EXHIBIT 10.1

 

The William Lyon Homes

 

2004 Executive Deferred Compensation Plan

 

Effective As Of December 28, 2004

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TABLE OF CONTENTS

 

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ARTICLE 1

   DEFINITIONS    1

1.1.

   Accrued Benefit    1

1.2.

   Affiliate.    1

1.3.

   Base Salary    1

1.4.

   Beneficiary.    2

1.5.

   Calendar Year.    2

1.6.

   Cause    2

1.7.

   Change in Control    2

1.8.

   Code.    2

1.9.

   Compensation.    2

1.10.

   Deferral Account.    2

1.11.

   Disability    2

1.12.

   Effective Date.    3

1.13.

   Election of Deferral.    3

1.14.

   Eligible Employee.    3

1.15.

   ERISA.    3

1.16.

   Good Reason    3

1.17.

   Key Employee    4

1.18.

   Normal Retirement Date.    4

1.19.

   Participant.    4

1.20.

   Participant Annual Deferral.    4

1.21.

   Plan.    4

1.22.

   Plan Administrator.    4

1.23.

   Plan Year.    4

1.24.

   Retirement.    4

1.25.

   Valuation Date.    4

ARTICLE 2

   ELIGIBILITY AND PARTICIPATION    4

2.1.

   Eligibility.    4

2.2.

   Participation.    4

ARTICLE 3

   CONTRIBUTIONS AND CREDITS    5

3.1.

   Deferral Election.    5

3.2.

   Corporation Discretionary Contributions.    6

ARTICLE 4

   DEFERRAL ACCOUNTS AND ALLOCATION OF FUNDS    6

4.1.

   Deferral Account Allocations.    6

4.2.

   Investment Election and Declared Rates.    7

4.3.

   Determination of Accounts    7

 

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ARTICLE 5

  ENTITLEMENT TO BENEFITS    8

5.1.

  Vesting of Benefits    8

5.2.

  Retirement Benefit.    8

5.3.

  Fixed Payment Date Benefit.    9

5.4.

  Disability Retirement Benefit    10

5.5.

  Death Benefits.    10

5.6.

  Termination of Employment Benefits.    11

5.7.

  Hardship Distribution.    12

5.8.

  Effect of Change in Control    12

5.9.

  Excise Tax Limitation.    13 ARTICLE 6   RIGHTS ARE LIMITED    15

6.1.

  Benefits Payable Only From General Corporate Assets: Unsecured General
Creditor Status of Participant.    15

6.2.

  No Contract of Employment    15

6.3.

  Benefits Not Transferable    15

6.4.

  No Trust Created    15 ARTICLE 7   BENEFICIARIES    16

7.1.

  Beneficiary Designation    16

7.2.

  Spouse’s Interest    16

7.3.

  Facility of Payment    16 ARTICLE 8   PLAN ADMINISTRATION    16

8.1.

  Responsibility of Administration of the Plan.    16

8.2.

  Claims Procedure.    17

8.3.

  Arbitration    21

8.4.

  Notice    24 ARTICLE 9   AMENDMENT OR TERMINATION    24

9.1.

  Amendment or Termination.    24 ARTICLE 10   THE TRUST    25

10.1.

  Establishment of Trust    25

10.2.

  Interrelationship of the Plan and the Trust    25

10.3.

  Contribution to the Trust    25 ARTICLE 11   MISCELLANEOUS    25

11.1.

  Governing Law    25

11.2.

  Withholding    25

 

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EXHIBIT A

   Participant Enrollment and Election Form    A-1

EXHIBIT B

   Deemed Investment Elections    B-1

EXHIBIT C

   Designation of Beneficiary    C-1

 

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WILLIAM LYON HOMES

2004 EXECUTIVE DEFERRED COMPENSATION PLAN

 

THIS WILLIAM LYON HOMES 2004 EXECUTIVE DEFERRED COMPENSATION PLAN is adopted as
of the 28th day of December, 2004, by William Lyon Homes, a Delaware corporation
(the “Corporation”), as follows:

 

RECITALS

 

WHEREAS, the Corporation wishes to establish the William Lyon Homes 2004
Executive Deferred Compensation Plan (the “Plan”), as of December 28, 2004, to
provide additional retirement benefits and income tax deferral opportunities for
a select group of management and highly compensated employees;

 

WHEREAS, the Corporation intends that the Plan shall at all times be
administered and interpreted in such a manner as to constitute an unfunded
nonqualified deferred compensation plan for a select group of management or
highly compensated employees and to qualify for all available exemptions from
the provisions of ERISA; and

 

WHEREAS, the Corporation wishes the Plan to comply with the provisions of the
American Jobs Creation Act of 2004 applicable to deferred compensation plans.

 

NOW, THEREFORE, the Corporation hereby adopts the following William Lyon Homes
2004 Executive Deferred Compensation Plan, effective December 28, 2004 for
deferral of compensation that is earned (i.e., the services that earned such
compensation are performed) or vested after December 31, 2004.

 

ARTICLE 1

 

DEFINITIONS

 

DEFINITION OF TERMS. Certain words and phrases are defined when first used in
later sections of this plan. In addition, the following words and phrases when
used herein, unless the context clearly requires otherwise, shall have the
following respective meanings.

