FIRST LANCASTER FEDERAL SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
-------------------------------------------
This Agreement entered into as of the 7th day of December, 1995 (the
"Effective Date") by and between First Lancaster Federal Savings Bank (the
"Bank") and Tony A. Merida (the "Executive").
WHEREAS, the Executive currently is employed in the capacity of
Executive Vice President of the Bank, and is expected to continue in this
capacity; and
WHEREAS, the Bank desires to retain the services of the Executive to
the Bank and as such wishes to provide the Executive with supplemental
retirement income as an added incentive to remain employed at the Bank.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements hereinafter contained, and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree to this
Agreement as follows:
ARTICLE I
DEFINITIONS
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"Agreement" shall mean this agreement between the Executive and the
Bank.
"Annual Offset Amount" shall mean the sum of (i) the primary social
security benefit payable annually to the Executive as of the earliest date,
following his termination of employment, on which he could begin to collect such
benefit (regardless of when such payment actually begins), (ii) the annual
benefit that would be payable to the Executive under the Bank's Pension Plan in
the form of a 50% joint and survivor annuity, with his Surviving Spouse as
contingent beneficiary, commencing upon his termination of employment
(regardless of when he actually begins to collect such benefits), and (iii) the
annual amount that would be payable to the Executive if that portion of his
account under the Bank's 401(k) Plan which would be attributable to the Bank's
contributions (assuming the Executive contributed the maximum amounts permitted
by Federal tax laws) were paid to him in the form of a 50% joint and survivor
annuity, with his Surviving Spouse as contingent beneficiary, commencing upon
his termination of employment (regardless of when he actually begins to collect
such benefits).
"Average Annual Compensation" shall mean the average of the Executive's
highest Compensation for the three calendar years (whether or not such years are
consecutive) in the five calendar years immediately preceding the calendar year
in which his employment with the Bank terminates for any reason.
"Bank" shall mean First Lancaster Federal Savings Bank.
"Benefits" shall mean, collectively, the benefits payable under
Articles II and III of the Agreement.
<PAGE>
"Board" shall mean the board of directors of the Bank.
"Change in Control" is defined in the Bank's Directors' Retirement
Plan, and shall be defined in the same manner for purposes of this Agreement.
Any amendment to the Bank's Directors' Retirement Plan that modifies said
definition shall be deemed to apply with equal force, effect, and timing to the
definition of Change in Control for purposes of this Agreement, except that a
modification that may adversely affect a Participant shall be ineffectual as to
the Executive unless he consents in writing to be bound by the modification.
"Compensation" shall mean the amount of W-2 earnings paid to the
Executive by the Bank (plus any amounts withheld from the Executive under a
401(k) Plan or cafeteria plan sponsored by the Bank) within a calendar year.
"Disability" shall mean a physical or mental infirmity which impairs
the Executive's ability to substantially perform his duties to the Bank and
which results in the Executive becoming eligible for long-term disability
benefits under the Bank's long-term disability plan (or, if the Bank has no such
plan in effect, which impairs the Executive's ability to substantially perform
his duties to the Bank for a period of one hundred eighty (180) consecutive
days).
"Executive" shall mean Tony A. Merida.
"Just Cause" shall mean, in the good faith determination of the Board,
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary, in the good faith determination of the Board, duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final case-and-desist order, or material breach of any provision of this
Agreement.
"Surviving Spouse" shall mean the Executive's spouse, if any, on the
date of his death, but shall not include a spouse from whom he is legally
separated or divorced at the time of his death.
"Vested Percentage" shall be equal to the product of (i) the number of
the Executive's full calendar years of employment with the Bank following
December 31, 1995 up to 10 years, and (ii) ten percent (10%). Notwithstanding
the foregoing, the Executive's Vested Percentage shall accelerate to 100% upon
(i) termination of his employment due to his death or Disability, or (ii) a
Change in Control.
ARTICLE II
RETIREMENT BENEFITS FOR THE EXECUTIVE
-------------------------------------
In the event that the Executive's employment with the Bank terminates
for any reason other than death or Just Cause, the Bank shall pay the Executive
an annual payment for the remainder of his life in an amount per year equal to
(i) the product of his Vested Percentage and 70% of his Average Annual
Compensation, less (ii) his Annual Offset Amount. The payments due under this
Article shall begin on the first day of the second month following the date of
the
<PAGE>
Executive's termination of employment with the Bank, and shall thereafter be
made on the annual anniversary dates of such first payment date. Except as
provided in Article III, no Benefits shall be payable hereunder after the death
of the Executive.
