections 4.01, 4.02 and 4.03 shall be credited to the Member’s thrift
benefit account as soon as reasonably practicable after the date that the compensation reduced
under Section 4.01 and/or 4.02 would otherwise have been paid to such Member.

     4.05 A Member’s thrift benefit account shall be credited from time to time with a
certain return on investment (positive or negative) that is substantially equivalent to the net
return on investment that would have been earned on the Member’s elected investments from those
available under the Thrift Plan (or substantially equivalent investments offered by a separate
financial institution), or at such other return on investment in such amount as may be determined
by the Committee in its discretion; provided, however, that if the Committee modifies this return
on investment figure, such modification shall only have prospective effect; and for amounts already
credited under this Plan at the time of such Committee action, no modification shall have the
effect of depriving a Member of the right to elect a return on investment substantially equivalent
to the return on investment that could be earned by the Member’s selecting between or among the
investment options then available under the Thrift Plan. Further, within the Plan’s investment
options, a Member may change his elected investments under the Plan as often as

- 6 -

 

permitted by Committee policy, and may continue to do so after retirement, disability
retirement or other termination of employment with the Bank.

     4.06. Beginning as soon as reasonably practicable after a Member’s retirement, disability
retirement, or other termination of employment from the Bank, the balance credited to the Member’s
thrift benefit account shall be paid to the Member in annual installments over a period of 15
years, unless prior to his retirement, disability, or other termination of employment the Member
elects, with the consent of the Committee pursuant to Section 4.07 below, to have such amounts paid
to him over an installment period that is less than 15 years or in any optional form of payment
then permitted under the Thrift Plan. The amount of an annual installment shall be determined by
dividing the remaining balance of the account by the number of installments remaining to be made.
Notwithstanding the foregoing, if at the time of the Member’s retirement, disability retirement or
other termination of employment from the Bank the value of the portion of his account that is to be
paid in a non-lump sum manner does not exceed $20,000, then that portion may be paid in the form of
a lump sum settlement at the discretion of the Committee.

     4.07. A Member’s optional payment election to receive amounts credited to his thrift benefit
account in annual installments for a period that is less than 15 years or in any optional form of
payment then permitted under the Thrift Plan may be made only on a form prescribed by the
Committee, filed by the Member with the Committee and consented to by the Committee prior to the
commencement of payment of his benefit.

     4.08. Unless a pension purchase option is selected pursuant to Section 4.06 above, if a Member
dies prior to receiving the balance credited to his thrift benefit account, the balance shall be
paid to his beneficiary in annual installments over a period of 10 years, or such shorter period as
the beneficiary may elect with the consent of the Committee pursuant to the same requirements as
set forth in Section 4.07, above.

     4.09 If a Member terminates employment with the Bank because of becoming Disabled, such Member
shall have the same payment options as described in Section 4.06, above.

     4.10 Notwithstanding any contrary provision of the Plan, if on the date payment under the Plan
would otherwise commence the lump sum settlement value of the Member’s total Plan benefit (i.e.,
Pension benefits and Thrift benefits combined) determined by the Actuary does not exceed $20,000,
then that Member’s benefit may be paid in the form of a lump sum settlement at the discretion of
the Committee.

ARTICLE V. SOURCE OF PAYMENTS

     5.01 All payments of benefits under the Plan shall be paid from, and shall only be a
general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its
discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in Code
Sections 671 through 677) to reflect or to aid it in meeting its obligations under the Plan with

- 7 -

 

respect to any Member or prospective member or beneficiary. No benefit whatever provided by
the Plan shall be payable from the assets of the Retirement Fund or the Thrift Plan.

     5.02 No member shall have any right, title or interest whatever in or to any investments which
the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its
obligations under the Plan. To the extent that any person acquires a right to receive payments from
the Bank under the Plan, such right shall be no greater than the right of an unsecured general
creditor of the Bank.