 

1.1. Accrued Benefit. The sum of all amounts deferred hereunder by or on behalf
of a Participant, including (i) any contributions made by the Corporation, and
(ii) any earnings, gains, losses, and changes in value credited to the
Participant or his or her Beneficiaries pursuant to the Plan, which shall be
reflected in the Deferral Account.

 

1.2. Affiliate. Any corporation, partnership, joint venture, association, or
similar organization or entity, which is a member of a controlled group of
companies which includes, or which is under common control with, the Corporation
under Section 414 of the Code, including, but not limited to, William Lyon
Homes, Inc., a California corporation, and Duxford Financial, Inc., a California
corporation.

 

1.3. Base Salary. The annual compensation (excluding bonuses, commissions,
overtime, incentive payments, non-monetary awards, directors fees and other
fees, stock

 

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options and grants, and car allowances) paid to a Participant for services
rendered to the Corporation, before reduction for compensation deferred pursuant
to all qualified, non-qualified and Code Section 125 plans of the Corporation.

 

1.4. Beneficiary. The Beneficiary designated by a Participant under Article 7,
or, if the Participant has not designated a Beneficiary under Article 7, the
person or persons entitled to receive distributions of benefits under Section
5.5.

 

1.5. Calendar Year. January 1 to December 31.

 

1.6. Cause. For purposes of this Agreement “Cause” shall mean any of the
following acts or circumstances: (i) willful destruction by the Participant of
property of the Corporation or an Affiliate having a material value to the
Corporation or such Affiliate; (ii) fraud, embezzlement, theft, or comparable
dishonest activity committed by the Participant (excluding acts involving a de
minimis dollar value and not related to the Corporation or an Affiliate); (iii)
the Participant’s conviction of or entering a plea of guilty or nolo contendere
to any crime constituting a felony or any misdemeanor involving fraud,
dishonesty or moral turpitude (excluding acts involving a de minimis dollar
value and not related to the Corporation or an Affiliate); (iv) the
Participant’s breach, neglect, refusal, or failure to materially discharge the
Participant’s duties (other than due to physical or mental illness) commensurate
with the Participant’s title and function or the Participant’s failure to comply
with the lawful directions of the Board or the Chief Executive Officer of the
Corporation, or of the Board of Directors or the Chief Executive Officer of the
Affiliate that employs the Participant, in any such case that is not cured
within fifteen (15) days after the Participant has received written notice
thereof from such Board of Directors or Chief Executive Officer; (v) any willful
misconduct by the Participant which may cause substantial economic or
reputational injury to the Corporation, including, but not limited to, sexual
harassment, or (vi) a willful and knowing material misrepresentation to the
Board or the Chief Executive Officer of the Corporation or to the Board of
Directors or the Chief Executive Officer of the Affiliate that employs the
Participant.

 

1.7. Change in Control. shall have the meaning prescribed in regulations
promulgated by the U.S. Treasury Department under Section 409A of the Code.

 

1.8. Code. The Internal Revenue Code of 1986, as amended from time to time.

 

1.9. Compensation. The Base Salary and bonuses that are earned by an employee
for services to the Corporation during a Calendar Year.

 

1.10. Deferral Account. Book entries maintained by the Corporation reflecting
the Participant’s Accrued Benefit, provided, however, that the existence of such
book entries and the Deferral Account shall not create, and shall not be deemed
to create, a trust of any kind, or a fiduciary relationship between the
Corporation and the Participant, his or her Beneficiaries.

 

1.11. Disability. Inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to

 

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result in death or can be expected to last for a continuous period of not less
than 12 months, or receipt of income replacement benefits for a period of not
less than three months under an accident and health plan of the Corporation or
an Affiliate by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months.

 

1.12. Effective Date. December 28, 2004, for deferral of Compensation that is
earned (i.e., the services that earned such Compensation are performed) or
vested after December 31, 2004.

 

1.13. Election of Deferral. A written notice filed by the Participant with the
Human Resources Department of the Corporation in substantially the form attached
hereto as Exhibit A, the Participant Enrollment and Election Form, specifying
the amount (if any) of Base Salary and bonus to be deferred.

 

1.14. Eligible Employee. Any employee of the Corporation or an Affiliate who is
selected to participate herein in accordance with the provisions of Section 2.1
hereof, and one of a select group of management or highly compensated employees,
as defined by ERISA.

 

1.15. ERISA. The Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

1.16. Good Reason. means the occurrence, on or after the occurrence of a Change
in Control, of any of the following:

 

  (a) The Corporation or any of its Affiliates reduces the Participant’s Base
Salary.

 

  (b) The Corporation discontinues its bonus plan in which the Participant
participates as in effect immediately before the Change in Control without
immediately replacing such bonus plan with a plan that is the substantial
economic equivalent of such bonus plan, or a successor to the Corporation fails
or refuses to assume the obligations of the Corporation under such bonus plan as
in effect immediately before the Change in Control or under a plan that is the
substantial economic equivalent of such bonus plan.