Notwithstanding the foregoing, but only to the extent required under
federal banking law, the amount payable hereunder shall be reduced to the extent
that on the date of the Employee's termination of employment, either (i) the
present value of his Benefits exceeds the limitations that are set forth in
Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the
Effective Date, or (ii) such reduction is necessary to avoid subjecting the Bank
to liability under Section 280G of the Internal Revenue Code of 1986, as
amended. In addition, any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
ARTICLE III
DEATH BENEFITS
--------------
In the event that the Executive dies before benefit payments commence
under Article II hereof, the Bank shall pay to the Executive's Surviving Spouse
an annual payment for the remainder of the Surviving Spouse's life (up to a
maximum of 20 years) in an amount equal to 50% of the annual benefit that the
Executive would have received under Article II if he had terminated employment
on the date of his death and then had a Vested Percentage equal to 100%.
In the event that the Executive dies after benefit payments have
commenced under Article II hereof, the Bank shall pay to the Executive's
Surviving Spouse an annual payment for the remainder of the Surviving Spouse's
life (up to a maximum of 20 years) in an amount equal to 50% of the annual
Benefits that the Executive would have received if he had survived to collect
all of the Benefits payable to him under this Agreement.
Death benefits shall be payable only pursuant to this Article III,
shall commence on the first day of the first month following the date of the
Executive's death, and shall thereafter be made on the annual anniversary dates
of such first payment date.
ARTICLE IV
SOURCE OF BENEFITS
------------------
The primary source of Benefits shall be the general assets of the Bank.
However, the Bank may establish and fund an irrevocable trust (the "Trust"),
whereby assets of the Bank will be held by the Trust pursuant to the Trust
Agreement, subject to claims by general creditors of the Bank by appropriate
judicial action as provided by such Trust. Any insurance policy or any other
asset acquired or held by the Bank in connection with the liabilities assumed by
it hereunder, shall not be deemed to be held under any trust for the benefit of
the Executive or his Surviving Spouse (if any), or to be security for the
performance of the obligations of the Bank,
<PAGE>
but shall be, and remain, a general, unpledged, unrestricted asset of the Bank.
Neither Executive nor his Surviving Spouse (if any) shall be named as owner of
any insurance policy, if any, held in connection with the liabilities hereunder.
The trustee of the Trust shall inform the Board annually prior to the
commencement of each fiscal year as to the manner in which Trust assets shall be
invested. In the event that funds from the Trust are at any time insufficient to
pay Benefits, the obligation to pay Benefits shall constitute an unfunded,
unsecured promise by the Bank to provide such payments as and to the extent such
Benefits become payable. In such case, Benefits shall be paid from the general
assets of the Bank, and no person shall, by virtue of this Agreement, have any
interest in such assets (other than as an unsecured creditor of the Bank).
ARTICLE V
ASSIGNMENT
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Except as otherwise provided by this Agreement, it is agreed that
neither the Executive nor his Surviving Spouse (if any) nor his estate shall
have any right to commute, sell, assign, transfer, encumber and pledge or
otherwise convey the right to receive any Benefits hereunder, which Benefits and
the rights thereto are expressly declared to be nonassignable and
nontransferable.
ARTICLE VI
NO RETENTION OF SERVICES
TERMINATION OR SUSPENSION UNDER FEDERAL LAW
-------------------------------------------
The Benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreement that may exist from time to time
between the parties hereto, or any other compensation payable by the Bank to the
Executive, whether salary, bonus, retirement income under employee benefit plans
sponsored or maintained by the Bank, or otherwise. This Agreement shall not
restrict the right of the Bank to terminate the Executive's employment, or
restrict the right of the Executive to terminate his employment.
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but vested rights of the
parties shall not be affected.
If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all
obligations under this Agreement shall terminate as of the date of default;
however, this paragraph shall not affect the vested rights of the parties.
All obligations under this Agreement shall terminate, except to the
extent that continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the Director of the Office of Thrift Supervision
("Director of OTS"), or his or her designee, at the time that the Federal
Deposit Insurance Corporation ("FDIC") or the Resolution Trust Corporation
enters into an agreement to provide assistance to or on behalf of the Bank under
the
<PAGE>
authority contained in Section 13(c) of FDIA; or (ii) by the Director of the
OTS, or his or her designee, at the time that the Director of the OTS, or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director of the OTS
to be in an unsafe or unsound condition. Such action shall not affect any vested
rights of the parties.