ARTICLE VI. DESIGNATION OF BENEFICIARIES

     6.01 Each Member of the Plan may file with the Committee a written designation of one or more
persons as the beneficiary who shall be entitled to receive the amount, if any, payable under the
Plan upon his death. The Member may, from time to time, revoke or change his beneficiary
designation without the consent of any prior beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be effective unless received
by the Committee prior to the Member’s death, and in no event shall it be effective as of a date
prior to such receipt.

     6.02 If no such beneficiary designation is in effect at the time of a Member’s death, or if no
designated beneficiary survives the Member, or if, in the opinion of the Committee, such
designation conflicts with applicable law, the Member’s estate shall be deemed to have been
designated his beneficiary and shall be paid the amount, if any, payable under the Plan upon the
Member’s death. If the Committee is in doubt as to the right of any person to receive such amount,
the Committee may retain such amount, without liability for any interest thereon, until the rights
thereto are determined, or the Committee may pay such amount into any court of appropriate
jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the
Bank therefor.

ARTICLE VII. ADMINISTRATION OF THE PLAN

     7.01 The Committee shall have general authority over and responsibility for the administration
and interpretation of the Plan. The Committee shall have full power and authority to interpret and
construe the Plan, to make all determinations considered necessary or advisable for the
administration of the Plan and any trust referred to in Article V above, and the calculation of the
amount of benefits payable thereunder, and to review claims for benefits under the Plan. Unless
arbitrary or capricious, the Committee’s interpretations and constructions of the Plan and its
decisions or actions thereunder shall be binding and conclusive on all persons for all purposes.

     7.02 The Committee shall arrange for the engagement of the Actuary, and if the
Committee deems it advisable, it shall arrange for the engagement of legal counsel and certified
public accountants (who may be counsel or accountants for the Bank), and other consultants, and
make use of agents and clerical or other personnel, for purposes of the Plan. The Committee may

- 8 -

 

rely upon the written opinions of such Actuary, counsel, accountants and consultants, and upon
any information supplied by the Retirement Fund or the Thrift Plan for purposes of Sections 3.01
and 4.01 of the Plan, and delegate to any agent or to any sub-committee or Committee member its
authority to perform any act hereunder, including without limitations those matters involving the
exercise of discretion; provided, however, that such delegation shall be subject to revocation at
any time at the discretion of the Committee. The Committee shall report to the Board of Directors,
or to a committee designated by the Board, at such intervals as shall be specified by the Board of
such designated committee, with regard to the matters for which it is responsible under the Plan.

     7.03 No Committee member shall be entitled to act on or decide any matters relating solely to
such member or any of his rights or benefits under the Plan.

     7.04 The Committee member shall not receive any special compensation for serving in such
capacity but shall be reimbursed for any reasonable expenses incurred in connection therewith. No
bond or other security need be required of the Committee or any member thereof in any jurisdiction.

     7.05 All claims for benefits under the Plan shall be submitted in writing to the Chairman of
the Committee. Written notice of the decision on each such claim shall be furnished with reasonable
promptness to the Member or his beneficiary (the claimant). The claimant may request a review by
the Committee of any decision denying the claim in whole or in part. Such request shall be made in
writing and filed with the Committee within 30 days of such denial. A request for review shall
contain all additional information which the claimant wishes the Committee to consider. The
Committee may hold any hearing or conduct any independent investigation which it deems desirable to
render its decision, and the decision on review shall be made as soon as feasible after the
Committee’s receipt of the request for review. Written notice of the decision on review shall be
furnished to the claimant. For all purposes under the Plan, such decisions on claims (where no
review is requested) and decisions on review (where review is requested) shall be final, binding
and conclusive on all interested persons as to all matters relating to the Plan.