 

  (c) Without the Participant’s express written consent, the Corporation or any
of its Affiliates requires the Participant to change the location of the
Participant’s job or office, so that the Participant will be based at a location
more than 100 miles from the former location of the Participant’s job or office.

 

  (d) Without the Participant’s express written consent, the Corporation or any
of its Affiliates reduces the Participant’s responsibilities or directs the
Participant to report to a person of lower rank or responsibilities than the
person to whom the Participant reported before the Change in Control.

 

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1.17. Key Employee. A key employee of the Corporation or any Affiliate, as
defined in Section 416(i) of the Code without regard to paragraph (5) thereof,
who is a participant in this Plan.

 

1.18. Normal Retirement Date. The date the Participant attains 65 years of age.

 

1.19. Participant. An Eligible Employee designated as a participant by the Plan
Administrator.

 

1.20. Participant Annual Deferral. The portion of a Participant’s compensation,
which he or she elects to defer for the Calendar Year in question.

 

1.21. Plan. This Plan, together with any and all amendments or supplements
thereto.

 

1.22. Plan Administrator. The Board of Directors of William Lyon Homes (a
Delaware corporation) or its designee, except as provided in Section 5.8.

 

1.23. Plan Year. The Calendar Year.

 

1.24. Retirement. The termination of a Participant’s employment with the
Corporation and all Affiliates after the Participant has reached his Normal
Retirement Date.

 

1.25. Valuation Date. The last day of each quarter during the Plan Year, or such
other dates as the Plan Administrator may establish in its discretion.

 

ARTICLE 2

 

ELIGIBILITY AND PARTICIPATION

 

2.1. Eligibility.

 

  (a) An Eligible Employee shall become a Participant in the Plan if such
Employee is designated as a Participant by the Corporation, in writing.

 

  (b) Once an employee becomes a Participant, he or she shall remain a
Participant until his or her termination of employment with the Corporation and
all Affiliates, and thereafter until all benefits to which he or she (or his or
her Beneficiaries) is entitled under the Plan have been paid.

 

2.2. Participation.

 

  (a) The Participant may elect a Participant Annual Deferral hereunder by
filing an Election of Deferral. Except as provided in Sections 2.2(b) and (c),
any Election of Deferral, to be effective, must be filed before the beginning of
the Plan Year to which it applies, and shall be effective only for Base Salary
and bonus which the Participant earns (i.e., the Participant performs the
services

 

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that earn such Base Salary and bonus) in the Plan Year to which the Election of
Deferral applies. The Plan Administrator may, in its discretion, require that
Elections of Deferral be filed a stated number of days before the beginning of
the Plan Year to which the Elections of Deferral apply.

 

  (b) Any employee who becomes an Eligible Employee and is designated as a
Participant by the Plan Administrator during a Plan Year may elect to
participate and commence deferrals by filing an Election of Deferral within 30
days following his designation as a Participant, in which case the Election of
Deferral shall be effective for Base Salary and bonus earned (i.e., the
Participant performs the services that earn such Base Salary and bonus) after
the date of the filing of such Election of Deferral in such Plan Year.

 

  (c) In the case of any bonus which is “performance-based compensation,” within
the meaning of regulations promulgated by the U.S. Treasury Department under
Section 409A of the Code, based on services performed over a period of at least
12 months, the Plan Administrator may permit a Participant to file an Election
of Deferral applying to such bonus not later than six months before the end of
such period.

 

  (d) Each Election of Deferral shall be irrevocable during the Plan Year to
which it relates, or, if it relates to a bonus which is “performance-based
compensation,” within the meaning of regulations promulgated by the U.S.
Treasury Department under Section 409A of the Code, based on services performed
over a period of at least 12 months, during such 12 month period.

 

ARTICLE 3

 

CONTRIBUTIONS AND CREDITS

 

3.1. Deferral Election.

 

  (a) Commencing on the Effective Date, and continuing through the date on which
the Participant’s employment terminates because of his or her death, Retirement,
Disability, or any other cause, each Participant shall be entitled to elect to
defer into his or her Deferral Account, by filing with the Plan Administrator an
Election of Deferral, in the form set forth on Exhibit A, at the times specified
in Section 2.2, a portion of the Base Salary and bonus that the Participant will
earn for the period for which the Election of Deferral will be effective as set
forth in Section 2.2. Such deferrals shall be accomplished by payroll deduction.

 

  (b) In the Election of Deferral, the Participant shall specify the amount to
be deferred, which such specification may be separate for the Base Salary and
the bonus, and may be expressed as a percentage of the Base Salary or bonus or
as a fixed dollar amount. However, the total amount of the deferrals made by
each Participant in any Calendar Year (i) shall not exceed 20% of the
Participant’s total Base Salary and bonus, and (ii) shall not be less than

 

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$10,000.00. The Plan Administrator and the Corporation shall disregard any
deferral election to the extent such deferral election exceeds 20% of the
Participant’s total Base Salary and bonus, or if such deferral election is less
than $10,000.00.