If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Executive
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Executive all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
ARTICLE VII
RIGHTS OF THE EXECUTIVE.
------------------------
The rights of the Executive and of his Surviving Spouse (if any) under
this Agreement shall be solely those of an unsecured creditor of the Bank except
as may be provided in this Article.
ARTICLE VIII
CHANGE IN CONTROL;
OR TERMINATION FOR JUST CAUSE
-----------------------------
The provisions of this Article shall supersede any provisions of this
Agreement to the contrary.
In the event of a Change in Control, the Executive's Vested Percentage
shall become 100%. In addition, at any time no later than five business days
following a Change in Control, the Bank shall establish the Trust (if it has not
been previously established), and shall contribute an amount to the Trust that
is projected to be sufficient to enable the Trust to pay all Benefits that could
become payable.
In the event of the Executive's termination of employment for Just
Cause, no Benefits shall be payable hereunder, and the Bank shall have no
further obligations hereunder, unless and to the extent that the Bank
determines, in its sole and absolute discretion, to the contrary.
ARTICLE IX
REORGANIZATION
--------------
The Bank agrees that it will not merge or consolidate with any other
corporation or organization, or permit its business activities to be taken over
by any other organization, unless and until the succeeding or continuing
corporation or other organization shall expressly assume the rights and
obligations of the Bank herein set forth. The Bank further agrees that it will
not cease its business activities or terminate its existence, other than as
heretofore set forth in this paragraph, without having made adequate provision
for the fulfillment of its obligation hereunder.
<PAGE>
ARTICLE X
AMENDMENTS
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This Agreement may be revoked or amended in whole or in part only by a
writing signed by all of the parties hereto.
ARTICLE XI
STATE LAW
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This Agreement shall be construed and governed in all respects under
and by the laws of the Commonwealth of Kentucky, except to the extent preempted
by federal law. If any provision of this Agreement shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
hereof shall continue to be fully effective.
ARTICLE XII
HEADINGS
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Heading and subheadings in this Agreement are inserted for convenience
and reference only and constitute no part of this Agreement.
ARTICLE XIII
COUNTERPARTS
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This Agreement may be executed in an original and any number of
counterparts, each of which shall constitute an original of one and the same
instrument.
ARTICLE XIV
EFFECTIVE DATE
--------------
This Agreement shall become effective on the date first hereinabove
written, subject to such changes as the Bank's Board of Directors may reasonably
deem to be necessary or proper in order to obtain approval of the Agreement by
the Office of Thrift Supervision. Unless terminated earlier in accordance with
Article XVII, this Agreement shall remain in effect during the term of
employment of the Executive and until all benefits payable hereunder have been
made.
ARTICLE XV
INTERPRETATION OF THE AGREEMENT
--------------------------------
The Board of Directors of the Bank shall have sole and absolute
discretion to administer, construe, and interpret the Agreement, and the
decisions of the Board shall be conclusive and binding on all affected parties
(unless such decisions are arbitrary and capricious).
<PAGE>
ARTICLE XVI
ARBITRATION OF DISPUTES
-----------------------
In the event that any dispute arises between the Executive and the Bank
as to the terms or interpretation of this Agreement, said dispute shall be
referred to the American Arbitration Association, and the parties expressly
consent to submit said dispute to be so arbitrated. The decision of the American
Arbitration Association shall be final and binding on all the parties, and there
shall be no appeal therefrom.
ARTICLE XVII
TERMINATION OF AGREEMENT
------------------------
The Bank and the Executive (or, in the event of his death, his
Surviving Spouse or estate, as the case may be) may terminate this Agreement at
any time in a writing executed by the parties.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement to be signed in
its corporate name by its duly authorized officer, impressed with its corporate
seal, and properly attested to, and the Executive has hereto set his hand, all
on the day and year first above written.
