FEDERAL HOME LOAN BANK OF CHICAGO PRESIDENT'S INCENTIVE COMPENSATION PLAN

EX-10.2 3 ex102.htm PRESIDENT'S INCENTIVE COMPENSATION PLAN WebFilings | EDGAR view
 

EXHIBIT 10.2
 
FEDERAL HOME LOAN BANK OF CHICAGO
PRESIDENT'S INCENTIVE COMPENSATION PLAN
 
 
I.    Plan Objectives
 
The purpose of the Federal Home Loan Bank of Chicago's (“Bank”) President's Incentive Compensation Plan (“Plan”) is to:
 
*     Promote the achievement of the Bank's profitability and business goals which directly support the Bank's business plan.
 
*     Link compensation to specific performance measures; and,
 
*     Provide a competitive compensation program.
 
 
II.    PLAN YEAR ACTIONS
 
A.    The Board of Directors shall each Plan Year establish Criteria and Performance Targets consistent with the Bank's Business Plan approved by the Board of Directors.
 
B.    Each Plan Year's Criteria, Performance Targets, Target Values and Definitions of Plan Criteria will be established in January by the Per sonnel & Compensation Committee, with the approval of the Board of Directors on a schedule in the general form of Exhibit B.
 
C.    The President's performance will be appraised by the Personnel and Compensation Committee in January following the Plan Year and any award pursuant to this Plan shall be paid in cash to the President.
 
D.    The President's Incentive Award payout levels are identified in Exhibit A.
 
 
III.    Award Calculations
 
A.    An Award for a Plan Year is calculated by:
 
(1)    Calculating the actual Plan Year Performance as a Percent of Target for each of the Criteria separately;
 
(2)    Multiplying the Target Value by the Performance as a Percent of Target for each of the Criteria;
 
(3)    Totaling the products of (2), above, which consti tutes the Total Award Percentage (Weighted Average);
 
(4)    Identifying the Total Award Percentage that correlates to the Payout Level on Exhibit A;
 
(5)    Multiplying the Payout Level by the Plan Year base salary to determine the dollar amount of the award.
 
The maximum and minimum incentive award payments are established in Exhibit A. The incentive award payment shall be calculated in accordance with the Incentive Compensation Payout and Award Scale in Exhibit A.
 
 
IV.    FORM AND TIME OF PAYMENT; DEFERRAL OF PAYMENT
 
A.Form
 
Payment of all awards shall be made in cash.
 
B.Time
 
(i)    
Fifty percent (50%) of an award shall be payable no later than two and one-half months after the Plan award year end as long as the President is employed as of such Plan year end.
 
(ii)    
Twenty-five percent (25%) of an award shall be payable no later than two and one-half months after the first anniversary of the Plan year end to which the award relates, as lo ng as there were not material inaccuracies relating to financial reporting or award performance metric criteria for the Plan award year or the succeeding Plan year as determined by the Board.
 
(iii)    
Twenty-five percent (25%) of an award shall be payable no later than two and one-half months after the second anniversary of the Plan year end to which the award relates, as long as there were not m aterial inaccuracies relating to financial reporting or award performance metric criteria for the Plan award year or either of the two (2) succeeding Plan years as determined by the Board.
 
(iv)    
Notwithstanding the foregoing,
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(1)    
The entire award balance if the President dies while still employed at the Bank shall be payable to his beneficiary, heirs or legatees, as provided by law, within sixty (60) days of such event.
 
(2)    
The entire award balance if the President (i) becomes Disabled, or (ii) attains age 60 and retires (for purposes of the Financial Institutions Retirement Fund) from active employment at the Bank, shall be payable within sixty (60) days of such event.
 
(3)    
In the event of: (i) a termination of the President's employment by the President for Good Reason, or (ii) the termination of the President's employment by the Bank without Cause, the award shall be payable to the President within sixty (60) days of such event.
 
(4)    
In the event of a Change of Control, the surviving entity will make all payments under this Plan in accordance with the payment provisions of Sections 4(a) and (c)(i) unless such entity elects to accelerate such payments, in which case any award will be payable to the President within sixty (60) days of the Change of Control.
 
(5)    
Should any income tax become due based on payments to the President, such amount of tax shall become immediately available for withdrawal.
 
(v)    
The retained award balance of the President shall be credited as of the end of each calendar quarter with interest at the same rate as the 90-day FHLB note rate during each corresponding quarter. In lieu of such rate, the Committee may desig nate, from time to time, such other indices of investment performance or investment funds as the measure of investment performance.
 
C.Payment Deferral
 
The President may elect to defer the receipt of all or any amount of any award under the Plan and to have such amount credited to an account under and paid according to the terms of the Federal Home Loan Bank of Chicago Benefit Equalization Plan. Election of such deferral shall be subject to the following rules:
 
(i)    
An election to defer all or any portion of an award that may be made pursuant to Section III.A of this Plan must be made no later than June 30 of the award Plan year; and
 
(ii)    
An election to defer all or any portion of a discretionary award that may be made pursuant to Section VI.A of this Plan must be made prior to January 1 of the award Plan year.
 