 

3.2. Corporation Discretionary Contributions.

 

  (a) The Corporation may make contributions to the Plan as it may determine
from time to time and may direct that such contributions be allocated among the
Deferral Accounts of those Participants that it may select. If a Participant is
not employed by the Corporation as of the last day of a Plan Year other than by
reason of his or her Retirement, Disability or death, the Corporation
Discretionary Contribution for such Plan Year shall be zero. In the event of
Retirement, Disability or death, a Participant shall be credited with the
Corporation Discretionary Contribution (if any) for the Plan Year in which he or
she Retires, becomes Disabled or dies.

 

  (b) No participant shall have a right to compel the Corporation to make a
discretionary contribution under this Section 3.2 and no Participant shall have
the right to share in the allocation of any such contribution for any Plan Year
unless selected by the Corporation, in its sole discretion.

 

ARTICLE 4

 

DEFERRAL ACCOUNTS AND ALLOCATION OF FUNDS

 

4.1. Deferral Account Allocations.

 

  (a) Compensation which is deferred under the Plan shall be deemed to be added
to the Deferral Account on the first day of the following month in which the
Compensation would otherwise have been paid.

 

  (b) Corporation Discretionary Contributions (if any) shall be credited to the
Participant’s Deferral Account at such time as directed by the Plan
Administrator.

 

  (c) All amounts paid from a Deferral Account shall be deemed to be paid on the
first day of the month following the month in which such payments are made.

 

  (d) Based on the Investment Elections of a Participant made under Section 4.2,
the Participant’s Deferral Account shall be credited with investment earnings,
gains, losses or changes in value effective at the end of each calendar quarter
during the Plan Year, except as otherwise provided in this Plan.

 

  (e) The Plan Administrator may, at any time, change the timing or methods for
crediting or debiting earnings, gains, losses, and changes in value of
investment options, deferrals of Compensation, Company Discretionary
Contributions, and payments of benefits and withdrawals under this Plan;
provided, however, that the times and methods for crediting or debiting such
items in effect at any particular time shall be uniform among all Participants
and Beneficiaries.

 

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4.2. Investment Election and Declared Rates.

 

  (a) Investment Elections may be made from any of the various investment
alternatives selected by the Participant from among those made available by the
Corporation from time to time, which are outlined in Exhibit B.

 

  (b) A Participant (or, in the event of the Participant’s death, the
Participant’s Beneficiary) shall make Investment Elections for the Participant’s
Deferral Account by filing a form substantially in the form of Exhibit B (or
another form acceptable to the Plan Administrator) with the Plan Administrator.
A Participant may elect to have his or her Deferral Account deemed to be
invested in up to ten (10) investment alternatives, provided, however, that such
investment alternative must be applied to at least 10% of the total balance in
his or her Deferral Account and must be in a whole percentage amount. Investment
Elections shall remain in effect until changed and may be changed once during
each calendar quarter, with such change to be effective on the first day of the
succeeding calendar quarter.

 

  (c) At the end of each calendar quarter (or such shorter period as the Plan
Administrator may determine), the Corporation shall compute the total return for
the quarter (or such shorter period) as to each Participant’s Investment
Elections and reduce such returns for that quarter’s (or shorter period’s) money
management fees, mortality charges, cost of insurance and investment expenses
associated specifically with each investment alternative. The total return for
each investment alternative shall be that investment alternative’s total return
for that quarter (or shorter period) reduced for expenses as described above.

 

  (d) From time to time, and at its sole discretion, the Corporation may change
the investment alternatives which it makes available to the Participant.
However, notwithstanding the provisions of this Section 4.2, the Corporation may
invest contributions in investments other than the investments selected by such
Participant but the Participant’s return will solely be based on the results of
his or her Investment Election reduced for expenses as described in Section
4.2(c) above. Nothing in this Plan shall require the Corporation actually to
acquire or hold any particular investment.

 

4.3. Determination of Accounts. A Participant’s Accrued Benefit and Deferral
Account balance as of each Valuation Date shall consist of the balance of
deferrals of Compensation, Corporation Discretionary Contributions, and
investment earnings, gains, losses, and changes in value in his or her Deferral
Account determined in accordance with this Section 4.

 

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ARTICLE 5

 

ENTITLEMENT TO BENEFITS

 

5.1. Vesting of Benefits. The portion of a Participant’s Deferral Account that
is attributable to his or her compensation deferral and deemed investment
earnings, gains, losses and changes in value credited thereon shall be
immediately fully vested. The portion of the Participant’s Deferral Account that
is attributable to Corporation Discretionary Contributions and deemed investment
earnings, gains, losses and changes in value credited thereon (if any), shall
vest based on the following table:

 

Completed Years of Plan Participation

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   Percent
Vested

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Less than 1

   0 %

1 but less than 2

   20  

2 but less than 3

   40  

3 but less than 4

   60  

4 but less than 5

   80  

5 or more

   100  

 

For purposes of this Section 5.1, the term “Completed Years of Plan
Participation” shall mean the continuous (except for leaves of absence approved
by the Corporation) period of time beginning on the date on which an Eligible
Employee becomes a Participant and ending on the termination of the employment
of the Participant with the Corporation and all Affiliates for any reason.