FIRST LANCASTER FEDERAL SAVINGS BANK
Attest:/s/ Kathy G. Johnica By:/s/ Virginia R.S. Stump
-------------------- ---------------------------------
Its Chairman of the Board
EXECUTIVE
Witness:/s/ Kathy G. Johnica /s/ Tony A. Merida
-------------------- ------------------------------------
Tony A. Merida
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
BETWEEN
FIRST LANCASTER FEDERAL SAVINGS BANK
AND
TONY A. MERIDA
FIRST AMENDMENT
WHEREAS, on December 7, 1995, First Lancaster Federal Savings Bank (the
"Bank") entered into a Supplemental Executive Retirement Agreement (the
"Agreement") with Tony A. Merida (the "Employee"); and
WHEREAS, the Board of Directors of the Bank and the Employee have
determined that it is in their best interests to amend the Agreement;
NOW, THEREFORE, the Agreement shall be amended as follows, with such
amendment to become effective immediately upon the execution hereof:
1. The definition of "Compensation" under Article I is amended by adding
the following phrase between the words "earnings" and "paid":
-- excluding W-2 earnings from stock option and management
recognition plans --.
2. The second sentence of the definition of "Vested Percentage" under
Article I is amended by deleting "(i)" and ", or (ii) a Change in Control".
3. The first sentence of the second paragraph of Article II is amended by
inserting the following phrase between the words "Benefits" and "exceeds":
, taken together with any other benefits he will receive
pursuant to other compensation arrangements with the Bank or its holding
company,
4. The second paragraph of Article VIII is amended in its entirety to
provide as follows:
The Bank shall establish the Trust (if it has not been previously
established) at any time no later than five business days
following a Change in Control, and shall contribute an amount to
the Trust that is projected to be sufficient to enable the Trust
to pay all Benefits that could become payable.
5. Nothing contained herein shall be held to alter, vary or affect any of
the terms, provisions, or conditions of the Agreement other than as stated
above.
<PAGE>
WHEREFORE, the undersigned hereby approve this First Amendment to the
Agreement.
Date of Execution: February 15, 1996
TONY A. MERIDA
/s/ Tony A. Merida
-------------------------------------
FIRST LANCASTER FEDERAL SAVINGS BANK
By /s/ Virginia R.S. Stump
----------------------------------
Attest:/s/ Kathy G. Johnica Its President
------------------------- ----------------------------------
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
BETWEEN
FIRST LANCASTER FEDERAL SAVINGS BANK
AND
TONY A. MERIDA
SECOND AMENDMENT
----------------
WHEREAS, on December 7, 1995, First Lancaster Federal Savings Bank (the
"Bank") entered into a Supplemental Executive Retirement Agreement (the
"Agreement") with Tony A. Merida (the "Employee"); and
WHEREAS, the Board of Directors of the Bank and the Employee have
determined that the definition of "Annual Offset Amount" needs to be clarified
with respect to benefits that are payable to the Employee under the Bank's
Pension Plan.
NOW, THEREFORE, the Agreement shall be amended as follows, with such
Amendment to become effective immediately upon the execution thereof:
1. The definition of "Annual Offset Amount" in Article I is amended to read
as follows:
"Annual Offset Amount" shall mean the sum of (i) the
primary social security benefit payable annually to the
Executive as of the earliest date, following his termination
of employment, on which he could begin to collect such benefit
(regardless of when such payment actually begins), (ii) the
annual benefit that would be payable to the Executive under
the Bank's Pension Plan as of the earliest date, following his
termination of employment, in the form of a 50% joint and
survivor annuity, with his Surviving Spouse as contingent
beneficiary, on which he could begin to collect such benefit
(regardless of when he actually begins to collect such
benefits), and (iii) the annual amount that would be payable
to the Executive if that portion of his account under the
Bank's 401(k) Plan which would be attributable to the Bank's
contributions (assuming the Executive contributed the maximum
amount permitted by the Federal tax laws) were paid to him in
the form of a 50% joint and survivor annuity, with his
surviving spouse as contingent beneficiary, commencing upon
his termination of employment regardless of when he actually
begins to collect such benefits.
2. Nothing contained herein shall be held to alter, vary or affect any of
the terms, provisions or conditions of the Agreement other than as stated above.
WHEREFORE, the undersigned hereby approve this Second Amendment to the
Agreement.
Date: September 7, 2000 /s/ Tonay A. Merida
----------------- ------------------------------------
TONY A. MERIDA
FIRST LANCASTER FEDERAL SAVINGS BANK
By: Virginia R.S. Stump
---------------------------------------
Attest: /s/ Kathy G. Johnica
--------------------
Its: President
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