Exhibit 10.1

 

BANK’34

 

EMPLOYEE STOCK OWNERSHIP PLAN

 

Originally adopted effective January 1, 2000

 

Amended and Restated Effective January 1, 2001

 

Further Amended and Restated Effective January 1, 2013

 

 

 

C O N T E N T S

 

    Page No.       Section 1. Plan Identity. 1 1.1 Name. 1 1.2 Purpose. 1 1.3
Effective Date. 1 1.4 Fiscal Period. 1 1.5 Single Plan for All Employers. 1 1.6
Interpretation of Provisions. 1 Section 2. Definitions. 1 Section 3. Eligibility
for Participation. 9 3.1 Initial Eligibility. 9 3.2 Definition of Eligibility
Year. 9 3.3 Terminated Employees. 9 3.4 Certain Employees Ineligible. 9 3.5
Participation and Reparticipation. 9 3.6 Omission of Eligible Employee. 9 3.7
Inclusion of Ineligible Employee. 10 Section 4. Contributions and Credits. 10
4.1 Discretionary Contributions. 10 4.2 Contributions for Stock Obligations. 10
4.3 Definitions Related to Contributions. 11 4.4 Conditions as to Contributions.
11 Section 5. Limitations on Contributions and Allocations. 11 5.1 Limitation on
Annual Additions. 11 5.2 Effect of Limitations. 14 5.3 Limitations as to Certain
Participants. 14 5.4 Erroneous Allocations. 15 Section 6. Trust Fund and Its
Investment 15 6.1 Creation of Trust Fund. 15 6.2 Stock Fund and Investment Fund.
15 6.3 Acquisition of Stock. 16 6.4 Participants’ Option to Diversify. 17
Section 7. Voting Rights and Dividends on Stock. 17 7.1 Voting and Tendering of
Stock. 17 7.2 Dividends on Stock. 18 Section 8. Adjustments to Accounts. 19 8.1
Adjustments for Transactions. 19 8.2 Valuation of Investment Fund. 19 8.3
Adjustments for Investment Experience. 19 Section 9. Vesting of Participants’
Interests. 19 9.1 Deferred Vesting in Accounts. 19 9.2 Computation of Vesting
Years. 20 9.3 Full Vesting Upon Certain Events. 21

 

 

 

 

9.4 Full Vesting Upon Plan Termination. 22 9.5 Forfeiture, Repayment, and
Restoral. 22 9.6 Accounting for Forfeitures. 23 9.7 Vesting and
Nonforfeitability. 23 Section 10. Payment of Benefits. 23 10.1 Benefits for
Participants. 23 10.2 Time for Distribution. 24 10.3 Marital Status. 30 10.4
Delay in Benefit Determination. 30 10.5 Accounting for Benefit Payments. 30 10.6
Options to Receive and Sell Stock. 30 10.7 Restrictions on Disposition of Stock.
31 10.8 Continuing Loan Provisions; Creations of Protections and Rights. 32 10.9
Direct Rollover of Eligible Distribution. 32 10.10 Waiver of 30 Day Period After
Notice of Distribution. 33 Section 11. Rules Governing Benefit Claims and Review
of Appeals. 33 11.1 Claim for Benefits. 33 11.2 Notification by Committee. 33
11.3 Claims Review Procedure. 34 Section 12. The Committee and Its Functions. 34
12.1 Authority of Committee. 34 12.2 Identity of Committee. 34 12.3 Duties of
Committee. 35 12.4 Valuation of Stock. 35 12.5 Compliance with ERISA. 35 12.6
Action by Committee. 35 12.7 Execution of Documents. 35 12.8 Adoption of Rules.
35 12.9 Responsibilities to Participants. 36 12.10 Alternative Payees in Event
of Incapacity. 36 12.11 Indemnification by Employers. 36 12.12 Nonparticipation
by Interested Member. 36 Section 13. Adoption, Amendment, or Termination of the
Plan. 36 13.1 Adoption of Plan by Other Employers. 36 13.2 Plan Adoption Subject
to Qualification. 37 13.3 Right to Amend or Terminate. 37 Section 14.
Miscellaneous Provisions. 37 14.1 Plan Creates No Employment Rights. 37 14.2
Nonassignability of Benefits. 38 14.3 Limit of Employer Liability. 38 14.4
Treatment of Expenses. 38 14.5 Number and Gender. 38 14.6 Nondiversion of
Assets. 38 14.7 Separability of Provisions. 38 14.8 Service of Process. 38

 

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14.9 Governing State Law. 38 14.10 Employer Contributions Conditioned on
Deductibility. 39 14.11 Unclaimed Accounts. 39 14.12 Qualified Domestic
Relations Order. 39 14.13 Use of Electronic Media to Provide Notices and Make
Participant Elections. 40 Section 15. Top-Heavy Provisions. 40 15.1 Top-Heavy
Plan. 40 15.2 Definitions. 40 15.3 Top-Heavy Rules of Application. 42 15.4
Top-Heavy Ratio. 43 15.5 Minimum Contributions. 43 15.6 Minimum Vesting. 44 15.7
Top-Heavy Provisions Control in Top-Heavy Plan. 44

 

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BANK’34

EMPLOYEE STOCK OWNERSHIP PLAN

 

Section 1.          Plan Identity.

 

1.1       Name. The name of this Plan is “BANK’34 Employee Stock Ownership Plan”
(formerly, “Alamogordo Federal Savings & Loan Association Employee Stock
Ownership Plan”).

 

1.2       Purpose. The purpose of this Plan is to describe the terms and
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.

 

1.3       Effective Date. The Effective Date of the original Plan is January 1,
2000, and the Effective Date of this amended and restated Plan is January 1,
2013, except as otherwise provided herein.

 

1.4       Fiscal Period. This Plan shall be operated on the basis of a January 1
to December 31 fiscal year for the purpose of keeping the Plan’s books and
records and distributing or filing any reports or returns required by law.

 

1.5       Single Plan for All Employers. This Plan shall be treated as a single
plan with respect to all participating Employers for the purpose of crediting
contributions and forfeitures and distributing benefits, determining whether
there has been any termination of Service, and applying the limitations set
forth in Section 5.

 

1.6       Interpretation of Provisions. The Employers intend this Plan and the
Trust to be a qualified stock bonus plan under Section 401(a) of the Code and an
employee stock ownership plan within the meaning of Section 407(d)(6) of ERISA
and Section 4975(e)(7) of the Code. The Plan is intended to have its assets
invested primarily in qualifying employer securities of one or more Employers
within the meaning of Section 407(d)(3) of ERISA, and to satisfy any requirement
under ERISA or the Code applicable to such a plan.

 

Accordingly, the Plan and Trust Agreement shall be interpreted and applied in a
manner consistent with this intent and shall be administered at all times and in
all respects in a nondiscriminatory manner.

 

Section 2.          Definitions.

 

The following capitalized words and phrases shall have the meanings specified
when used in this Plan and in the Trust Agreement, unless the context clearly
indicates otherwise:

 

 

 

 

“Account” means a Participant’s interest in the assets accumulated under this
Plan as expressed in terms of a separate account balance which is periodically
adjusted to reflect his Employer’s contributions, the Plan’s investment
experience, and distributions and forfeitures.

 

“Active Participant” means any Employee who has satisfied the eligibility
requirements of Section 3 and who qualifies as an Active Participant for a
particular Plan Year under Section 4.3.

 

“Bank” means BANK’34 (formerly, Alamogordo Federal Savings & Loan Association)
and any entity which succeeds to the business of BANK’34 and adopts this Plan as
its own pursuant to Section 13.2.

 

“Beneficiary” means the person or persons who are designated by a Participant to
receive benefits payable under the Plan on the Participant’s death. In the
absence of any designation or if all the designated Beneficiaries shall die
before the Participant dies or shall die before all benefits have been paid, the
Participant’s Beneficiary shall be his surviving Spouse, if any, or his estate
if he is not survived by a Spouse. The Committee may rely upon the advice of the
Participant’s executor or administrator as to the identity of the Participant’s
Spouse.

 

“Break in Service” means any Plan Year, or, for the initial eligibility
computation period under Section 3.2, the 12-consecutive month period beginning
on the first day of which an Employee has an Hour of Service, in which an
Employee has 500 or fewer Hours of Service. Solely for this purpose, an Employee
shall be considered employed for his normal hours of paid employment during a
Recognized Absence (said Employee shall not be credited with more than 501 Hours
of Service to avoid a Break in Service), unless he does not resume his Service
at the end of the Recognized Absence. Further, if an Employee is absent for any
period beginning on or after January 1, 1985, (i) by reason of the Employee’s
pregnancy, (ii) by reason of the birth of the Employee’s child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee’s
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” means the committee responsible for the administration of this Plan
in accordance with Section 12.

 

“Company” means Alamogordo Financial Corp., the stock holding company of the
Bank. The Company is a publicly traded corporation and is taxed as a corporation
under sub-chapter C of the Code.

 

“Disability” means only a disability which renders the Participant totally
unable, as a result of bodily or mental disease or injury, to perform any duties
for an Employer for which he is reasonably fitted, which disability is expected
to be permanent or of long and indefinite duration. However, this term shall not
include any disability directly or indirectly resulting from or related to
habitual drunkenness or addiction to narcotics, a criminal act or attempt,
service in

 

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the armed forces of any country, an act of war, declared or undeclared, any
injury or disease occurring while compensation to the Participant is suspended,
or any injury which is intentionally self-inflicted. Further, this term shall
apply only if (i) the Participant is sufficiently disabled to qualify for the
payment of disability benefits under the federal Social Security Act or Veterans
Disability Act, or (ii) the Participant’s disability is certified by a physician
selected by the Committee. Unless the Participant is sufficiently disabled to
qualify for disability benefits under the federal Social Security Act or
Veterans Disability Act, the Committee may require the Participant to be
appropriately examined from time to time by one or more physicians chosen by the
Committee, and no Participant who refuses to be examined shall be treated as
having a Disability. In any event, the Committee’s good faith decision as to
whether a Participant’s Service has been terminated by Disability shall be final
and conclusive. Notwithstanding the foregoing, for purposes of subsection (d)(4)
in the definition of 415 Compensation, Disabled shall have the meaning under
Section 22(e)(3) of the Code.

 

“Early Retirement” means retirement on or after a Participant’s attainment of
age 55 and the completion of fifteen years of employment with an Employer. If
the Participant terminates employment before satisfying the age requirement, but
has satisfied the employment requirement, the Participant will be entitled to
elect early retirement upon satisfaction of the age requirement.

 

“Effective Date” means the effective date of the original plan, which is January
1, 2000, and the effective date of the amended and restated Plan, which is
January 1, 2013, unless a different effective date is specifically applied to
another section of the Plan.

 

“Employee” means any individual who is or has been employed or self-employed by
an Employer. “Employee” also means an individual employed by a leasing
organization who, pursuant to an agreement between an Employer and the leasing
organization, has performed services for the Employer and any related persons
(within the meaning of Section 414(n)(6) of the Code) on a substantially
full-time basis for more than one year, if such services are performed under the
primary direction or control of the Employer. However, such a “leased employee”
shall not be considered an Employee if (i) he participates in a money purchase
pension plan sponsored by the leasing organization which provides for immediate
participation, immediate full vesting, and an annual contribution of at least 10
percent of the Employee’s 415 Compensation, and (ii) leased employees do not
constitute more than 20 percent of the Employer’s total work force (including
leased employees, but excluding Highly Paid Employees and any other Employees
who have not performed services for the Employer on a substantially full-time
basis for at least one year).

 

“Employer” means the Bank or any affiliate within the purview of section 414(b),
(c) or (m) and 415(h) of the Code, any other corporation, partnership, or
proprietorship which adopts this Plan with the Bank’s consent pursuant to
Section 13.1, and any entity which succeeds to the business of any Employer and
adopts the Plan pursuant to Section 13.2. The Employer has never been an
S-corporation.

 

“Entry Date” means January 1 and July 1 of each Plan Year.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974 (P.L. 93-406,
as amended).

 

“415 Compensation”

 

(a)          shall mean wages, as defined in Code Section 3401(a) for purposes
of income tax withholding at the source.

 

(b)          Any elective deferral as defined in Code Section 402(g)(3) (any
Employer contributions made on behalf of a Participant to the extent not
includible in gross income and any Employer contributions to purchase an annuity
contract under Code Section 403(b) under a salary reduction agreement) and any
amount which is contributed or deferred by the Employer at the election of the
Participant and which is not includible in gross income of the Participant by
reason of Code Section 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b)
shall also be included in the definition of 415 Compensation.

 

(c)          415 Compensation in excess of $255,000 (as indexed) shall be
disregarded for all Participants. For purposes of this subsection, the $255,000
limit shall be referred to as the “applicable limit” for the Plan Year in
question. The $255,000 limit shall be adjusted for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code, effective for the
Plan Year which begins within the applicable calendar year. For purposes of the
applicable limit, 415 Compensation shall be prorated over short Plan Years and
only compensation for the portion of the Plan Year during which the individual
was a Participant shall be taken into account.