 
V.    MISCELLANEOUS
 
Base pay may be adjusted annually by merit increases, but is not affected by any incentive award.
 
The Bank shall, during each plan year, give the Personnel & Compensation Committee a mid-year status report on progress toward performance targets established hereunder.
 
The Plan shall be maintained in accordance with and is subject to Federal Housing Finance Board regulations and policies.
 
 
VI.    OTHER TERMS AND CONDITIONS
 
A.    Discretionary Authority.
 
The Bank, with the approval of the Personnel & Compensation Committee, may make adjustments in the criteria established herein for any award period whether before or after the end of the award period and, to the extent it deems appropriate in its sole discretion which shall be conclusive and binding upon all parties concerned, make awards or adjust awards to compensate for or reflect any significant changes which may have occurred during the award period which alter the basis upon which such performance targets were determined or othe rwise. The Bank, with the approval of the Board of Directors, may, in its discretion, make additional awards in such amounts as it deems appropriate to the President in consideration of extraordinary performance by the Bank.
 
 
 
 
B.    Other Conditions.
 
(1)    No person shall have any claim to be granted an award under the Plan and there is no obligation for uniformity of treatment of eligible employees under the Plan. Except as otherwise required by law, awards under the Plan may not be assigned.
 
(2)    Neither the Plan nor any action taken hereunder shall be construed as giving the President the right to be retained in the employ of the Bank.
 
(3)    The Bank shall have the right to deduct from an y award to be paid under the Plan any Federal, state or local taxes required by law to be withheld with respect to such payment.
 
(4)    No award shall be paid to the President for the current plan year if the President's employment ceases prior to the end of the Plan year, whether by resignation, termination or otherwise.
 
(5)    Any award hereunder may be reduced pro rata in the event that the Bank's President (i) commences employment with the Bank during the calendar year or (ii) is absent from the Bank (other than regular vacation) during the calendar year whether through approved leave or otherwise, including but not limited to: short or long term disability, leave under the Family and Medical Leave Act, a personal leave of absence or military leave.
 
C.    Plan Administration
 
(1)    The Bank shall have full power to administer and interpret the Plan and to establish rules for its administration. The levels of financia l and individual performance referred to in Sections II & III achieved for each award period shall be conclusively determined by the Bank. The determination of financial performance achieved for any award period may, but need not, be adjusted to reflect extraordinary financial items and adjustments or restatements of the financial statements, in the discretion of the Bank. Any such determination shall not be affected by subsequent adjustments or restatements. Any determinations or actions required or permitted to be made by the Bank may be made by the Personnel & Compensation Committee. The Personnel & Compensation Committee in making any determinations under or referred to in the Plan shall be entitled to rely on opinions, reports or statements of officers or employees of the Bank and of counsel, public accountants and other professional or expert persons.
 
(2)    The Plan shall be governed by applicable Federal law.
 
(3)    This Plan supersedes any prior Incentive Compensation Plan for the President for the plan year commencing on January 1, 2010.
 
D.    Definitions
 
For purposes of the Plan:
 
(i)    
“Beneficiary” shall mean the beneficiary or beneficiaries of the President who are designated in writing by the President on a form provided by, filed with and accepted by the Bank, or in the absence of any such designation, to the beneficiary or beneficiaries of the President who are entitled to receive the benefits of the President which are payable under the qualified defined benefit pension plan sponsored by the Bank or its successor plan.
 
(ii)    
“Change of Control” of the Bank shall mean the occurrence at any time of any of the following events:
 
(1)    
any person, more than one person acting as a “group” (as defined in section 1.409A-3(i)(5) of the Income Tax Regulations), acquires ownership of equity securities of the Bank that, together with equity securities held by such person or group, constitutes more than 50% of the total voting power of the equity securities of the Bank; provided, however, that if any person or group, is considered to own more than 50% of the total voting power of the equity securities of the Bank, the acquisition of additional equity securities by the same person or group will not be considered a Change of Control under the Plan. An increase in the percentage of equity securities of the Bank owned by any person or group as a result of a transaction in which the Bank acquires its own equity securities in exchange for property will be treated as an acquisition of equity securities of the Bank for purposes of this paragraph; or
 
(2)    
during any period of twelve (12) consecutive months, individuals who at the beginning of such period constituted the Board (together with (a) any new or replacement directors whose election by the Board, or (b) whose nomination for election by the Bank's shareholders, was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or
 
(3)    
the Bank sells or transfers 95% or more of its business and/or assets to another bank or other entity.
 
(iii)    
“Disability” shall mean the President: (1) is unable to engage in an y substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (2) 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 twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.
 