 

Notwithstanding the foregoing, but subject to Sections 5.6(b) and 5.9, a
Participant, or his or her Beneficiary in the case of a death benefit, shall
become fully vested in the portion of his Deferral Account that is attributable
to Corporation Discretionary Contributions and deemed investment earnings,
gains, losses and changes in value credited thereon (if any), upon his Normal
Retirement Date, death, or Disability.

 

5.2. Retirement Benefit.

 

  (a) From and after the Retirement of the Participant, the Corporation shall
thereafter pay to the Participant his or her Accrued Benefit, unless the
Participant has validly elected a later fixed payment date under Section 5.3.
Such benefits shall be payable in the manner elected by the Participant as
follows:

 

  • Lump Sum

 

  • Monthly over 2 years

 

  • Monthly over 5 years

 

  • Monthly over 10 years

 

  • Monthly over 15 years

 

  • Monthly over 20 years

 

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Such election shall be made concurrently with the first Election of Deferral
filed by the Participant on or after the Effective Date of this Plan. Such
payments shall commence on or about the first day of the first month following
the Participant’s Retirement, unless the Participant has validly elected a later
fixed payment date under Section 5.3. The amount of each installment to be paid
during the Calendar Year in which payment begins shall be equal to the total
amount payable to the Participant as of his or her Normal Retirement Date,
divided by the total number of installment payments to be made.

 

  (b) As of January 1 of each subsequent Calendar Year during the benefit
payment period, the amount of each installment to be paid during such Calendar
Year shall be recalculated and shall be equal to:

 

  (i) the remaining balance in the Participant’s Deferral Account as of January
1; divided by

 

  (ii) the number of installment payments to be made in or after such subsequent
Calendar Year.

 

  (c) The final installment payment shall be equal to the remaining amount
payable to the Participant. In no event shall the amount of any installment
payment exceed the remaining amount payable to the Participant.

 

  (d) Notwithstanding the foregoing, a Participant’s retirement benefit will be
distributed in one lump sum rather than in installments if the balance in the
Participant’s Deferral Account as of his Normal Retirement Date is less than
$25,000.00.

 

  (e) After the filing of the first Election of Deferral filed by the
Participant on or after the Effective Date of this Plan, the Participant’s
election of the form of payments on Retirement or Disability may be changed only
in accordance with the provisions of this Section 5.2(e). In no event may a
change be made that would accelerate the payment of benefits on a Participant’s
Retirement or Disability. Any election by a Participant to delay payment of
benefits on the Participant’s Retirement or Disability (i) cannot take effect
until 12 months after the date on which the Participant makes such election, and
(ii) the first payment for which such an election is made must be deferred for
at least five years after the date on which such first payment would otherwise
have been made.

 

  (f) Notwithstanding the foregoing, if any stock of this Corporation is
publicly traded on established securities market or otherwise, no payment shall
be made to a Key Employee within six months after such Key Employee’s separation
from service (or, if earlier, the date of his or her death).

 

5.3. Fixed Payment Date Benefit.

 

  (a) A Participant may select a fixed payment date for the payment or
commencement of payment of his or her vested Accrued Benefit. Payments

 

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made under this election will be payable in the manner elected by the
Participant in the same manner as retirement benefits are paid under Section
5.2. A Participant may extend a fixed payment date by written notice to the Plan
Administrator, provided that the Participant gives such written notice at least
12 months before the fixed payment date before such extension. Such fixed
payment dates may not be accelerated.

 

  (b) Any fixed payment date elected by a Participant as provided under Section
5.3(a) above (i) may be before or after the Participant’s Retirement or
termination of employment with the Corporation and all Affiliates for any reason
other than Cause, Disability, Retirement, or death, but (ii) must be no earlier
than the January 1 of the sixth Calendar Year after the Calendar Year in which
the election is made or in which the Participant gives a written notice of
extension.

 

5.4. Disability Retirement Benefit. The Participant shall be entitled to receive
payments hereunder prior to his or her Normal Retirement Date if he or she is
Disabled. If the Participant’s employment is terminated pursuant to this Section
5.4, the benefit payable hereunder shall be the same amount as would have been
payable as a Retirement Benefit under Section 5.2 above had the Participant
attained his or her Normal Retirement Date on the date of the disability
determination, and shall be paid on account of the Participant’s Disability even
if the Participant has validly elected a later fixed payment date under Section
5.3. If the total amount of benefits payable is less than $25,000.00, the Plan
Administrator will be required to pay the benefit in a lump sum rather than in
installments.

 

5.5. Death Benefits.

 

  (a) Death Benefit Prior to Commencement of Benefits. In the event of the
Participant’s death while in the employment of the Corporation or an Affiliate
and prior to commencement of benefit payments, the Corporation shall pay a
survivor benefit in an amount equal to the greater of: (a) the Participant’s
Accrued Benefit at the date of death, or (b) a specified dollar amount stated in
a written notice given by the Corporation to the Participant; provided, however,
that (i) the Corporation may increase, decrease or eliminate such specified
dollar amount at any time by giving a written notice of such change to the
Participant, and (ii) the Corporation shall not be obligated to give such notice
or to specify any dollar amount under this clause (b), and, if the Corporation
does not give such notice or specify any dollar amount, the specified dollar
amount shall be deemed to be zero. The death benefit payable under this Section
5.5 shall be distributed to the Participant’s Beneficiary in a lump sum on or
about the first day of the third month following the Participant’s date of death
(even if the Participant has validly elected a later fixed payment date under
Section 5.3) and based on the last Beneficiary designation received by the
Corporation from the Participant prior to his or her death. If no such
designation has been received by the Corporation, such payment shall be made to
the Participant’s surviving legal spouse. If the Participant is not survived by
a legal spouse, the said payment

 

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shall be made to the then living children of the Participant, if any, in equal
shares. If there are no surviving children, the balance of the Accrued Benefit
shall be paid to the estate of the Participant.