 

(c)          For limitation years beginning on and after July 1, 2007, 415
Compensation shall also include regular pay after severance from employment if
(a) the payment is for regular compensation for services during the
Participant’s regular working hours, or compensation for services outside of the
Participant’s regular working hours (such as overtime or shift differential),
commissions, bonuses, or other similar payments, and (b) the payment would have
been paid to the Participant prior to severance from employment if the
Participant had continued in employment with the Employer. Such amounts shall
only be included in 415 Compensation to the extent they are paid by the later of
2½ months after severance from employment, or by the end of the limitation year
that includes the date of such severance from employment.

 

(d)          For limitation years beginning on and after January 1, 2009, if the
Employer is making differential wage payments to a former Employee who is
performing qualified military services (as defined in Code Section 414(u)(1)),
415 Compensation shall include such payments to the extent that those payments
do not exceed the amounts the individual would have received if the individual
had continued to perform services for the Employer rather than entering
qualified military service.

 

(e)          For limitation years beginning on and after July 1, 2007, leave
cashouts shall be included in 415 Compensation if those amounts would have been
included in the definition of 415 Compensation if they were paid prior to the
Participant’s severance from

 

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employment, and the amounts are payment for unused accrued bona fide sick,
vacation or other leave, but only if the Participant would have been able to use
the leave if his employment had continued. In addition, deferred compensation
shall be included in 415 Compensation if the compensation would have been
included in the definition of 415 Compensation if it had been paid prior to the
Participant’s severance from employment, and the compensation is received
pursuant to a nonqualified unfunded deferred compensation plan, but only if the
payment would have been paid at the same time if the Participant had continued
in employment with the Employer and only to the extent that the payment is
includible in the Participant’s gross income.

 

(f)          For limitation years beginning on and after July 1, 2007, 415
Compensation shall include amounts earned but not paid during the limitation
year solely because of the timing of the pay periods and pay dates.

 

“Highly Paid Employee” for any Plan Year means an Employee who, during either of
that or the immediately preceding Plan Year was at any time a five percent owner
of the Employer (as defined in Code Section 416(i)(1)) or, during the
immediately preceding Plan Year, had 415 Compensation exceeding $115,000 (as
indexed) and was among the most highly compensated one-fifth of all Employees.
For this purpose:

 

(a)          “415 Compensation” shall include any amount which is excludable
from the Employee’s gross income for tax purposes pursuant to Sections 125,
132(f)(4), 402(a)(8), 402(h)(1)(B), or 403(b) of the Code.

 

(b)          The number of Employees in “the most highly compensated one-fifth
of all Employees” shall be determined by taking into account all individuals
working for all related Employer entities described in the definition of
“Service”, but excluding any individual who has not completed six months of
Service, who normally works fewer than 17-1/2 hours per week or in fewer than
six months per year, who has not reached age 21, whose employment is covered by
a collective bargaining agreement, or who is a nonresident alien who receives no
earned income from United States sources.

 

“Hours of Service” means hours to be credited to an Employee under the following
rules:

 

(a)          Each hour for which an Employee is paid or is entitled to be paid
for services to an Employer is an Hour of Service.

 

(b)          Each hour for which an Employee is directly or indirectly paid or
is entitled to be paid for a period of vacation, holidays, illness, disability,
lay-off, jury duty, temporary military duty, or leave of absence is an Hour of
Service. However, except as otherwise specifically provided, no more than 501
Hours of Service shall be credited for any single continuous period which an
Employee performs no duties. No more than 501 Hours of Service will be credited
under this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Further, no Hours of Service
shall be credited on account of payments made solely under a plan maintained to
comply with worker’s

 

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compensation, unemployment compensation, or disability insurance laws, or to
reimburse an Employee for medical expenses.

 

(c)          Each hour for which back pay (ignoring any mitigation of damages)
is either awarded or agreed to by an Employer is an Hour of Service. However, no
more than 501 Hours of Service shall be credited for any single continuous
period during which an Employee would not have performed any duties. The same
Hours of Service will not be credited both under paragraph (a) or (b) as the
case may be, and under this paragraph (c). These hours will be credited to the
employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award agreement or
payment is made.

 

(d)          Hours of Service shall be credited in any one period only under one
of the foregoing paragraphs (a), (b) and (c); an Employee may not get double
credit for the same period.

 

(e)          If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each Employee in that
class or group shall be credited with 45 Hours of Service for each weekly pay
period in which he has at least one Hour of Service. However, an Employee shall
be credited only for his normal working hours during a paid absence.

 

(f)          Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of Service for
which the payment was made. If the period overlaps two or more Plan Years, the
Hours of Service credit shall be allocated in proportion to the respective
portions of the period included in the several Plan Years. However, in the case
of periods of 31 days or less, the Administrator may apply a uniform policy of
crediting the Hours of Service to either the first Plan Year or the second.

 

(g)          In all respects an Employee’s Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of Labor’s
regulations under Title I of ERISA.

 

“Investment Fund” means that portion of the Trust Fund consisting of assets
other than Stock. Notwithstanding the above, assets from the Investment Fund may
be used to purchase Stock in the open market or otherwise, or used to pay on the
Stock Obligation, and shares so purchased will be allocated to a Participant’s
Stock Fund.

 

“Normal Retirement” means retirement on or after the Participant’s Normal
Retirement Date.

 

“Normal Retirement Date” means the later of (i) the date on which a Participant
attains age 65 and (ii) the 5th anniversary of the time a Participant commenced
participation in the Plan.

 

“Participant” means any Employee who is participating in the Plan, or who has
previously participated in the Plan and still has a balance credited to his
Account.

 

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“Plan Year” means the twelve month period commencing January 1 and ending
December 31, 2000 and each period of 12 consecutive months beginning on January
1 of each succeeding year.

 

“Recognized Absence” means a period for which —

 

(a)          an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leave on a nondiscriminatory basis;
or

 

(b)          an Employee is temporarily laid off by an Employer because of a
change in business conditions; or

 

(c)          an Employee is on active military duty, but only to the extent that
his employment rights are protected by the Military Selective Service Act of
1967 (38 U.S.C. Sec. 2021).

 

“Service” means an Employee’s period(s) of employment or self-employment with an
Employer, excluding for initial eligibility purposes any period in which the
individual was a nonresident alien and did not receive from an Employer any
earned income which constituted income from sources within the United States. An
Employee’s Service shall include any Service which constitutes Service with a
predecessor Employer within the meaning of Section 414(a) of the Code. An
Employee’s Service shall also include any Service with an entity which is not an
Employer, but only either (i) for a period after 1975 in which the other entity
is a member of a controlled group of corporations or is under common control
with other trades and businesses within the meaning of Section 414(b) or 414(c)
of the Code, and a member of the controlled group or one of the trades and
businesses is an Employer, (ii) for a period after 1979 in which the other
entity is a member of an affiliated service group within the meaning of Section
414(m) of the Code, and a member of the affiliated service group is an Employer,
or (iii) all Employers aggregated with the Employer under Section 414(o) of the
Code (but not until the Proposed Regulations under Section 414(o) become
effective). Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.

 

“Spouse” means the individual, if any, to whom a Participant is lawfully married
on the date benefit payments to the Participant are to begin, or on the date of
the Participant’s death, if earlier. A former Spouse shall be treated as the
Spouse or surviving Spouse to the extent provided under a qualified domestic
relations order as described in section 414(p) of the Code.

 

“Stock” means common stock issued by the Employer (or by a corporation which is
a member of the same controlled group) which is readily tradable on an
established securities market, and beginning on and after January 1, 2012,
within the meaning of Treasury Regulation 1.401(a)(35)-1(f)(5). In the event
there is no common stock which meets the requirements of the preceding sentence,
then “Stock” means common stock issued by the Employer (or by a corporation
which is a member of the same controlled group) having a combined voting power
and dividend rights equal to or in excess of (A) that class of common stock of
the Employer (or

 

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of any other such corporation) having the greatest voting power; and (B) that
class of common stock of the Employer (or of any other such corporation) having
the greatest dividend rights.

 

“Stock Fund” means that portion of the Trust Fund consisting of Stock.

 

“Stock Obligation” means an indebtedness arising from any extension of credit to
the Plan or the Trust which satisfies the requirements set forth in Section 6.3
and which was obtained for any or all of the following purposes:

 

(i)          to acquire qualifying Employer securities as defined in Treasury
Regulations § 54.4975-12;

 

(ii)         to repay such Stock Obligation; or

 

(iii)        to repay a prior exempt loan.

 

“Trust” or “Trust Fund” means the trust fund created under this Plan.

 

“Trust Agreement” means the agreement between the Bank and the Trustee
concerning the Trust Fund. If any assets of the Trust Fund are held in a
co-mingled trust fund with assets of other qualified retirement plans, “Trust
Agreement” shall be deemed to include the trust agreement governing that
co-mingled trust fund. With respect to the allocation of investment
responsibility for the assets of the Trust Fund, the provisions of Article II of
the Trust Agreement are incorporated herein by reference.

 

“Trustee” means one or more corporate persons or individuals selected from time
to time by the Bank to serve as trustee or co-trustees of the Trust Fund.

 

“Unallocated Stock Fund” means that portion of the Stock Fund consisting of the
Plan’s holding of Stock which has been acquired in exchange for one or more
Stock obligations and which has not yet been allocated to the Participant’s
Accounts in accordance with Section 4.2.

 

“Valuation Date” means each business day provided the Stock is readily tradable
on an established securities market. If the Stock is not readily tradable on an
established securities market, then “Valuation Date” shall mean the last day of
the Plan Year and each other date as of which the Committee shall determine the
investment experience of the Investment Fund and adjust the Participants’
Accounts accordingly. The Valuation Date for transactions between the Plan and a
disqualified person, if any, shall be the date of the transaction, in accordance
with Treasury Regulation 54.4975-11(d)(5).

 

“Valuation Period” means the period following a Valuation Date and ending with
the next Valuation Date.

 

“Vesting Year” means a unit of Service credited to a Participant pursuant to
Section 9.2 for purposes of determining his vested interest in his Account.

 

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Section 3.            Eligibility for Participation.

 

3.1         Initial Eligibility. An Employee shall enter the Plan as of the
Entry Date coincident with or next following the later of the following dates:

 

(a)          the last day of the Employee’s first Eligibility Year, and

 

(b)          the Employee’s 21st birthday. However, if an Employee is not in
active Service with an Employer on the date he would otherwise first enter the
Plan, his entry shall be deferred until the next day he is in Service.

 

3.2         Definition of Eligibility Year. An “Eligibility Year” means an
applicable eligibility period (as defined below) in which the Employee has
completed 1,000 Hours of Service for the Employer. For this purpose:

 

(a)          an Employee’s first “eligibility period” is the 12-consecutive
month period beginning on the first day on which he has an Hour of Service, and

 

(b)          his subsequent eligibility periods will be 12-consecutive month
periods beginning on each January 1 after that first day of Service.

 

3.3         Terminated Employees. No Employee shall have any interest or rights
under this Plan if he is never in active Service with an Employer on or after
the Effective Date.

 

3.4         Certain Employees Ineligible. No Employee shall participate in the
Plan while his Service is covered by a collective bargaining agreement between
an Employer and the Employee’s collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee’s participation in the Plan.

 

3.5         Participation and Reparticipation. Subject to the satisfaction of
the foregoing requirements, an Employee shall participate in the Plan during
each period of his Service from the date on which he first becomes eligible
until his termination. For this purpose, an Employee who returns before five (5)
consecutive Breaks in Service who previously satisfied the initial eligibility
requirements or who returns after five (5) consecutive one year Breaks in
Service with a vested Account balance in the Plan shall re-enter the Plan as of
the date of his return to Service with an Employer.

 

3.6         Omission of Eligible Employee. If, in any Plan Year, any Employee
who should be included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution by his
Employer for the year has been made, the Employer shall make a subsequent
contribution with respect to the omitted Employee in the amount which the said
Employer would have contributed shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under applicable provisions
of the Code.

 

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3.7         Inclusion of Ineligible Employee. If, in any Plan Year, any person
who should not have been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made until after a
contribution for the year has been made, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person regardless
of whether or not a deduction is allowable with respect to the ineligible person
shall constitute a forfeiture for the Plan Year in which the discovery is made.

 

Section 4.            Contributions and Credits.

 

4.1         Discretionary Contributions. The Employer shall from time to time
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. The Employer shall have no obligation to contribute any amount
under this Plan except as so determined in its sole discretion. The Employer’s
contributions and available forfeitures for a Plan Year shall be credited as of
the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of 415 Compensation. Notwithstanding the foregoing,
this Plan shall not accept a direct rollover or rollover contribution of an
“eligible rollover” as such term is defined in Section 10.9-1 of the Plan.

 

4.2         Contributions for Stock Obligations. If the Trustee, upon
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer may contribute for each Plan Year an amount sufficient to
cover all payments of principal and interest as they come due under the terms of
the Stock Obligation. If there is more than one Stock Obligation, the Employer
shall designate the one to which any contribution is to be applied. Investment
earnings realized on Employer contributions and any dividends paid by the
Employer on Stock held in the Unallocated Stock Account, shall be applied to the
Stock Obligation related to that Stock, subject to Section 7.2.