     7.06 All expenses incurred by the Committee in its administration of the Plan shall be paid by
the Bank.

ARTICLE VIII. AMENDMENT AND TERMINATION

     8.01 The Board of Directors of the Bank may amend, suspend or terminate, in whole or in
part, the Plan without the consent of the Committee, any Member, beneficiary or other person,
except that no amendment, suspension or termination shall retroactively impair or otherwise
adversely affect the rights of any Member, beneficiary or other person to benefits under the Plan
which have accrued prior to the date of such action, as determined by the Committee in its sole
discretion. The Committee may adopt any amendment or take any other action which may be necessary
or appropriate to facilitate the administration, management and interpretation of the

- 9 -

 

Plan or to conform the Plan thereto, provided any such amendment or action does not have a
material effect on the then currently estimated cost to the Bank of maintaining the Plan.

ARTICLE IX. GENERAL PROVISIONS

     9.01 The Plan shall be binding upon and inure to the benefit of the Bank and its successors
and assigns and the Members, and the successors, assigns, designees and estates of the Members. The
Plan shall also be binding upon and inure to the benefit of any successor bank or organization
succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan
shall preclude the Bank from merging or consolidating into or with, or transferring all or
substantially all of its assets to, another bank which assumes the Plan and all obligations of the
Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of
Members’ rights under the Plan in any agreement or plan which it may enter into to effect any
merger, consolidation, reorganization or transfer of assets. In such a merger, consolidation,
reorganization, or transfer of assets and assumption of Plan obligations of the Bank, the term Bank
shall refer to such other bank and the Plan shall continue in full force and effect.

     9.02 Neither the Plan nor any action taken thereunder shall be construed as giving to a Member
the right to be retained in the employ of the Bank or as affecting the right of the Bank to dismiss
any member from its employ.

     9.03 The Bank shall withhold or cause to be withheld from all benefits payable under the Plan
all federal, state, local or other taxes required by applicable law to be withheld with respect to
such payments.

     9.04 No right or interest of a Member under the Plan may be assigned, sold, encumbered,
transferred or otherwise disposed of and any attempted disposition of such right or interest shall
be null and void.

     9.05 If the Committee shall find that any person to whom any amount is or was payable under
the Plan is unable to care for his affairs because of illness, accident or is a minor, or has died,
then any payment, or any part thereof, due to such person or his estate (unless a prior claim
therefor has been made by a duly appointed legal representative), may, if the Committee is so
inclined, be paid to such person’s spouse, child or other relative, an institution maintaining or
having custody of such person, or any other person deemed by the Committee to be a proper recipient
on behalf of such person otherwise entitled to payment. Any such payment shall be in complete
discharge of the liability of the Plan and the Bank therefor.

     9.06 All elections, designations, requests, notices, instructions, and other
communications from a Member, beneficiary or other person to the Committee required or permitted
under the Plan shall be in such form as is prescribed from time to time by the Committee and shall
be mailed by first-class mail or delivered to such location as shall be specified by the Committee
and shall be deemed to have been given and delivered only upon actual receipt thereof at such
location.

- 10 -

 

     9.07 The benefits payable under the Plan shall be in addition to all other benefits provided
for employees of the Bank and shall not be deemed salary or other compensation by the Bank for the
purpose of computing benefits to which he may be entitled under any other plan or arrangement of
the Bank.

     9.08 No Committee member shall be personally liable by reason of any instrument executed by
him or on his behalf, or action taken by him, in his capacity as a Committee member nor for any
mistake of judgment made in good faith. The Bank shall indemnify and hold harmless each Committee
member and each employee, officer or director of the Bank, to whom any duty, power, function or
action in respect of the Plan may be delegated or assigned, or from whom any information is
requested for Plan purposes, against any cost or expense (including fees of legal counsel) and
liability (including any sum paid in settlement of a claim or legal action with the approval of the
Bank) arising out of anything done or omitted to be done in connection with the Plan, unless
arising out of such person’s fraud or bad faith.

     9.09 As used in the Plan the masculine gender shall be deemed to refer to the feminine, and
the singular person shall be deemed to refer to the plural, wherever appropriate.

     9.10 The captions preceding the Sections of the Plan have been inserted solely as a matter of
convenience and shall not in any manner define or limit the scope or intent of any provisions of
the Plan.

     9.11 The Plan shall be construed according to the laws of the State of Ohio in effect from
time to time.

- 11 -

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