 

  (b) Death Benefit After Commencement of Retirement Benefits. In the event of
the Participant’s death after the commencement of benefit payments, but prior to
the completion of such payments due to and owing hereunder, the Corporation
shall continue to make such payments, in installments over the remainder of the
period specified in Sections 5.2 or 5.3 hereof that would have been applicable
to the Participant had he or she survived. Such continuing payment shall be made
to the Participant’s designated Beneficiary in accordance with the last such
designation received by the Corporation from the Participant prior to his death.
If no such designation has been received by the Corporation, such payments shall
be made to the Participant’s surviving legal spouse. If such spouse dies before
receiving all payments to which he or she is entitled hereunder, then the
balance of the Accrued Benefit shall be paid to the spouse’s estate. If the
Participant is not survived by a legal spouse, then the said payments shall be
made to the then living children of the Participant, if any, in equal shares. If
there are no surviving children, the balance of the Accrued Benefit shall be
paid to the estate of the Participant.

 

5.6. Termination of Employment Benefits.

 

  (a) In the event of the Participant’s termination of employment with the
Corporation or an Affiliate for any reason other than for Cause, Disability,
Retirement or death, the Corporation shall pay to the Participant a Termination
Benefit equal to the vested value of the Participant’s Accrued Benefit, unless
the Participant has validly elected a later fixed payment date under Section
5.3. Such termination benefit shall be payable in a lump sum on or about the
first day of the third month following the date of termination, unless (i) the
Participant has validly elected a later fixed payment date under Section 5.3, or
(ii) if any stock of this Corporation is publicly traded on established
securities market or otherwise, no payment shall be made to a Key Employee
within six months after such Key Employee’s separation from service (or, if
earlier, the date of his or her death).

 

  (b) In the event the Participant’s employment is terminated for Cause, no
benefits of any kind will be due or payable under the terms of this Plan from
amounts credited to the Participant’s Deferral Account attributable to Corporate
Discretionary Contributions, and any cumulative earnings, gains, and changes in
value thereon, and all rights of the Participant, his or her designated
Beneficiary, executors, or administrators, or any other person, to receive
payments thereof shall be forfeited. If, after installment payments of benefits
under this Plan have begun, the Plan Administrator determines that Cause existed
before the Participant’s Retirement or Disability, such installment payments
shall be reduced by amounts credited to the Participant’s Deferral Account
attributable to Corporate Discretionary Contributions, and any cumulative
earnings, gains, and changes in value thereon.

 

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5.7. Hardship Distribution.

 

  (a) Hardship Withdrawal. In the event that the Plan Administrator, upon the
written request of a Participant, determines, in its sole discretion, that the
Participant has suffered an unforeseeable financial emergency, the Corporation
shall pay to the Participant, as soon as practicable following such
determination, an amount necessary to meet the emergency (the “Hardship
Withdrawal”), but not exceeding the vested balance of such Participant’s
Deferral Account as of the date of such payment. For purposes of this Section
5.7(a), an “unforeseeable financial emergency” shall mean a severe financial
hardship to the Participant resulting from an illness or accident of the
Participant, the Participant’s spouse, or a dependent (as defined in Section
152(a) of the Code) of the Participant, loss of the Participant’s property due
to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The amounts
of a Hardship Withdrawal may not exceed the amount the Plan Administrator
reasonably determines, under regulations issued by the U.S. Treasury Department
under Section 409A of the Code, to be necessary to meet such emergency needs
(including taxes incurred by reason of a taxable distribution), after taking
into account the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent that the liquidation of such assets would
not itself cause severe financial hardship).

 

  (b) Rules Adopted by Plan Administrator. The Plan Administrator shall have the
authority to adopt additional rules relating to hardship distributions. In
administering these rules, the Plan Administrator shall act in accordance with
the principle that the primary purpose of this Plan is to provide additional
retirement income, not additional funds for current consumption.

 

  (c) Limit on Number of Hardship Distributions. No participant may receive more
than one hardship distribution in any Calendar Year.

 

  (d) Prohibition of Further Deferrals. A Participant who receives a hardship
distribution, and who is still employed by the Corporation or an Affiliate,
shall be prohibited from making deferrals under section 3.1 for the remainder of
the Calendar Year in which the distribution is made.

 

5.8. Effect of Change in Control. To the extent permitted in regulations
promulgated by the U.S. Treasury Department under Section 409A of the Code, a
Participant shall become fully vested in the portion of his Deferral Account
that is attributable to Corporation Discretionary Contributions and deemed
investment earnings, gains, losses and changes in value credited thereon (if
any) if, within one year after the occurrence of a Change in Control, his
employment is involuntarily terminated by the Corporation or any of its
Affiliates for any reason other than Cause or his death or Disability, or he
voluntarily terminates his employment with the Corporation and all Affiliates
for Good Reason.