 

In each Plan Year in which Employer contributions, earnings on contributions, or
dividends on unallocated Stock are used as payments under a Stock Obligation, a
certain number of shares of the Stock acquired with that Stock Obligation which
is then held in the Unallocated Stock Fund shall be released for allocation
among the Participants. The number of shares released shall bear the same ratio
to the total number of those shares then held in the Unallocated Stock Fund
(prior to the release) as (i) the principal and interest payments made on the
Stock Obligation in the current Plan Year bears to (ii) the sum of (i) above,
and the remaining principal and interest payments required (or projected to be
required on the basis of the interest rate in effect at the end of the Plan
Year) to satisfy the Stock Obligation.

 

At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.

 

 10 

 

 

4.3         Definitions Related to Contributions. For the purposes of this Plan,
the following terms have the meanings specified:

 

“Active Participant” means a Participant who has satisfied the eligibility
requirements under Section 3 and who has at least 1000 Hours of Service during
the current Plan Year. However, a Participant shall not qualify as an Active
Participant unless (i) he is in active Service with an Employer as of the last
day of the Plan Year, or (ii) he is on a Recognized Absence as of that date, or
(iii) his Service terminated during the Plan Year by reason of Disability,
death, Early or Normal Retirement.

 

In the event a Plan Year is a period of less than 12 months for any reason, then
415 Compensation for the short period shall not exceed the pro rata portion of
this limit created by multiplying a fraction which is the number of months in
the short period divided by twelve times the annual compensation limit.

 

4.4         Conditions as to Contributions. Employers’ contributions shall in
all events be subject to the limitations set forth in Section 5. Contributions
may be made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer’s contributions in connection with a failure
of the Plan to qualify initially under the Code, any amount contributed by an
Employer due to a good faith mistake of fact, or based upon a good faith but
erroneous determination of its deductibility under Section 404 of the Code,
shall be returned to the Employer within one year after the date on which the
contribution was originally made, or within one year after its nondeductibility
has been finally determined. However, the amount to be returned shall be reduced
to take account of any adverse investment experience within the Trust Fund in
order that the balance credited to each Participant’s Account is not less that
it would have been if the contribution had never been made.

 

Section 5.            Limitations on Contributions and Allocations.

 

5.1         Limitation on Annual Additions. Notwithstanding anything herein to
the contrary, allocation of Employer contributions for any Plan Year shall be
subject to the following:

 

5.1-1      No more than one-third of the Employer contributions used for
repayment of any Stock Obligation in accordance with Section 4.2 shall be
allocated to the accounts of Highly Paid Employees (within the meaning of Code
Section 414(q)), with the remaining Employer contributions to be made to
Non-Highly Compensated Employees in the manner specified under Section 8.1. Such
adjustments shall be made before any allocations occur.

 

 11 

 

 

5.1-2      After adjustment, if any, required by the preceding paragraph, the
annual additions during any Plan Year to any Participant’s Account under this
and any other defined contribution plans maintained by the Employer or an
affiliate (within the purview of Sections 414(b), (c) and (m) and Section 415(h)
of the Code, which affiliate shall be deemed the Employer for this purpose)
shall not exceed the lesser of: (i) $51,000 (or such other dollar amount which
results from cost-of-living adjustments under Section 415(d) of the Code) (the
“Dollar Limitation”) or (ii) 100 percent of the Participant’s 415 Compensation
for such limitation year (the “Percentage Limitation”). In the event Stock is
released from the Unallocated Stock Fund and allocated to a Participant’s
account for a particular Plan Year, the Employer may determine for such year
that an annual addition shall be calculated on the basis of the fair market
value of the Stock so released and allocated (such fair market value to be based
on the value as of the last Valuation Date of the Plan Year for which the Stock
is released) if the annual addition, as so calculated, is lower than the annual
addition calculated on the basis of the Employer contribution. The percentage
limitation shall not apply to any contribution for medical benefits after
separation from service (within the meaning of Section 401(h) or Section
419A(f)(2) of the Code) which is otherwise treated as an annual addition. If, as
a result of the allocation of forfeitures, a reasonable error in estimating a
Participant’s annual compensation, a reasonable error in determining the amount
of elective deferrals (within the meaning of Code Section 401(g)(3)) that may be
made with respect to any individual under the limits of Code Section 415, or
under other limited facts and circumstances that the Commissioner of the
Internal Revenue Service finds justify the availability of the rules set forth
in this paragraph, the annual additional under the terms of the Plan for a
particular Participant would cause the limitations of Code Section 415
applicable to that Participant for the limitation year to be exceeded, the
excess amounts shall not be deemed annual additional in that limitation year if
they are treated in accordance with any one of the following:

 

(i)          Any excess amount at the end of the Plan Year that cannot be
allocated to the Participant’s Account shall be reallocated to the remaining
Participants who are eligible for an allocation of Employer contributions for
the Plan Year. The reallocation shall be made in accordance with Section 4.1 of
the Plan as if the Participant whose Account otherwise would receive the excess
amount is not eligible for an allocation of Employer contributions.

 

(ii)         If, as a result of the allocation of forfeitures, there is an
excess annual addition with respect to a Participant for a limitation year and
the Participant is covered by the Plan at the end of the Plan Year, any excess
amount at the end of the Plan Year that cannot be allocated to the Participant’s
Account shall be used to reduce the Employer contributions for the Participant
in the next limitation year and any succeeding limitation years if necessary.

 

(iii)        If the Participant is not covered by the Plan at the end of the
Plan Year, the excess amount will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer contributions for all
remaining Participants in the next limitation year and each succeeding
limitation year if necessary.

 

 12 

 

 

(iv)        If a suspense account is in existence at any time during a
limitation year, it will not participate in any allocation of investment gains
and losses. All amounts held in suspense accounts must be allocated to
Participant’s Accounts before any contributions may be made to the Plan for the
limitation year.

 

(v)         If a suspense account exists at the time of Plan termination,
amounts held in the suspense account that cannot be allocated shall revert to
the Employer.

 

(vi)        Notwithstanding any provision of the Plan to the contrary, effective
for limitation years beginning on and after July 1, 2007, if the annual
additions are exceeded for any Participant, then the Plan may only correct such
excess in accordance with the Employee Plans Compliance Resolution System
(EPCRS) as set forth in Revenue Procedure 2013-12 or any superseding guidance,
including, but not limited to, the preamble to the final Treasury Regulations
under Section 415 of the Code.

 

5.1-3      For purposes of this Section 5.1, the “annual addition” to a
Participant’s Accounts means the sum of (i) Employer contributions, (ii)
Employee contributions, if any, and (iii) forfeitures. Annual additions to a
defined contribution plan also include amounts allocated, after March 31, 1984,
to an individual medical account, as defined in Section 415(l)(2) of the
Internal Revenue Code, which is part of a pension or annuity plan maintained by
the Employer, amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a Key
Employee under a welfare benefit fund, as defined in Section 419A(d) of the
Internal Revenue Code, maintained by the Employer. The $30,000 limitations
referred to shall, for each limitation year ending after 1988, be automatically
adjusted to the new dollar limitations determined by the Commissioner of
Internal Revenue for the calendar year beginning in that limitation year.
Effective July 1, 2007, “annual additions” shall not include (i) the direct
transfer of a benefit or Employee contribution from a qualified plan to the
Plan, (ii) rollover contributions described in Sections 401(a)(31), 402(c)(1),
403(a)(4), 403(b)(8), 408(d)(3) or 457(e)(16) of the Code, (iii) repayments of
amounts described in Section 411(a)(7)(B) of the Code, or (iv) restorative
payments. A restorative payment is a payment made to restore losses to the Plan
resulting from actions by a fiduciary for which there is a reasonable risk of
liability for breach of a fiduciary duty under ERISA or other applicable federal
or state law, where Participants who are similarly situated are treated
similarly with respect to the payments. Generally, payments are restorative
payments only if the payments are made to restore some or all of the Plan’s
losses due to an action (or failure to act) that creates a reasonable risk of
liability for such a breach of fiduciary duty, including payments to the Plan
made pursuant to a Department of Labor order, the Department of Labor’s
Voluntary Fiduciary Correction Program, or a court-approved settlement, to
restore losses to the Plan on account of the breach of fiduciary duty.

 

5.1-4      Notwithstanding the foregoing, if no more than one-third of the
Employer contributions to the Plan for a year which are deductible under Section
404(a)(9) of the Code are allocated to Highly Paid Employees (within the meaning
of Section 414(q) of the Internal Revenue Code), the limitations imposed herein
shall not apply to:

 

 13 

 

 

(i)          forfeitures of Employer securities (within the meaning of Section
409 of the Code) under the Plan if such securities were acquired with the
proceeds of a loan described in Section 404(a)(9)(A) of the Code), or

 

(ii)         Employer contributions to the Plan which are deductible under
Section 404(a)(9)(B) and charged against a Participant’s Account.

 

5.1-5      If the Employer contributes amounts, on behalf of Employees covered
by this Plan, to other “defined contribution plans” as defined in Section 3(34)
of ERISA, the limitation on annual additions provided in this Section shall be
applied to annual additions in the aggregate to this Plan and to such other
plans. Reduction of annual additions, where required, shall be accomplished
first by reductions under such other plan pursuant to the directions of the
named Fiduciary for administration of such other plans or under priorities, if
any, established under the terms of such other plans and then by allocating any
remaining excess for this Plan in the manner and priority set out above with
respect to this Plan.

 

5.1-6      A limitation year shall mean each 12 consecutive month period
beginning each January 1. Effective July 1, 2007, the limitation year may only
be changed by Plan amendment. Furthermore, if the Plan is terminated effective
as of a date other than the last day of the Plan’s limitation year, then the
Plan shall be treated as if the Plan had been amended to change its limitation
year.

 

5.2         Effect of Limitations. The Committee shall take whatever action may
be necessary from time to time to assure compliance with the limitations set
forth in Section 5.1. Specifically, the Committee shall see that each Employer
restrict its contributions for any Plan Year to an amount which, taking into
account the amount of available forfeitures, may be completely allocated to the
Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants’ compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
corrected in accordance with Section 5.1-2 of the Plan.

 

5.3         Limitations as to Certain Participants. Aside from the limitations
set forth in Section 5.1, if the Plan acquires any Stock in a transaction as to
which a selling shareholder or the estate of a deceased shareholder is claiming
the benefit of Section 1042 of the Code, the Committee shall see that none of
such Stock, and no other assets in lieu of such Stock, are allocated to the
Accounts of certain Participants in this Plan or be allocated directly or
indirectly under any plan of the Employer meeting the requirements of Code
Section 401(a) during the non allocation period, in order to comply with Code
Section 409(n).

 

This restriction shall apply at all times to a Participant who owns (taking into
account the attribution rules under Section 318(a) of the Code, without regard
to the exception for employee plan trusts in Section 318(a)(2)(B)(i)) more than
25 percent of (i) any class of outstanding stock of a corporation and (ii) the
total value of any class of outstanding stock of a corporation which

 

 14 

 

 

issued the Stock acquired by the Plan, or another corporation within the same
controlled group, as defined in Section 409(l)(4) of the Code (any such class of
stock hereafter called a “Related Class”). For this purpose, a Participant who
owns more than 25 percent of Related Class at any time within the one year
preceding the Plan’s purchase of the Stock shall be subject to the restriction
as to all allocations of the Stock, but any other Participant shall be subject
to the restriction only as to allocations which occur at a time when he owns
more than 25 percent of any Related Class.

 

Further, this restriction shall apply to the selling shareholder claiming the
benefit of Section 1042 and any other Participant who is related to such a
shareholder within the meaning of Section 267(b) of the Code, during the period
beginning on the date of sale and ending on the later of (1) the date that is
ten years after the date of sale, or (2) the date of the Plan allocation
attributable to the final payment of acquisition indebtedness incurred in
connection with the sale.

 

This restriction shall not apply to any Participant who is a lineal descendant
of a selling shareholder if the aggregate amounts allocated under the Plan for
the benefit of all such descendants do not exceed five percent of the Stock
acquired from the shareholder.

 

5.4         Erroneous Allocations. No Participant shall be entitled to any
annual additions or other allocations to his Account in excess of those
permitted under Section 5. If it is determined at any time that the
administrator and/or Trustee have erred in accepting and allocating any
contributions or forfeitures under this Plan, or in allocating investment
adjustments, or in excluding or including any person as a Participant, then the
administrator, in a uniform and nondiscriminatory manner, shall determine the
manner in which such error shall be corrected and shall promptly advise the
Trustee in writing of such error and of the method for correcting such error.
The Accounts of any or all Participants may be revised, if necessary, in order
to correct such error.

 

Section 6.            Trust Fund and Its Investment

 

6.1         Creation of Trust Fund. All amounts received under the Plan from
Employers and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Bank and the Trustee. The
benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, and the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.

 

6.2         Stock Fund and Investment Fund. The Trust Fund held by the Trustee
shall be divided into the Stock Fund, consisting entirely of Stock, and the
Investment Fund, consisting of all assets of the Trust other than Stock. The
Trustee shall have no investment responsibility for the Stock Fund, but shall
accept any Employer contributions made in the form of Stock, and shall acquire,
sell, exchange, distribute, and otherwise deal with and dispose of Stock in
accordance with the instructions of the Committee. The Trustee shall have full
responsibility for the investment of the Investment Fund, except to the extent
such responsibility may be delegated from time to time to one or more investment
managers pursuant to Section 2.3 of the Trust

 

 15 

 

 

Agreement, or to the extent the Committee directs the Trustee to purchase Stock
with the assets in the Investment Fund.