(iv)    “Cause” means any of the following activities by the President: (i) the conviction of the President for a felony, or a crime involving moral turpitude; (ii) the commission of any act involving dishonesty, disloyalty, or fraud with respect to the Bank or any of its members; (iii) willful and continued failure to perform material duties which are reasonably directed by the Board which are consistent with the terms of this Agreement and the position of President and CEO; (iv) gross negligence or willful misconduct with respect to the Bank or any of its members; (v) any violation of Bank policies regarding sexual harassment, discrimination, substance abuse or the Bank's Code of Ethics to the extent such acts would provide grounds for a termination for cause with respect to other employees; or (vi) a material breach by the President of a material provision of this Agreement. No act or failure to act on the part of the President shall be considered “wil lful” unless it is done, or omitted to be done, by the President in bad faith or without reasonable belief that his action or omission was in the best interests of the Bank.
(v)    “Good Reason” shall mean either of the following:
 
(1)    
a material reduction by the Bank in the President's base salary, unless such reduction: (i) is associated with a “General Reduction” in compensation among employees in the same job grade or employees who are similarly situated and such reduction is in response to adverse or declining economic conditions; and (ii) does not exceed 5% of the President's base salary amount in effect at the time of the reduction; or
 
(2)    
the relocation of the President's principal office assignment to a location more than fifty (50) miles from its location on the date immediately preceding such assignment.
 
E.    Modif ication or Termination of Plan.
 
The Bank may modify or terminate the Plan at any time to be effective at such date as the Bank may determine. A modification may affect present and future awards and eligible employees.
 
F.    Effective Date.
 
The Plan shall be effective January 1, 2011.
 
 
 
 
 
APPROVED BY THE BOARD OF
DIRECTORS THIS 7TH DAY OF
OCTOBER, 2010.
 
 
 
/s/ Peter E. Gutzmer
Its Corporate Secretary
 
EXHIBIT A
 
 
 
 FHLBANK CHICAGO PRE SIDENT
INCENTIVE AWARD
 
AWARD
MAXIMUM
 
 
COEFFICIENT
AWARD
 
 
FACTOR
PERCENTAGE
 
 
130
%
100.00
%
 
 
129
%
98.67
%
 
 
128
%
97.33
%
 
 
127
%
96.00
%
 
 
126
%
94.67
%
 
 
125
%
93.33
%
 
 
124
%
92.00
%
 
 
123
%
90.67
%
&nbs p;
 
122
%
89.33
%
 
 
121
%
88.00
%
 
 
120
%
86.67
%
 
 
119
%
85.33
%
 
 
118
%
84.00
%
 
 
117
%
82.67
%
 
 
116
%
81.33
%
 
 
115
%
80.00
%
 
 
114
%
78.67
%
& nbsp;
 
113
%
77.33
%
 
 
112
%
76.00
%
 
 
111
%
74.67
%
 
 
110
%
73.33
%
 
 
109
%
72.00
%
 
 
108
%
70.67
%
 
 
107
%
69.33
%
 
 
106
%
%
 
 
105
%
66.67
%
 
 
104
%
65.33
%
 
 
103
%
64.00
%
 
 
102
%
62.67
%
 
 
101
%
61.33
%
 
 
100
%
60.00
%
 
 
99
%
57.00
%
 
 
98
%
54.00
%
 
 
97
%
%
 
 
96
%
48.00
%
 
 
95
%
45.00
%
 
 
94
%
42.00
%
 
 
93
%
39.00
%
 
 
92
%
36.00
%
 
 
91
%
33.00
%
 
 
90
%
30.00
%
 
 
89
%
27.00
%
 
 
88
%
24.00
%
 
 
87
%
21.00
%
  ;
 
86
%
18.00
%
 
 
85
%
15.00
%
 
 
84
%
12.00
%
 
 
83
%
9.00
%
 
&nb sp;
82
%
6.00
%< /font>
 
 
81
%
3.00
%
 
 
80
%
—
%
 
EXHIBIT B
 
 
 
 
 
 
FEDERAL HOME LOAN BANK OF CHICAGO
PRESIDENT'S SHORT TERM INCENTIVE COMPENSATION PLAN
CRITERIA AND PERFORMANCE TARGETS [Insert Date]
 
 
 
 
 
 
 
Pr esident: [Insert Name]
 
 
 
 
 
 
 
 
 
 
 
A
B
C
D
E
F
G
 BANK CRITERIA*
TARGET VALUE
[INSERT DATE] PERFORMANCE TARGET
[INSERT DATE] RESULTS
PERFORMANCE AS A % OF TARGET** (D/C)
AWARD COEFFICIENT FACTOR ( E X B )
MAXIMUM AWARD PERCENTAGE***
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
&nbs p;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  TOTALS
 
 
 
 
 
 
*Definitions of Bank Criteria are attached.
 
 
 
 
**Maximum value in column E equals 150%.
 
 
 
 
 
 
 
 
 
Approved as of [Insert Date]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[Insert Name] Chairman, on behalf of the Board of Directors
 
 
 
 
 
 
Any award hereunder is subject to the Personnel and Compensation Committee's
 
 
 
determination that the risk principles listed below have been successfully maintained:
 
 
 
    - Market: maintain interest rate risk within approved risk policy framework
 
 
 
    - Credit: experience no material credit loses with members or counterparties
 
 
 
    - Operations: experience no material loss due to operations
 
 
 
The Committee may adjust awards based on such determination.