 

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To the extent permitted in regulations promulgated by the U.S. Treasury
Department under Section 409A of the Code, from and after the occurrence of a
Change in Control, the Plan Administrator shall consist of a committee of the
individuals who were members of the Corporation’s Board of Directors 90 days
before the occurrence of the Change in Control, with any vacancy in such
committee occurring thereafter being filled with a person or persons selected by
the other members of such committee.

 

5.9. Excise Tax Limitation.

 

  (a) Notwithstanding anything contained in this Plan to the contrary, in the
event that any payment or benefit (within the meaning of Section 280G(b)(2) of
the Code) to the Participant or for the Participant’s benefit paid or payable or
distributed or distributable (including, but not limited to, the acceleration of
the time for the vesting or payment of such benefit or payment) pursuant to the
terms of this Plan or otherwise in connection with, or arising out of, the
Participant’s employment with the Corporation or any of its Affiliates or a
change of control within the meaning of Section 280G of the Code (a “Payment” or
“Payments”), would be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), then the Payments shall be reduced (but not below zero)
but only to the extent necessary that no portion thereof shall be subject to the
excise tax imposed by Section 4999 of the Code (the “Section 4999 Limit”).
Unless the Participant shall have given prior written notice specifying a
different order to the Corporation to effectuate the limitations described in
the preceding sentence, the Corporation shall reduce or eliminate the Payments
by first reducing or eliminating those Payments or benefits which are not
payable in cash and then by reducing or eliminating cash Payments, in each case
in reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Participant pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Participant’s rights and entitlements to any benefits or
compensation.

 

  (b) All determinations required to be made under this Section 5.9 (each, a
“Determination”) shall be made, at the Corporation’s expense, by the accounting
firm which is the Corporation’s accounting firm prior to the Change in Control
or another nationally recognized accounting firm designated by the Board (or a
committee thereof) prior to the Change in Control (the “Accounting Firm”). The
Accounting Firm shall provide its calculations, together with detailed
supporting documentation, both to the Corporation and to the Participant before
payment of the Participant’s benefits hereunder (if requested at that time by
the Corporation or the Participant) or such other time as requested by the
Corporation or the Participant (in either case provided that the Corporation or
the Participant

 

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believe in good faith that any of the Payments may be subject to the Excise
Tax); provided, however, that if the Accounting Firm determines that no Excise
Tax is payable by the Participant with respect to a Payment or Payments, it
shall furnish the Participant with an opinion reasonably acceptable to the
Participant that no Excise Tax will be imposed with respect to any such Payment
or Payments. Within 10 calendar days of the delivery of the Determination to the
Participant, the Participant shall have the right to dispute the Determination
(the “Dispute”). The existence of any Dispute shall not in any way affect the
Participant’s right to receive the Payments in accordance with the
Determination. If there is no Dispute, the Determination by the Accounting Firm
shall be final, binding and conclusive upon the Corporation and the Participant,
subject to the application of Section 5.9 (c). Any Dispute shall be resolved by
arbitration in accordance with the provisions of this Plan.

 

  (c) As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that the Payments either will have been made or
will not have been made by the Corporation, in either case in a manner
inconsistent with the limitations provided in Section 5.9(a) (an “Excess
Payment” or “Underpayment”, respectively). If it is established pursuant to (i)
a final determination of a court for which all appeals have been taken and
finally resolved or the time for all appeals has expired, or (ii) an Internal
Revenue Service (the “IRS”) proceeding which has been finally and conclusively
resolved, that an Excess Payment has been made, such Excess Payment shall be
deemed for all purposes to be a loan to the Participant made on the date the
Participant received the Excess Payment and the Participant shall repay the
Excess Payment to the Corporation on demand, together with interest on the
Excess Payment at 120% of the applicable federal rate (as defined in Section
1274(d) of the Code) compounded semi-annually from the date of the Participant’s
receipt of such Excess Payment until the date of such repayment. If it is
determined (i) by the Accounting Firm, the Corporation (which shall include the
position taken by the Corporation, together with its consolidated group, on its
federal income tax return) or the IRS, (ii) pursuant to a determination by a
court, or (iii) upon the resolution to the Participant’s satisfaction of the
Dispute, that an Underpayment has occurred, the Corporation shall pay an amount
equal to the Underpayment to the Participant within ten (10) calendar days of
such determination or resolution, together with interest on such amount at 120%
of the applicable federal rate compounded semi-annually from the date such
amount should have been paid to the Participant pursuant to the terms of this
Plan or otherwise, but for the operation of this Section 5.9 (c), until the date
of payment.