 

6.3         Acquisition of Stock. From time to time the Committee may, in its
sole discretion, direct the Trustee to acquire Stock from the issuing Employer
or from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for
such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
“Stock Obligation”. The term “Stock Obligation” shall refer to a loan made to
the Plan by a disqualified person within the meaning of Section 4975(e)(2) of
the Code, or a loan to the Plan which is guaranteed by a disqualified person. A
Stock Obligation includes a direct loan of cash, a purchase-money transaction,
and an assumption of an obligation of a tax-qualified employee stock ownership
plan under Section 4975(e)(7) of the Code (“ESOP”). For these purposes, the term
“guarantee” shall include an unsecured guarantee and the use of assets of a
disqualified person as collateral for a loan, even though the use of assets may
not be a guarantee under applicable state law. An amendment of a Stock
Obligation in order to qualify as an “exempt loan” is not a refinancing of the
Stock Obligation or the making of another Stock Obligation. The term “exempt
loan” refers to a loan that satisfies the provisions of this paragraph. A
“non-exempt loan” fails to satisfy this paragraph. “Stock Obligation” shall be
synonymous with “exempt loan.” All Stock Obligations incurred by the Plan must
be for the primary benefit of Plan Participants and Beneficiaries. Any Stock
Obligation shall be subject to the following conditions and limitations:

 

6.3-1      A Stock Obligation shall be for a specific term, shall not be payable
on demand except in the event of default, and shall bear a reasonable rate of
interest, such that the interest rate and the price of the securities to be
acquired with the Stock Obligation will not cause the Plan’s assets to be
inappropriately impaired in violation of Treasury Regulation Section
54.4975-7(b)(3).6.3-2  A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior Stock
Obligation which is being repaid with the proceeds of the current Stock
Obligation. No other assets of the Plan and Trust may be used as collateral for
a Stock Obligation, and no creditor under a Stock Obligation shall have any
right or recourse to any Plan and Trust assets other than Stock remaining
subject to a collateral pledge.

 

6.3-3      Any pledge of Stock to secure a Stock Obligation must provide for the
release of pledged Stock in connection with payments on the Stock obligations in
the ratio prescribed in Section 4.2.

 

6.3-4      Repayments of principal and interest on any Stock Obligation during
any Plan Year must not exceed an amount equal to the sum of contributions and
earnings received during or prior to such Plan Year, less such payments in prior
Plan Years and from cash dividends received on Stock, in the last case, however,
subject to the further requirements of Section 7.2. All contributions and
earnings shall be separately accounted for in the Plan’s records until the Stock
Obligation is repaid.

 

 16 

 

 

6.3-5      In the event of default of a Stock Obligation, the value of Plan
assets transferred in satisfaction of the Stock Obligation must not exceed the
amount of the default. If the lender is a disqualified person within the meaning
of Section 4975 of the Code, a Stock Obligation must provide for a transfer of
Plan assets upon default only upon and to the extent of the failure of the Plan
to meet the payment schedule of said Stock Obligation. For purposes of this
paragraph, the making of a guarantee does not make a person a lender.

 

6.4         Participants’ Option to Diversify. The Committee shall provide for a
procedure under which each Participant may, during the qualified election
period, elect to “diversify” a portion of the Employer Stock allocated to his
Account, as provided in Section 401(a)(28)(B) of the Code. An election to
diversify must be made on the prescribed form and filed with the Committee
within the period specified herein. For each of the first five (5) Plan years in
the qualified election period, the Participant may elect to diversify an amount
which does not exceed 25% of the number of shares allocated to his Account since
the inception of the Plan, less all shares with respect to which an election
under this Section has already been made. For the last year of the qualified
election period, the Participant may elect to have up to 50 percent of the value
of his Account committed to other investments, less all shares with respect to
which an election under this Section has already been made. The term “qualified
election period” shall mean the six (6) Plan Year period beginning with the
first Plan Year in which a Participant has both attained age 55 and completed 10
years of participation in the Plan. A Participant’s election to diversify his
Account may be made within each year of the qualified election period and shall
continue for the 90-day period immediately following the last day of each year
in the qualified election period. Once a Participant makes such election, the
Plan must complete diversification in accordance with such election within 90
days after the end of the period during which the election could be made for the
Plan Year. In the discretion of the Committee, the Plan may satisfy the
diversification requirement by any of the following methods:

 

6.4-1      The Plan may distribute all or part of the amount subject to the
diversification election.

 

6.4-2      The Plan may offer the Participant at least three other distinct
investment options, if available under the Plan. The other investment options
shall satisfy the requirements of Regulations under Section 404(c) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

6.4-3      The Plan may transfer the portion of the Participant’s Account
subject to the diversification election to another qualified defined
contribution plan of the Employer that offers at least three investment options
satisfying the requirements of the Regulations under Section 404(c) of ERISA.

 

Section 7.            Voting Rights and Dividends on Stock.

 

7.1         Voting and Tendering of Stock. The Trustee generally shall vote all
shares of Stock held under the Plan in accordance with the written instructions
of the Committee.  However, if any Employer has registration-type class of
securities within the meaning of Section

 

 17 

 

 

409(e)(4) of the Code, or if a matter submitted to the holders of the Stock
involves a merger, consolidation, recapitalization, reclassification,
liquidation, dissolution, or sale of substantially all assets of an entity, then
(i) the shares of Stock which have been allocated to Participants’ Accounts
shall be voted by the Trustee in accordance with the Participants’ written
instructions, and (ii) the Trustee shall vote any unallocated Stock and
allocated Stock for which it has received no voting instructions in the same
proportions as it votes the allocated Stock for which it has received
instructions from Participants. In the event no shares of Stock have been
allocated to Participants’ Accounts at the time Stock is to be voted and any
exempt loan which may be outstanding is not in default, each Participant shall
be deemed to have one share of Stock allocated to his or her Account for the
sole purpose of providing the Trustee with voting instructions.

 

Notwithstanding any provision hereunder to the contrary, all unallocated shares
of Stock must be voted by the Trustee in a manner determined by the Trustee to
be for the exclusive benefit of the Participants and Beneficiaries. Whenever
such voting rights are to be exercised, the Employers shall provide the Trustee,
in a timely manner, with the same notices and other materials as are provided to
other holders of the Stock, which the Trustee shall distribute to the
Participants. The Participants shall be provided with adequate opportunity to
deliver their instructions to the Trustee regarding the voting of Stock
allocated to their Accounts. The instructions of the Participants’ with respect
to the voting of allocated shares hereunder shall be confidential.

 

7.1-1      In the event of a tender offer, Stock shall be tendered by the
Trustee in the same manner as set forth above with respect to the voting of
Stock. Notwithstanding any provision hereunder to the contrary, Stock must be
tendered by the Trustee in a manner determined by the Trustee to be for the
exclusive benefit of the Participants and Beneficiaries.

 

7.2         Dividends on Stock. Dividends on Stock which are received by the
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant’s Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
been paid. Dividends on Stock credited to Participants’ Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Employer paying the dividends, either (i) be credited to the Accounts in
accordance with Section 8.3 and invested as part of the Investment Fund, (ii) be
distributed immediately to the Participants in proportion with the Participants’
Stock Fund Account balance (iii) be distributed to the Participants within 90
days of the close of the Plan Year in which paid in proportion with the
Participants’ Stock Fund Account balance; (iv) be used to make payments on the
Stock Obligation, or (v) at the election of the Participant or his Beneficiary,
be (1) payable as provided clause (ii) or (iii) above, or (2) paid to the Plan
and reinvested in the Stock Fund pursuant to Section 6.2 hereof. If dividends on
Stock allocated to a Participant’s Account are used to repay the Stock
Obligation, Stock with a fair market value equal to the dividends so used must
be allocated to such Participant’s Account in lieu of the dividends. Dividends
on Stock held in the Unallocated Stock Fund which are received by the Trustee in
the form of cash shall be allocated to Participants’ Investment Fund Accounts
(pro rata based on the Participant’s Account balance in relation to all
Participants’ Account balances) and shall be applied as soon as practicable to

 

 18 

 

 

payments of principal and interest under the Stock Obligation incurred with the
purchase of the Stock.

 

Section 8.            Adjustments to Accounts.

 

8.1         Adjustments for Transactions. An Employer contribution pursuant to
Section 4.1 shall be credited to the Participants’ Accounts as of the last day
of the Plan Year for which it is contributed, in accordance with Section 4.1.
Stock released from the Unallocated Stock Fund upon the Trust’s repayment of a
Stock Obligation pursuant to Section 4.2 shall be credited to the Participants’
Accounts as of the last day of the Plan Year in which the repayment occurred,
pro rata based on the cash applied from such Participant’s account relative to
the cash applied from all Participants’ Accounts. Any benefit which is paid to a
Participant or Beneficiary pursuant to Section 10 shall be charged to the
Participant’s Account as of the first day of the Valuation Period in which it is
paid. Any forfeiture or restoral shall be charged or credited to the
Participant’s Account as of the first day of the Valuation Period in which the
forfeiture or restoral occurs pursuant to Section 9.6.

 

8.2         Valuation of Investment Fund. As of each Valuation Date, the Trustee
shall prepare a balance sheet of the Investment Fund, recording each asset
(including any contribution receivable from an Employer) and liability at its
fair market value. Any liability with respect to short positions or options and
any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer. The determination of gain or loss shall be consistent with the
balance sheets of the Investment Fund for the current and preceding Valuation
Dates.

 

8.3         Adjustments for Investment Experience. Any net gain or loss of the
Investment Fund during a Valuation Period, as determined pursuant to Section
8.2, shall be allocated as of the last day of the Valuation Period among the
Participants’ Accounts in proportion to the opening balance in each Account, as
adjusted for benefit payments and forfeitures during the Valuation Period,
without regard to whatever Stock may be credited to an Account. Any cash
dividends received on Stock credited to Participant’s Accounts shall be
allocated as of the last day of the Valuation Period among the Participants’
Accounts based on the opening balance in each Participant’s Stock Fund Account.

 

Section 9.            Vesting of Participants’ Interests.

 

9.1         Deferred Vesting in Accounts. A Participant’s vested interest in his
Account shall be based on his Vesting Years in accordance with the following
table, subject to the balance of this Section 9:

 

 19 

 

 

Vesting

Years

 

Percentage of

Interest Vested

        Fewer than 2   0% 2   20% 3   40% 4   60% 5   80% 6 or more   100%

 

Notwithstanding the foregoing, to the extent that the Plan incurred a Stock
Obligation for the purpose of acquiring “employer securities” (as defined in
Code Section 4975(e)(8)) prior to September 26, 2005, the vesting schedule
described below shall apply to Plan Years beginning before the earlier of the
date on which such loan (a) was fully repaid; or (b) was, as of September 26,
2005, scheduled to be fully repaid and further applies to the Account of any
Participant who does not have one Hour of Service under the Plan in or after the
first Plan Year following the Plan Year in which such repayment was made.

 

Vesting

Years

 

Percentage of

Interest Vested

        Fewer than 3   0% 3   20% 4   40% 5   60% 6   80% 7 or more   100%

 

9.2         Computation of Vesting Years. For purposes of this Plan, a “Vesting
Year” means generally a Plan Year in which an Employee has at least 1,000 Hours
of Service, beginning with the first Plan Year in which the Employee has
completed an Hour of Service with the Employer, and including Service with other
Employers as provided in the definition of “Service.” However, a Participant’s
Vesting Years shall be computed subject to the following conditions and
qualifications:

 

9.2-1      A Participant’s Vesting Years shall not include any Service prior to
the date on which an Employee attains age 18.

 

9.2-2      A Participant’s vested interest in his Account accumulated before
five (5) consecutive Breaks in Service shall be determined without regard to any
Service after such five consecutive Breaks in Service. Further, if a Participant
has five (5) consecutive Breaks in Service before his interest in his Account
has become vested to some extent, pre-Break years of Service shall not be
required to be taken into account for purposes of determining his post-Break
vested percentage.

 

 20 

 

 

9.2-3      In the case of a Participant who has 5 or more consecutive 1-year
Breaks in Service, the Participant’s pre-Break Service will count in vesting of
the Employer-derived post-break accrued benefit only if either:

 

(i)          such Participant has any nonforfeitable interest in the accrued
benefit attributable to Employer contributions at the time of separation from
Service, or

 

(ii)         upon returning to Service the number of consecutive 1-year Breaks
in Service is less than the number of years of Service.

 

9.2-4      Unless otherwise specifically excluded, a Participant’s Vesting Years
shall include any period of active military duty to the extent required by the
Military Selective Service Act of 1967 (38 U.S.C. Section 2021). Notwithstanding
any provision of the Plan to the contrary, calculation of service for
determining Vesting Years with respect to qualified military service will be
provided in accordance with Section 414(u) of the Code.

 

9.2-5      If any amendment changes the vesting schedule, including an automatic
change to or from a top-heavy vesting schedule, any Participant with three (3)
or more Vesting Years may, by filing a written request with the Employer, elect
to have his vested percentage computed under the vesting schedule in effect
prior to the amendment. The election period must begin not later than the later
of sixty (60) days after the amendment is adopted, the amendment becomes
effective, or the Participant is issued written notice of the amendment by the
Employer or the Committee.

 

9.3         Full Vesting Upon Certain Events.

 

9.3-1      Notwithstanding Section 9.1, a Participant’s interest in his Account
shall fully vest on the Participant’s Normal Retirement Date. The Participant’s
interest shall also fully vest in the event that his Service is terminated by
Early Retirement, Disability or by death. Effective January 1, 2007, for
purposes of this Section 9.3-1, benefits payable in the event of a Participant’s
death or Disability while performing qualified military service shall be
determined in accordance with Section 414(u)(9) of the Code.

 

9.3-2      The Participant’s interest in his Account shall also fully vest in
the event of a “Change in Control” of the Bank, or the Company. For these
purposes, a “Change in Control” shall be defined as a change in control of the
Bank or the Company of a nature that: (i) would be required to be reported in
response to Item 5.01 of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or
the Company within the meaning of the Home Owners’ Loan Act, as amended, and
applicable rules and regulations promulgated thereunder (collectively, the
“HOLA”) as in effect at the time of the Change in Control; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any “person” (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act),

 

 21 

 

 

directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of Company’s outstanding securities, except for any
securities purchased by the Bank’s employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the “Incumbent
Board”) cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company’s
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or Company or similar transaction in which the Bank or Company is not the
surviving institution occurs or is effected; or (d) a proxy statement soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company is distributed, seeking stockholder approval of a plan
of reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the plan are exchanged for or converted into
cash or property or securities not issued by the Bank; or (e) a tender offer is
made for 25% or more of the voting securities of the Company and the
shareholders owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their shares pursuant
to such tender offer and such tendered shares have been accepted by the tender
offeror. Notwithstanding anything in this subsection to the contrary, a Change
in Control shall not be deemed to have occurred upon the conversion of the
Company’s mutual holding company parent to stock form, or in connection with any
reorganization used to effect such a conversion.

 

9.4         Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
Participant’s interest in his Account shall fully vest upon termination of this
Plan or upon the permanent and complete discontinuance of contributions by his
Employer. In the event of a partial termination, the interest of each affected
Participant shall fully vest with respect to that part of the Plan which is
terminated. For purposes of determining whether there has been a partial
termination of the Plan under Code Section 411(d)(3), such determination will be
made consistent with Code Section 411(d)(3) and the regulations promulgated
thereunder, and by applying the principles set forth in Revenue Ruling 2007-43
and any subsequent authority issued by the Internal Revenue Service or Treasury
Department.

 

9.5         Forfeiture, Repayment, and Restoral. If a Participant’s Service
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited if he either (i) receives a distribution
of his entire vested interest pursuant to Section 10.1, or (ii) incurs five (5)
consecutive one year Break in Service. If a Participant’s Service terminates
prior to having any portion of his Account become vested, such Participant shall
be deemed to have received a distribution of his vested interest as of the
Valuation Date next following his termination of Service.

 

 22 

 

 

If a Participant who has received his entire vested interest returns to Service
before he has five (5) consecutive Breaks in Service, he may repay to the
Trustee an amount equal to the distribution. The Participant may repay such
amount at any time within five years after he has returned to Service. The
amount shall be credited to his Account at the time it is repaid; an additional
amount equal to that portion of his Account which was previously forfeited shall
be restored to his Account at the same time from other Employees’ forfeitures
and, if such forfeitures are insufficient, from a special contribution by his
Employer for that year. A Participant who was deemed to have received a
distribution of his vested interest in the Plan shall have his Account restored
as of the first day on which he performs an Hour of Service after his return.

 

9.6         Accounting for Forfeitures. If a portion of a Participant’s Account
is forfeited, Stock allocated to said Participant’s Account shall be forfeited
only after other assets are forfeited. If interests in more than one class of
Stock have been allocated to a Participant’s Account, the Participant must be
treated as forfeiting the same proportion of each class of Stock. A forfeiture
shall be charged to the Participant’s Account as of the first day of the first
Valuation Period in which the forfeiture becomes certain pursuant to Section
9.5. Except as otherwise provided in that Section, a forfeiture shall be added
to the contributions of the terminated Participant’s Employer which are to be
credited to other Participants pursuant to Section 4.1 as of the last day of the
Plan Year in which the forfeiture becomes certain.

 

9.7         Vesting and Nonforfeitability. A Participant’s interest in his
Account which has become vested shall be nonforfeitable for any reason.

 

Section 10.          Payment of Benefits.

 

10.1       Benefits for Participants. For a Participant whose Service ends for
any reason, distribution will be made to or for the benefit of the Participant
or, in the case of the Participant’s death, his Beneficiary, by either, or a
combination of the following methods:

 

10.1-1    By payment in a lump sum, in accordance with Section 10.2; or

 

10.1-2    By payment in a series of substantially equal annual installments over
a period not to exceed five (5) years, provided the maximum period over which
the distribution of a Participant’s Account may be made shall be extended by 1
year, up to five (5) additional years, for each $205,000 (or fraction thereof)
by which such Participant’s Account balance exceeds $1,035,000 (the
aforementioned figures are subject to cost-of-living adjustments prescribed by
the Secretary of the Treasury pursuant to Section 409(o)(2) of the Code).

 

The Participant shall elect the manner in which his vested Account balance will
be distributed to him. If a Participant so desires, he may direct how his
benefits are to be paid to his Beneficiary. If a deceased Participant did not
file a direction with the Committee, the Participant’s benefits shall be
distributed to his Beneficiary in a lump sum. Notwithstanding any provision to
the contrary, if the value of a Participant’s vested Account balance at the time
of any distribution, does not equal or exceed $5,000, then such Participant’s
vested Account shall be

 

 23 

 

 

distributed in a lump sum within 60 days after the end of the Plan Year in which
employment terminates. If the value of a Participant’s vested Account balance
is, or has ever been, in excess of $5,000, then his benefits shall not be paid
prior to the later of the time he has attained Normal Retirement or age 62
unless he elects an early payment date in a written election filed with the
Committee. A Participant may modify such an election at any time, provided any
new benefit payment date is at least 30 days after a modified election is
delivered to the Committee. Failure of a Participant to consent to a
distribution prior to the later of Normal Retirement or age 62 shall be deemed
to be an election to defer commencement of payment of any benefit under this
section.

 

Notwithstanding the foregoing, effective as of March 28, 2005, if a
Participant’s vested Account balance does not exceed $1,000 and the Participant
fails to return his distribution election form, the Plan Administrator shall
distribute the vested portion of his Account balance to the Participant in a
lump sum, in cash or stock or a combination of cash and stock, in the sole
discretion of the Plan Administrator, as soon as practicable but in no event
later than 60 days after the end of the Plan Year in which employment
terminates. If the terminated Participant’s vested Account balance exceeds
$1,000 but is not greater than $5,000, and the Participant fails to consent to
the distribution, then the Plan Administrator shall liquidate the Participant’s
Stock Fund Account and pay the Participant’s vested Account balance, in cash, in
a direct rollover to an individual retirement plan designated by the Plan
Administrator in accordance with Code Section 401(a)(31)(B) and the regulations
promulgated thereunder.

 

The Administrator shall provide Participants or other distributees of mandatory
distributions under Section 10.1 with a written notice designed to comply with
the requirements of Section 411(a)(11) of the Code. Such notice shall be
provided within a reasonable time before such mandatory distribution, and such
notice may be provided up to 180 days before the first day of the first period
for which an amount is payable.

 

10.2       Time for Distribution.

 

10.2-1  If the Participant and, if applicable, with the consent of the
Participant’s spouse, elects the distribution of the Participant’s Account
balance in the Plan, distribution shall commence as soon as practicable
following his termination of Service, but no later than one year after the close
of the Plan Year:

 

(i)          in which the Participant separates from service by reason of
attainment of Normal Retirement Age under the Plan, Disability, or death; or

 

(ii)         which is the fifth Plan Year following the year in which the
Participant resigns or is dismissed, unless he is reemployed before such date.

 

10.2-2  Unless the Participant elects otherwise, the distribution of the balance
of a Participant’s Account shall commence not later than the 60th day after the
latest of the close of the Plan Year in which -

 

(i)          the Participant attains the age of 65;

 

 24 

 

 

(ii)         occurs the tenth anniversary of the year in which the Participant
commenced participation in the Plan; or

 

(iii)        the Participant terminates his Service with the Employer.

 

10.2-3  Notwithstanding anything to the contrary, (1) with respect to a
5-percent owner (as defined in Code Section 416), distribution of a
Participant’s Account shall commence (whether or not he remains in the employ of
the Employer) not later than the April 1 of the calendar year next following the
calendar year in which the Participant attains age 70- ½, and (2) with respect
to all other Participants, payment of a Participant’s benefit will commence not
later than April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2, or, if later, the year in which the Participant
retires. A Participant’s benefit from that portion of his Account committed to
the Investment Fund shall be calculated on the basis of the most recent
Valuation Date before the date of payment. All distributions under this Plan
shall be determined and made in accordance with final and temporary regulations
Sections 1.401(a)(9)-1 through 1.401(a)(9)-9, as promulgated under Code Section
401(a)(9), including the minimum distribution incidental benefit requirements of
Code Section 401(a)(9)(G) and Section 1.401(a)(9)-2 of the regulations. These
provisions override any distribution options in the Plan inconsistent with Code
Section 401(a)(9).

 

10.2-4    Distribution of a Participant’s Account balance after his death shall
comply with the following requirements:

 

(i)          If a Participant dies before his distributions have commenced,
distribution of his Account to his Beneficiary shall commence not later than one
year after the end of the Plan Year in which the Participant died, however, if
the Participant’s Beneficiary is his surviving Spouse, distributions may
commence on the date on which the Participant would have attained age 70-1/2. In
either case, distributions shall be completed within five years after they
commence.

 

(ii)         If the Participant dies after distribution has commenced pursuant
to Section 10.1-2 but before his entire interest in the Plan has been
distributed to him, then the remaining portion of that interest shall, in
accordance with Section 401(a)(9) of the Code, be distributed at least as
rapidly as under the method of distribution being used under Section 10.1-2 at
the date of his death.

 

(iii)        If a married Participant dies before his benefit payments begin,
then unless he has specifically elected otherwise the Committee shall cause the
balance in his Account to be paid to his Spouse. No election by a married
Participant of a different Beneficiary shall be valid unless the election is
accompanied by the Spouse’s written consent, which (i) must acknowledge the
effect of the election, (ii) must explicitly provide either that the designated
Beneficiary may not subsequently be changed by the Participant without the
Spouse’s further consent, or that it may be changed without such consent, and
(iii) must be witnessed by the Committee, its representative, or a notary

 

 25 

 

 

public. (This requirement shall not apply if the Participant establishes to the
Committee’s satisfaction that the Spouse may not be located.)

 

10.2-5    Minimum Distribution Requirements for Plan Years Beginning On or After
January 1, 2003.

 

(i)           General Rules.

 

(A)         Effective Date. The provisions of this Section 10.2-5 will apply for
purposes of determining required minimum distributions for calendar years
beginning with the 2003 calendar year.

 

(B)         TEFRA Section 242(b)(2) Elections. Notwithstanding the other
provisions of this Section 10, distributions may be made under a designation
made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax
Equity and Fiscal Responsibility Act (“TEFRA”) and the provisions of the Plan
that relate to Section 242(b)(2) of TEFRA.

 

(ii)          Time and Manner of Distribution.

 

(A)         Required Beginning Date. The Participant’s entire interest will be
distributed, or begin to be distributed, to the Participant no later than the
Participant’s Required Beginning Date.

 

(B)         Death of Participant before Distributions Begin. If the Participant
dies before distributions begin, the Participant’s entire interest will be
distributed, or begin to be distributed, no later than as follows:

 

(I)         if the Participant’s surviving spouse is the Participant’s sole
Designated Beneficiary, then, distributions to the surviving spouse will begin
by December 31 of the calendar year immediately following the calendar year in
which the Participant died, or by December 31 of the calendar year in which the
Participant would have attained age 70½, if later.

 

(II)        if the Participant’s surviving spouse is not the Participant’s sole
Designated Beneficiary, then, distributions to the Designated Beneficiary will
begin by December 31 of the calendar year immediately following the calendar
year in which the Participant died.

 

(III)       if there is no Designated Beneficiary as of September 30 of the year
following the year of the Participant’s death, the Participant’s entire interest
will be distributed by December 31 of the calendar year containing the fifth
anniversary of the Participant’s death.

 

(IV)        if the Participant’s surviving spouse is the Participant’s sole
Designated Beneficiary and the surviving spouse dies after the Participant but
before distributions to the surviving spouse begin, this Section 10.2-5(ii)(B),
other

 

 26 

 

 

than Section 10.2.5(ii)(B)(I), will apply if the surviving spouse were the
Participant.

 

For purposes of this Section 10.2-5(ii)(B) and Section 10.2-5(iv), unless
Section 10.2-5(ii)(IV) applies, distributions are considered to begin on the
Participant’s Required Beginning Date. If Section 10.2-5(ii)(IV) applies,
distributions are considered to begin on the date distributions are required to
begin to the surviving spouse under Section 10.2-5(ii)(B)(I).

 

(C)         Forms of Distribution. Unless the Participant’s interest is
distributed in a lump sum on or before the Required Beginning Date, as of the
first distribution calendar year distributions will be made in accordance with
Sections 10.2-5(iii) and Section 10.2-5(iv).

 

(iii)         Required Minimum Distributions During Participant’s Lifetime.

 

(A)         Amount of Required Minimum Distribution for Each Distribution
Calendar Year. During the Participant’s lifetime, the minimum amount that will
be distributed for each Distribution Calendar Year is the lesser of:

 

(I)         the quotient obtained by dividing the Participant’s Account Balance
by the distribution period in the Uniform Lifetime Table set forth in Section
1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the
Participant’s birthday in the Distribution Calendar Year; or

 

(II)        if the Participant’s sole Designated Beneficiary for the
Distribution Calendar Year is the Participant’s spouse, the quotient obtained by
dividing the Participant’s Account Balance by the number in the Joint and Last
Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations,
using the Participant’s and spouse’s ages as of the Participant’s and spouse’s
birthdays in the Distribution Calendar Year.

 

(B)         Lifetime Required Minimum Distributions Continue through Year of
Participant’s Death. Required minimum distributions will be determined under
this Section 10.2-5 beginning with the first Distribution Calendar Year and up
to and including the Distribution Calendar Year that includes the Participant’s
date of death.

 

(iv)         Required Minimum Distributions After Participant’s Death.

 

(A)         Death On or After Date Distributions Begin.

 

(I)         Participant Survived by Designated Beneficiary. If the Participant
dies on or after the date distributions begin and there is a Designated
Beneficiary, the minimum amount that will be distributed for each Distribution
Calendar Year after the year of the Participant’s death is

 

 27 

 

 

the quotient obtained by dividing the Participant’s Account Balance by the
longer of the remaining Life Expectancy of the Participant or the remaining Life
Expectancy of the Participant’s Designated Beneficiary, determined as follows:

 

The Participant’s remaining Life Expectancy is calculated using the age of the
Participant in the year of death, reduced by one for each subsequent year.

 

If the Participant’s surviving spouse is the Participant’s sole Designated
Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated
for each Distribution Calendar Year after the year of the Participant’s death
using the surviving spouse’s age as of the spouse’s birthday in that year. For
Distribution Calendar Years after the year of the surviving spouse’s death, the
remaining Life Expectancy of the surviving spouse is calculated using the age of
the surviving spouse as of the spouse’s birthday in the calendar year of the
spouse’s death, reduced by one for each subsequent calendar year.

 

If the Participant’s surviving spouse is not the Participant’s sole Designated
Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is
calculated using the age of the Beneficiary in the year following the year of
the Participant’s death, reduced by one for each subsequent year.

 

(II)        No Designated Beneficiary. If the Participant dies on or after the
date distributions begin and there is no Designated Beneficiary as of September
30 of the year after the year of the Participant’s death, the minimum amount
that will be distributed for each Distribution Calendar Year after the year of
the Participant’s death is the quotient obtained by dividing the Participant’s
Account Balance by the Participant’s remaining Life Expectancy calculated using
the age of the Participant in the year of death, reduced by one for each
subsequent year.

 

(B)         Death before Date Distributions Begin.

 

(I)         Participant Survived by Designated Beneficiary. If the Participant
dies before the date distributions begin and there is a Designated Beneficiary,
the minimum amount that will be distributed for each Distribution Calendar Year
after the year of the Participant’s death is the quotient obtained by dividing
the Participant’s Account Balance by the remaining Life Expectancy of the
Participant’s Designated Beneficiary, determined as provided in Section
10.2-5(iv)(A).

 

(II)        No Designated Beneficiary. If the Participant dies before the date
distributions begin and there is no Designated Beneficiary as of

 

 28 

 

 

September 30 of the year following the year of the Participant’s death,
distribution of the Participant’s entire interest will be completed by December
31 of the calendar year containing the fifth anniversary of the Participant’s
death.

 

(III)       Death of Surviving Spouse Before Distributions to Surviving Spouse
Are Required to Begin. If the Participant dies before the date distributions
begin, the Participant’s surviving spouse is the Participant’s sole Designated
Beneficiary, and the surviving spouse dies before distributions are required to
begin to the surviving spouse under Section 10.2-5(ii)(B)(I), this Section
10.2-5(iv)(B) will apply as if the surviving spouse were the Participant.

 

(iv)         Definitions.

 

(A)         “Designated Beneficiary.” The individual who is designated as the
Beneficiary under the Plan and is the Designated Beneficiary under Section
401(a)(9) of the Code and Section 1.401(1)(9)-1, Q&A-4, of the Treasury
Regulations.

 

(B)         “Distribution Calendar Year.” A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant’s
death, the first Distribution Calendar Year is the calendar year immediately
preceding the calendar year which contains the Participant’s required beginning
date. For distributions beginning after the Participant’s death, the first
Distribution Calendar Year is the calendar year in which distributions are
required to begin under Section 10.2.5(ii)(B). The required minimum distribution
for the Participant’s first Distribution Calendar Year will be made on or before
the Participant’s required beginning date. The required minimum distribution for
other Distribution Calendar Years, including the required minimum distribution
for the Distribution Calendar Year in which the Participant’s required beginning
date occurs, will be made on or before December 31 of that Distribution Calendar
Year.

 

(C)         “Life Expectancy.” Life Expectancy as computed by use of the Single
Life Table in Section 1.401(a)(9)-9 of the Treasury Regulations.

 

(D)         “Participant’s Account Balance.” The Account balance as of the last
Valuation Date in the calendar year immediately preceding the Distribution
Calendar Year (valuation calendar year) increased by the amount of any
contributions made and allocated or forfeitures allocated to the Account balance
as of dates in the valuation calendar year after the Valuation Date and
decreased by distributions made in the valuation calendar year after the
Valuation Date. The Account balance for the valuation calendar year includes any
amounts rolled over or transferred to the Plan either in the valuation calendar
year or in the

 

 29 

 

 

Distribution Calendar Year if distributed or transferred in the valuation
calendar year.

 

(E)         “Required Beginning Date.” The Required Beginning Date shall be,
with respect to a 5-percent owner (as defined in Code Section 416), not later
than April 1 of the calendar year next following the calendar year in which the
Participant attains age 70½, and (2) with respect to all other Participants, the
Required Beginning Date shall be not later than April 1 of the calendar year
following the calendar year in which the Participant attains age 70½, or, if
later, the year in which the Participant retires.

 

10.3       Marital Status. The Committee shall from time to time take whatever
steps it deems appropriate to keep informed of each Participant’s marital
status. Each Employer shall provide the Committee with the most reliable
information in the Employer’s possession regarding its Participants’ marital
status, and the Committee may, in its discretion, require a notarized affidavit
from any Participant as to his marital status. The Committee, the Plan, the
Trustee, and the Employers shall be fully protected and discharged from any
liability to the extent of any benefit payments made as a result of the
Committee’s good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.

 

10.4       Delay in Benefit Determination. If the Committee is unable to
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days after they can first be
determined, with whatever makeup payments may be appropriate in view of the
delay.

 

10.5       Accounting for Benefit Payments. Any benefit payment shall be charged
to the Participant’s Account as of the first day of the Valuation Period in
which the payment is made.

 

10.6       Options to Receive and Sell Stock. Unless ownership of virtually all
Stock is restricted to active Employees and qualified retirement plans for the
benefit of Employees pursuant to the certificates of incorporation or by-laws of
the Employers issuing Stock, a terminated Participant or the Beneficiary of a
deceased Participant may instruct the Committee to distribute the Participant’s
entire vested interest in his Account in the form of Stock or cash, or in a
combination of Stock and cash. In the event the Participant elects to receive
his distribution in the form of Stock, the Committee shall apply the
Participant’s vested interest in the Investment Fund to purchase sufficient
Stock from the Stock Fund or from any owner of Stock to make the required
distribution. If a Participant makes no election as to the form of distribution,
the Participant’s vested interest in the Stock Fund shall be distributed in
shares of Stock, and his vested interest in the Investment Fund shall be
distributed in cash.

 

Any Participant who receives Stock pursuant to Section 10.1, and any person who
has received Stock from the Plan or from such a Participant by reason of the
Participant’s death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section
402(a)(5) of the Code, shall have the right to require the Employer which issued
the Stock to purchase the Stock for its current fair market value

 

 30 

 

 

(hereinafter referred to as the “put right”). The put right shall be exercisable
by written notice to the Committee during the first 60 days after the Stock is
distributed by the Plan, and, if not exercised in that period, during the first
60 days in the following Plan Year after the Committee has communicated to the
Participant its determination as to the Stock’s current fair market value.
However, the put right shall not apply to the extent that the Stock, at the time
the put right would otherwise be exercisable, may be sold on an established
market in accordance with federal and state securities laws and regulations.
Similarly, the put option shall not apply with respect to the portion of a
Participant’s Account which the Employee elected to have reinvested under Code
Section 401(a)(28)(B). If the put right is exercised, the Trustee may, if so
directed by the Committee in its sole discretion, assume the Employer’s rights
and obligations with respect to purchasing the Stock. Notwithstanding anything
herein to the contrary, in the case of a plan established by a Bank (as defined
in Code Section 581), the put option shall not apply if prohibited by a federal
or state law and Participants are entitled to elect their benefits be
distributed in cash.

 

If a Participant elects to receive his distribution in the form of a lump sum
pursuant to Section 10.1-1 of the Plan, the Employer or the Trustee, as the case
may be, may elect to pay for the Stock in equal periodic installments, not less
frequently than annually, over a period not longer than five years from the day
after the put right is exercised, with adequate security and interest at a
reasonable rate on the unpaid balance, all such terms to be set forth in a
promissory note delivered to the seller with normal terms as to acceleration
upon any uncured default.

 

If a Participant elects to receive his distribution in the form of an
installment payment pursuant to Section 10.1-2 of the Plan, the Employer or the
Trustee, as the case may be, shall pay for the Stock distributed in the
installment distribution over a period which shall not exceed 30 days after the
exercise of the put right.

 

Nothing contained herein shall be deemed to obligate any Employer to register
any Stock under any federal or state securities law or to create or maintain a
public market to facilitate the transfer or disposition of any Stock. The put
right described herein may only be exercised by a person described in the second
preceding paragraph, and may not be transferred with any Stock to any other
person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right shall be nonterminable. The put right for Stock
acquired through a Stock Obligation shall continue with respect to such Stock
after the Stock Obligation is repaid or the Plan ceases to be an employee stock
ownership plan. Notwithstanding anything in the Plan to the contrary, if
securities acquired with the proceeds of an exempt loan available for
distribution consist of more than one class, a distributee must receive
substantially the same proportion of each such class, in accordance with
Treasury Regulations Section 54.4975-11(f)(2).

 

10.7       Restrictions on Disposition of Stock. Except in the case of Stock
which is readily tradable on an established securities market, a Participant who
receives Stock pursuant to Section 10.1, and any person who has received Stock
from the Plan or from such a Participant by reason of the Participant’s death or
incompetency, by reason of divorce or separation from the Participant, or by
reason of a rollover contribution described in Section 402(a)(5) of the Code,
shall, prior to any sale or other transfer of the Stock to any other person,
first offer the Stock to the issuing Employer and to the Plan at the greater of
(i) its current fair market value, or (ii) the

 

 31 

 

 

purchase price offered in good faith by an independent third party purchaser.
This restriction shall apply to any transfer, whether voluntary, involuntary, or
by operation of law, and whether for consideration or gratuitous. Either the
Employer or the Trustee may accept the offer within 14 days after it is
delivered. Any Stock distributed by the Plan shall bear a conspicuous legend
describing the right of first refusal under this Section 10.7, as well as any
other restrictions upon the transfer of the Stock imposed by federal and state
securities laws and regulations.

 

10.8       Continuing Loan Provisions; Creations of Protections and Rights.
Except as otherwise provided in Sections 10.6 and 10.7 and this Section, no
shares of Employer Stock held or distributed by the Trustee may be subject to a
put, call or other option, or buy-sell arrangement. The provisions of this
Section shall continue to by applicable to such Stock even if the Plan ceases to
be an employee stock ownership plan under Section 4975(e)(7) of the Code.

 

10.9       Direct Rollover of Eligible Distribution. A Participant or
distributee may elect, at the time and in the manner prescribed by the Trustee
or the Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Participant or
distributee in a direct rollover.

 

10.9-1    An “eligible rollover” is any distribution that does not include: (i)
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the Participant and the Participant’s Beneficiary, or for a specified period
of ten years or more; (ii) any distribution to the extent such distribution is
required under Code Section 401(a)(9); (iii) the portion of any distribution
that is not included in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities); or (iv) a
hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code. A
portion of a distribution shall not fail to be an eligible rollover distribution
merely because the portion consists of after-tax employee contributions which
are not includible in gross income. However, such portion may be transferred
only to an individual retirement account or annuity described in Sections 408(a)
or (b) of the Code, or to a qualified defined contribution plan described in
Sections 401(a) or 403(a) of the Code that agrees to separately accounting for
the portion of such distribution which is includible in gross income and the
portion of such distribution which is no so includible.

 

10.9-2    An “eligible retirement plan” is an individual retirement account
described in Code Section 401(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the distributee’s
eligible rollover distribution. An eligible retirement plan shall also include
an annuity contract described in Section 403(b) of the Code and an eligible plan
under Section 457(b) of the Code which is maintained by a state, or any agency
or instrumentality of a state or political subdivision of a state and which
agrees to separately account for amounts transferred into such plan from this
Plan. Effective January 1, 2008, an eligible retirement plan shall include a
Roth IRA described in Code Section 408A and a deemed individual retirement
account pursuant to Section 408(q) of the Code.

 

 32 

 

 

10.9-3    A “direct rollover” is a payment by the Plan to the eligible
retirement plan specified by the distributee.

 

10.9-4    The term “distributee” shall refer to a deceased Participant’s Spouse
or a Participant’s former Spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code Section 414(p). Effective January
1, 2007, the term “distributee” shall also include a Participant’s non-spousal
Beneficiary.

 

10.9-5    The Administrator shall provide Participants or other distributees of
eligible rollover distributions with a written notice designed to comply with
the requirements of Section 402(f) of the Code. Such notice shall be provided
within a reasonable time before making an eligible rollover distribution.
Effective January 1, 2007, such notice may be provided up to 180 days before the
first day of the first period for which an amount is payable.

 

10.10     Waiver of 30 Day Period After Notice of Distribution. If a
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:

 

(i)          the Trustee or Administrative Committee, as applicable, clearly
informs the Participant that the Participant has a right to a period of at least
30 days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular option), and

 

(ii)         the Participant, after receiving the notice, affirmatively elects a
distribution.

 

Section 11.          Rules Governing Benefit Claims and Review of Appeals.

 

11.1       Claim for Benefits. Any Participant or Beneficiary who qualifies for
the payment of benefits shall file a claim for his benefits with the Committee
on a form provided by the Committee. The claim, including any election of an
alternative benefit form, shall be filed at least 30 days before the date on
which the benefits are to begin. If a Participant or Beneficiary fails to file a
claim by the day before the date on which benefits become payable, he shall be
presumed to have filed a claim for payment for the Participant’s benefits in the
standard form prescribed by Sections 10.1 or 10.2.

 

11.2       Notification by Committee. Within 90 days after receiving a claim for
benefits (or within 180 days, if special circumstances require an extension of
time and written notice of the extension is given to the Participant or
Beneficiary within 90 days after receiving the claim for benefits), the
Committee shall notify the Participant or Beneficiary whether the claim has been
approved or denied. If the Committee denies a claim in any respect, the
Committee shall set forth in a written notice to the Participant or Beneficiary:

 

(i)          each specific reason for the denial;

 

 33 

 

 

(ii)         specific references to the pertinent Plan provisions on which the
denial is based;

 

(iii)        a description of any additional material or information which could
be submitted by the Participant or Beneficiary to support his claim, with an
explanation of the relevance of such information; and

 

(iv)        an explanation of the claims review procedures set forth in Section
11.3.

 

11.3       Claims Review Procedure. Within 60 days after a Participant or
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee’s determination. In
connection with his appeal the Participant or Beneficiary or his representative
may inspect or purchase copies of pertinent documents and records to the extent
not inconsistent with other Participants’ and Beneficiaries’ rights of privacy.
Within 60 days after receiving a notice of appeal from a prior determination (or
within 120 days, if special circumstances require an extension of time and
written notice of the extension is given to the Participant or Beneficiary and
his representative within 60 days after receiving the notice of appeal), the
Committee shall furnish to the Participant or Beneficiary and his
representative, if any, a written statement of the Committee’s final decision
with respect to his claim, including the reasons for such decision and the
particular Plan provisions upon which it is based.

 

Section 12.          The Committee and Its Functions.

 

12.1       Authority of Committee. The Committee shall be the “plan
administrator” within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically (i) allocated to the Bank, the Employers, or the Trustee under the
Plan and Trust Agreement, (ii) delegated in writing to other persons by the
Bank, the Employers, the Committee, or the Trustee, or (iii) allocated to other
parties by operation of law. The Committee shall have exclusive responsibility
regarding decisions concerning the payment of benefits under the Plan. The
Committee shall have no investment responsibility with respect to the Investment
Fund except to the extent, if any, specifically provided in the Trust Agreement.
In the discharge of its duties, the Committee may employ accountants, actuaries,
legal counsel, and other agents (who also may be employed by an Employer or the
Trustee in the same or some other capacity) and may pay their reasonable
expenses and compensation.

 

12.2       Identity of Committee. The Committee shall consists of three or more
individuals selected by the Bank. Any individual, including a director, trustee,
shareholder, officer, or Employee of an Employer, shall be eligible to serve as
a member of the Committee. The Bank shall have the power to remove any
individual serving on the Committee at any time without cause upon 10 days
written notice, and any individual may resign from the Committee at any time
upon 10 days written notice to the Bank. The Bank shall notify the Trustee of
any change in membership of the Committee.

 

 34 

 

 

12.3       Duties of Committee. The Committee shall keep whatever records may be
necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Bank. The Committee shall furnish to the
Trustee whatever information may be necessary to properly administer the Trust.
The Committee shall see to the filing with the appropriate government agencies
of all reports and returns required of the plan Committee under ERISA and other
laws.

 

Further, the Committee shall have exclusive responsibility and authority with
respect to the Plan’s holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Bank’s long-term intention that the Plan, as
an employee stock ownership plan, be invested primarily in Stock. Subject to the
direction of the Board as to the application of Employer contributions to Stock
Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants’ rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants’ Accounts. In determining the proper
extent of the Trust’s investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.

 

12.4       Valuation of Stock. If the Stock is not readily tradable on an
established securities market, the valuation of such Stock shall be determined
by an independent appraiser. For purposes of the preceding sentence, the term
“independent appraiser” means any appraiser meeting requirements similar to the
requirements of the regulations prescribed under Code Section 170(a)(1).

 

12.5       Compliance with ERISA. The Committee shall perform all acts necessary
to comply with ERISA. Each individual member or employee of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA.

 

12.6       Action by Committee. All actions of the Committee shall be governed
by the affirmative vote of a number of members which is a majority of the total
number of members currently appointed, including vacancies. The members of the
Committee may meet informally and may take any action without meeting as a
group.

 

12.7       Execution of Documents. Any instrument executed by the Committee
shall be signed by any member or employee of the Committee.

 

12.8       Adoption of Rules. The Committee shall adopt such rules and
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.

 

 35 

 

 

12.9       Responsibilities to Participants. The Committee shall determine which
Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may decide in its sole discretion to
permit modifications of elections and to defer or accelerate benefits to the
extent consistent with applicable law and the Plan document and the best
interests of all Participants and Beneficiaries in a non-discriminatory manner.

 

12.10     Alternative Payees in Event of Incapacity. If the Committee finds at
any time that an individual qualifying for benefits under this Plan is a minor
or is incompetent, the Committee may direct the benefits to be paid, in the case
of a minor, to his parents, his legal guardian, or a custodian for him under the
Uniform Gifts to Minors Act, or, in the case of an incompetent, to his spouse,
or his legal guardian, the payments to be used for the individual’s benefit. The
Committee and the Trustee shall not be obligated to inquire as to the actual use
of the funds by the person receiving them under this Section 12.10, and any such
payment shall completely discharge the obligations of the Plan, the Trustee, the
Committee, and the Employers to the extent of the payment.

 

12.11     Indemnification by Employers. Except as separately agreed in writing,
the Committee, and any member or employee of the Committee, shall be indemnified
and held harmless by the Employer, jointly and severally, to the fullest extent
permitted by ERISA, and subject to and conditioned upon compliance with 12
C.F.R. Section 545.121, to the extent applicable, against any and all costs,
damages, expenses, and liabilities reasonably incurred by or imposed upon it or
him in connection with any claim made against it or him or in which it or he may
be involved by reason of its or his being, or having been, the Committee, or a
member or employee of the Committee, to the extent such amounts are not paid by
insurance.

 

12.12     Nonparticipation by Interested Member. Any member of the Committee who
also is a Participant in the Plan shall take no part in any determination
specifically relating to his own participation or benefits, unless his
abstention would leave the Committee incapable of acting on the matter.

 

Section 13.          Adoption, Amendment, or Termination of the Plan.

 

13.1       Adoption of Plan by Other Employers. With the consent of the Bank,
any entity may become a participating Employer under the Plan by (i) taking such
action as shall be necessary to adopt the Plan, (ii) becoming a party to the
Trust Agreement establishing the Trust Fund, and (iii) executing and delivering
such instruments and taking such other action as may be necessary or desirable
to put the Plan into effect with respect to the entity’s Employees.

 

 36 

 

 

13.2       Plan Adoption Subject to Qualification. Notwithstanding any other
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) either as
originally adopted or as amended, each Employer’s contributions to the Trust
under this Plan (including any earnings thereon) shall be returned to it and
this Plan shall be terminated. In the event that this Plan is amended after its
initial qualification and the Plan as amended is held by the Internal Revenue
Service not to qualify under Section 401(a), the amendment may be modified
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure approval of the amendment under Section 401(a). In addition,
reversions of Employer contributions (including earnings or losses attributable
thereto) are permitted within one year after the applicable determination date,
if the reversion is due to a good faith mistake of fact.

 

13.3       Right to Amend or Terminate. The Bank intends to continue this Plan
as a permanent program. However, each participating Employer separately reserves
the right to suspend, supersede, or terminate the Plan at any time and for any
reason, as it applies to that Employer’s Employees, and the Bank reserves the
right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at
any time and for any reason, as it applies to the Employees of each Employer. No
amendment, suspension, supersession, merger, consolidation, or termination of
the Plan shall (i) reduce any Participant’s or Beneficiary’s proportionate
interest in the Trust Fund, (ii) reduce or restrict, either directly or
indirectly, the benefit provided any Participant prior to the amendment, or
(iii) divert any portion of the Trust Fund to purposes other than the exclusive
benefit of the Participants and their Beneficiaries prior to the satisfaction of
all liabilities under the Plan. Moreover, there shall not be any transfer of
assets to a successor plan or merger or consolidation with another plan unless,
in the event of the termination of the successor plan or the surviving plan
immediately following such transfer, merger, or consolidation, each participant
or beneficiary would be entitled to a benefit equal to or greater than the
benefit he would have been entitled to if the plan in which he was previously a
participant or beneficiary had terminated immediately prior to such transfer,
merger, or consolidation. Following a termination of this Plan by the Bank, the
Trustee shall continue to administer the Trust and pay benefits in accordance
with the Plan as amended from time to time and the Committee’s instructions.

 

Section 14.          Miscellaneous Provisions.

 

14.1       Plan Creates No Employment Rights. Nothing in this Plan shall be
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.

 

 37 

 

 

14.2       Nonassignability of Benefits. No assignment, pledge, or other
anticipation of benefits from the Plan will be permitted or recognized by the
Employer, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former spouse, child or other dependent of a Participant pursuant to
a state domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code, as more fully
set forth in Section 14.2 hereof. Notwithstanding any provisions of this Section
14.2 to the contrary, an offset of a Participant’s Account against an amount the
Participant is ordered or required to pay the Plan with respect to a judgment,
order or decree issued, or a settlement entered into, on or after August 5,
1997, shall be permitted in accordance with Code Sections 401(a)(13)(C) and (D).

 

14.3       Limit of Employer Liability. The liability of the Employer with
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.

 

14.4       Treatment of Expenses. All expenses incurred by the Committee and the
Trustee in connection with administering this Plan and Trust Fund shall be paid
by the Trustee from the Trust Fund to the extent the expenses have not been paid
or assumed by the Employer or by the Trustee.

 

14.5       Number and Gender. Any use of the singular shall be interpreted to
include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.

 

14.6       Nondiversion of Assets. Except as provided in Sections 5.3 and 13.3,
under no circumstances shall any portion of the Trust Fund be diverted to or
used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.

 

14.7       Separability of Provisions. If any provision of this Plan is held to
be invalid or unenforceable, the other provisions of the Plan shall not be
affected but shall be applied as if the invalid or unenforceable provision had
not been included in the Plan.

 

14.8       Service of Process. The agent for the service of process upon the
Plan shall be the chief executive officer of the Bank, or such other person as
may be designated from time to time by the Bank.

 

14.9       Governing State Law. This Plan shall be interpreted in accordance
with the laws of the State of New Mexico to the extent those laws are applicable
under the provisions of ERISA.

 

 38 

 

 

14.10     Employer Contributions Conditioned on Deductibility. Employer
Contributions to the Plan are conditioned on deductibility under Code Section
404. In the event that the Internal Revenue Service shall determine that all or
any portion of an Employer Contribution is not deductible under that Section,
the nondeductible portion shall be returned to the Employer within one year of
the disallowance of the deduction.

 

14.11     Unclaimed Accounts. Neither the Employer nor the Trustees shall be
under any obligation to search for, or ascertain the whereabouts of, any
Participant or Beneficiary. The Employer or the Trustees, by certified or
registered mail addressed to his last known address of record with the Employer,
shall notify any Participant or Beneficiary that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
Section. If the Participant or Beneficiary fails to claim his benefits or make
his whereabouts known in writing to the Employer or the Trustees within seven
(7) calendar years after the date of notification, the benefits of the
Participant or Beneficiary under the Plan will be disposed of as follows:

 

(a)          If the whereabouts of the Participant is unknown but the
whereabouts of the Participant’s Beneficiary is known to the Trustees,
distribution will be made to the Beneficiary.

 

(b)          If the whereabouts of the Participant and his Beneficiary are
unknown to the Trustees, the Plan will forfeit the benefit, provided that the
benefit is subject to a claim for reinstatement if the Participant or
Beneficiary make a claim for the forfeited benefit.

 

Any payment made pursuant to the power herein conferred upon the Trustees shall
operate as a complete discharge of all obligations of the Trustees, to the
extent of the distributions so made.

 

14.12     Qualified Domestic Relations Order. Section 14.2 shall not apply to a
“qualified domestic relations order” defined in Code Section 414(p), and such
other domestic relations orders permitted to be so treated under the provisions
of the Retirement Equity Act of 1984. Further, to the extent provided under a
“qualified domestic relations order”, a former Spouse of a Participant shall be
treated as the Spouse or surviving Spouse for all purposes under the Plan.

 

In the case of any domestic relations order received by the Plan:

 

(a)          The Employer or the Plan Committee shall promptly notify the
Participant and any other alternate payee of the receipt of such order and the
Plan’s procedures for determining the qualified status of domestic relations
orders, and

 

(b)          Within a reasonable period after receipt of such order, the
Employer or the Plan Committee shall determine whether such order is a qualified
domestic relations order and notify the Participant and each alternate payee of
such determination. The Employer or the Plan Committee shall establish
reasonable procedures to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.

 

 39 

 

 

During any period in which the issue of whether a domestic relations order is a
qualified domestic relations order is being determined (by the Employer or Plan
Committee, by a court of competent jurisdiction, or otherwise), the Employer or
the Plan Committee shall segregate in a separate account in the Plan or in an
escrow account the amounts which would have been payable to the alternate payee
during such period if the order had been determined to be a qualified domestic
relations order. If within eighteen (18) months the order (or modification
thereof) is determined to be a qualified domestic relations order, the Employer
or the Plan Committee shall pay the segregated amounts (plus any interest
thereon) to the person or persons entitled thereto. If within eighteen (18)
months it is determined that the order is not a qualified domestic relations
order, or the issue as to whether such order is a qualified domestic relations
order is not resolved, then the Employer or the Plan Committee shall pay the
segregated amounts (plus any interest thereon) to the person or persons who
would have been entitled to such amounts if there had been no order. Any
determination that an order is a qualified domestic relations order which is
made after the close of the eighteen (18) month period shall be applied
prospectively only. The term “alternate payee” means any Spouse, former Spouse,
child or other dependent of a Participant who is recognized by a domestic
relations order as having a right to receive all, or a portion of, the benefit
payable under a Plan with respect to such Participant.

 

14.13     Use of Electronic Media to Provide Notices and Make Participant
Elections. Pursuant to Treasury Regulations Section 1.401(a)-21, the Plan may
elect to use electronic media to provide notices required to be provided to
Participants under the Plan and will accept elections from Participants
communicated to the Plan using such electronic media.

 

14.14     Acquisition of Securities. Notwithstanding any other provision of the
Plan to the contrary, at no time shall the Plan be obligated to acquire
securities from a particular security holder at an indefinite time determined
upon the happening of an event such as the death of the security holder,
pursuant to Treasury Regulations Section 54.4975-11(a)(7)(i).

 

Section 15.          Top-Heavy Provisions.

 

15.1       Top-Heavy Plan. For any Plan Year beginning after December 31, 1983,
this Plan is top-heavy if any of the following conditions exist:

 

(a)          If the top-heavy ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any required aggregation group or permissive
aggregation group;

 

(b)          If this Plan is a part of a required aggregation group (but is not
part of a permissive aggregation group) and the aggregate top-heavy ratio for
the group of Plans exceeds sixty percent (60%); or

 

(c)          If this Plan is a part of a required aggregation group and part of
a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds sixty percent (60%).

 

15.2       Definitions.

 

In making this determination, the Committee shall use the following definitions
and principles:

 

 40 

 

 

15.2-1    The “Determination Date”, with respect to the first Plan Year of any
plan, means the last day of that Plan Year, and with respect to each subsequent
Plan Year, means the last day of the preceding Plan Year. If any other plan has
a Determination Date which differs from this Plan’s Determination Date, the
top-heaviness of this Plan shall be determined on the basis of the other plan’s
Determination Date falling within the same calendar years as this Plan’s
Determination Date.

 

15.2-2    A “Key Employee” means any employee or former employee (including any
deceased employee) who at any time during the plan year that includes the
determination date was an officer of the employer having annual compensation
greater than $165,000 (as adjusted under section 416(i)(1) of the Code), a
5-percent owner of the employer, or a 1-percent owner of the employer having
annual compensation of more than $150,000. For this purpose, annual compensation
means compensation within the meaning of section 415(c)(3) of the Code. The
determination of who is a key employee will be made in accordance with section
416(i)(1) of the Code and the applicable regulations and other guidance of
general applicability issued thereunder.

 

15.2-3    A “Non-key Employee” means an Employee who at any time during the five
years ending on the top-heavy Determination Date for the Plan Year has received
compensation from an Employer and who has never been a Key Employee, and the
Beneficiary of any such Employee.

 

15.2-4    A “required aggregation group” includes (a) each qualified Plan of the
Employer in which at least one Key Employee participates in the Plan Year
containing the Determination Date and any of the four (4) preceding Plan Years,
and (b) any other qualified Plan of the Employer which enables a Plan described
in (a) to meet the requirements of Code Sections 401(a)(4) and 410. For purposes
of the preceding sentence, a qualified Plan of the Employer includes a
terminated Plan maintained by the Employer within the five (5) year period
ending on the Determination Date. In the case of a required aggregation group,
each Plan in the group will be considered a top-heavy Plan if the required
aggregation group is a top-heavy group. No Plan in the required aggregation
group will be considered a top-heavy Plan if the required aggregation group is
not a top-heavy group. All Employers aggregated under Code Sections 414(b), (c)
or (m) or (o) (but only after the Code Section 414(o) regulations become
effective) are considered a single Employer.

 

15.2-5    A “permissive aggregation group” includes the required aggregation
group of Plans plus any other qualified Plan(s) of the Employer that are not
required to be aggregated but which, when considered as a group with the
required aggregation group, satisfy the requirements of Code Sections 401(a)(4)
and 410 and are comparable to the Plans in the required aggregation group. No
Plan in the permissive aggregation group will be considered a top-heavy Plan if
the permissive aggregation group is not a top-heavy group. Only a Plan that is
part of the required aggregation group will be considered a top-heavy Plan if
the permissive aggregation group is top-heavy.

 

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15.3       Top-Heavy Rules of Application.

 

For purposes of determining the value of Account balances and the present value
of accrued benefits the following provisions shall apply:

 

15.3-1    The value of Account balances and the present value of accrued
benefits will be determined as of the most recent Valuation Date that falls
within or ends with the twelve (12) month period ending on the Determination
Date.

 

15.3-2    For purposes of testing whether this Plan is top-heavy, the present
value of an individual’s accrued benefits and an individual’s Account balances
is counted only once each year.

 

15.3-3    The Account balances and accrued benefits of a Participant who is not
presently a Key Employee but who was a Key Employee in a Plan Year beginning on
or after January 1, 1984 will be disregarded.

 

15.3-4    For years beginning after December 31, 1984, Employer contributions
attributable to a salary reduction or similar arrangement will be taken into
account.

 

15.3-5    When aggregating Plans, the value of Account balances and accrued
benefits will be calculated with reference to the Determination Dates that fall
within the same calendar year.

 

15.3-6    The present values of accrued benefits and the amounts of account
balances of an employee as of the determination date shall be increased by the
distributions made with respect to the employee under the plan and any plan
aggregated with the plan under Section 416(g)(2) of the Code during the 1-year
period ending on the determination date. The preceding sentence shall also apply
to distributions under a terminated plan which, had it not been terminated,
would have been aggregated with the plan under Section 416(g)(2)(A)(i) of the
Code. In the case of a distribution made for a reason other than separation from
service, death, or disability, this provision shall be applied by substituting
“five (5) year period” for “one (1) year period.”

 

15.3-7    Accrued benefits and Account balances of an individual shall not be
taken into account for purposes of determining the top-heavy ratios if the
individual has performed no services for the Employer during the one (1) year
period ending on the applicable Determination Date. Compensation for purposes of
this subparagraph shall not include any payments made to an individual by the
Employer pursuant to a qualified or non-qualified deferred compensation plan.

 

15.3-8    Accrued benefits and Account balances of an individual shall not be
taken into account for purposes of determining the top-heavy ratios if the
individual has performed no services for the Employer during the five (5) year
period ending on the applicable Determination Date. Compensation for purposes of
this subparagraph shall not include any payments made to an individual by the
Employer pursuant to a qualified or non-qualified deferred compensation plan.

 

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15.3-9    The present value of the accrued benefits or the amount of the Account
balances of any Employee participating in this Plan shall not include any
rollover contributions or other transfers voluntarily initiated by the Employee
except as described below. If this Plan transfers or rolls over funds to another
Plan in a transaction voluntarily initiated by the Employee after December 31,
1983, then this Plan shall count the distribution for purposes of determining
Account balances or the present value of accrued benefits. A transfer incident
to a merger or consolidation of two or more Plans of the Employer (including
Plans of related Employers treated as a single Employer under Code Section 414),
or a transfer or rollover between Plans of the Employer, shall not be considered
as voluntarily initiated by the Employee.

 

15.4       Top-Heavy Ratio. If the Employer maintains one (1) or more defined
contribution plans (including any simplified Employee pension plan) and the
Employer has never maintained any defined benefit plans which have covered or
could cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of the Account balances of all Key Employees as of
the Determination Date, and the denominator of which is the sum of the Account
balances of all Employees as of the Determination Date. Both the numerator and
denominator of the top-heavy ratio shall be increased to reflect any
contribution which is due but unpaid as of the Determination Date.

 

If the Employer maintains one (1) or more defined contribution plans (including
any simplified Employee pension plan) and the Employer maintains or has
maintained one (1) or more defined benefit plans which have covered or could
cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of Account balances under the defined contribution
plans for all Key Employees and the present value of accrued benefits under the
defined benefit plans for all Key Employees, and the denominator of which is the
sum of the Account balances under the defined contribution plans for all
Employees and the present value of accrued benefits under the defined benefit
plans for all Employees.

 

For these purposes, the accrued benefit of a Participant other than a Key
Employee in a defined benefit plan shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (b) if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Section 411(b)(1)(C).

 

15.5       Minimum Contributions. For any Top-Heavy Year, each Employer shall
make a special contribution on behalf of each Participant to the extent that the
total allocations to his Account pursuant to Section 4 is less than the lesser
of:

 

(i)          three percent of his 415 Compensation for that year, or

 

(ii)         the highest ratio of such allocation to 415 Compensation received
by any Key Employee for that year. For purposes of the special contribution of
this Section 15.2, a Key Employee’s 415 Compensation shall include amounts the
Key Employee elected to defer under a

 

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qualified 401(k) arrangement. Such a special contribution shall be made on
behalf of each Participant who is employed by an Employer on the last day of the
Plan Year, regardless of the number of his Hours of Service, and shall be
allocated to his Account.

 

If the Employer maintains a qualified plan in addition to this Plan and more
than one such plan is determined to be Top-Heavy, a minimum contribution or a
minimum benefit shall be provided in one of such other plans, including a plan
that consists solely of a cash or deferred arrangement which meets the
requirements of Section 401(k)(2) of the Code and matching contributions with
respect to which the requirements of Section 401(m)(11) of the Code are met. If
the Employer has both a Top-Heavy defined benefit plan and a Top-Heavy defined
contribution plan and a minimum contribution is to be provided only in the
defined contribution plan, then the sum of the Employer contributions and
forfeitures allocated to the Account of each Non-key Employee shall be equal to
at least five percent (5%) of such Non-key Employee’s 415 Compensation for that
year.

 

15.6         Minimum Vesting. For any Plan Year in which this Plan is Top-Heavy,
a Participant’s vested interest in his Account shall be based on the following
“top-heavy table”:

 

Vesting Years  Percentage of Interest Vested  Fewer than 2   0% 2   20% 3   40%
4   60% 5   80% 6 or more   100%

 

15.7         Top-Heavy Provisions Control in Top-Heavy Plan. In the event this
Plan becomes top-heavy and a conflict arises between the top-heavy provisions
herein set forth and the remaining provisions set forth in this Plan, the
top-heavy provisions shall control.

 

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