 

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ARTICLE 6

 

RIGHTS ARE LIMITED

 

6.1. Benefits Payable Only From General Corporate Assets: Unsecured General
Creditor Status of Participant.

 

  (a) Payment to the Participant or any Beneficiary hereunder shall be made from
assets which shall continue, for all purposes, to be part of the general,
unrestricted assets of the Corporation; no person shall have any interest in any
such asset by virtue of any provision of this Plan. The Corporation’s obligation
hereunder shall be an unfunded and unsecured promise to pay money in the future.
To the extent that any person acquires a right to receive payments from the
Corporation under the provisions hereof, such right shall be no greater than the
right of any unsecured general creditor of the Corporation; no such person shall
have or acquire any legal or equitable right, interest or claim in or to any
property or assets of the Corporation.

 

  (b) In the event that, in its discretion, the Corporation purchases an
insurance policy or policies insuring the life of a Participant, or any employee
of the Corporation, to allow the Corporation to recover or meet the cost of
providing benefits in whole or in part, hereunder, no Participant or Beneficiary
shall have any rights whatsoever therein or in said policy or the proceeds
therefrom. The Corporation shall be the sole owner and beneficiary of any such
insurance policy or property and shall possess and may exercise all incidents of
ownership therein.

 

6.2. No Contract of Employment. Nothing contained herein shall be construed to
be a contract of employment for any term of years, nor as conferring upon the
Participant the right to continue to be employed by the Corporation in his or
her present capacity or in any capacity. It is expressly understood that this
Plan relates only to the payment of deferred compensation for the Participant’s
services.

 

6.3. Benefits Not Transferable. No Participant or Beneficiary under this Plan
shall have any power or right to transfer, assign, anticipate, hypothecate or
otherwise encumber any part of all the amounts payable hereunder. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant’s or any other person’s
bankruptcy or insolvency, or dissolution of marriage. Any such attempted
assignment shall be void.

 

6.4. No Trust Created. Nothing contained in this Plan, and no action taken
pursuant to its provisions by any person shall create, or be construed to
create, a trust of any kind, or a fiduciary relationship between the Corporation
and any other person.

 

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ARTICLE 7

 

BENEFICIARIES

 

7.1. Beneficiary Designation. The Participant shall have the right, at any time,
to submit in substantially the form attached hereto as Exhibit C, a written
designation of primary and secondary beneficiaries to whom payment under this
Plan shall be made in the event of his or her death prior to complete
distribution of the benefits payable. Each Beneficiary designation shall become
effective only when receipt thereof is acknowledged in writing by the Plan
Administrator. The Plan Administrator shall have the right, in its sole
discretion, to reject any Beneficiary designation, which is not in substantially
the form attached hereto as Exhibit C. Any attempt to designate a Beneficiary,
otherwise than as provided in this Section 7.1, shall be ineffective.

 

7.2. Spouse’s Interest. A Participant’s Beneficiary designation shall be deemed
automatically revoked if the Participant names a spouse as Beneficiary and the
marriage is later dissolved or the spouse dies. Without limiting the generality
of the foregoing, the interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant or whose marriage with the
Participant has been dissolved shall automatically pass to the Participant and
shall not be transferable by such spouse in any manner, including but not
limited to such spouse’s will, nor shall such interest pass under the laws of
intestate succession.

 

7.3. Facility of Payment. If a distribution is to be made to a minor, or to a
person who is otherwise incompetent, then the Plan Administrator may, in its
discretion, make such distribution (i) to the legal guardian, or if none, to a
parent of a minor payee with whom the payee maintains his or her residence, or
(ii) to the conservator or committee or, if none, to the person having custody
of an incompetent payee. Any such distribution shall fully discharge the Plan
Administrator, the Corporation and Plan from further liability on account
thereof.

 

ARTICLE 8

 

PLAN ADMINISTRATION

 

8.1. Responsibility of Administration of the Plan.

 

  (a) The Plan Administrator shall be responsible for the management, operation
and administration of the Plan. The Plan Administrator may employ others to
render advice with regard to its responsibilities under this Plan. It may also
allocate its responsibilities to others and may exercise any other powers
necessary for the discharge of its duties. The Plan Administrator shall be
entitled to rely conclusively upon all tables, valuations, certifications,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Plan Administrator with respect to
the Plan.

 

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  (b) The primary responsibility of the Plan Administrator is to administer the
Plan for the benefit of the Participants and their beneficiaries, subject to the
specific terms of the Plan. The Plan Administrator shall administer the Plan in
accordance with its terms and shall have the power to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination shall be conclusive and binding upon all
persons and their heirs, executors, beneficiaries, successors and assigns. The
Plan Administrator shall have all powers necessary or appropriate to accomplish
its duties under the Plan. The Plan Administrator shall also have the discretion
and authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and
all questions, including but not limited to, interpretations of this Plan and
entitlement to or amount of benefits under this Plan, as may arise in connection
with the Plan.

 

8.2. Claims Procedure.

 

  (a) Claim. A person who believes that he or she is being denied a benefit to
which he or she is entitled under the Plan or such person’s authorized
representative (hereinafter collectively referred to as a “Claimant”) may file a
written request for such benefit with the Vice President of Human Resources,
setting forth his or her claim. The request must be addressed to the Vice
President of Human Resources at his then principal place of business. A Claimant
shall not be charged a fee or be liable for any costs associated with making a
claim or appealing an adverse benefit determination pursuant to this Section
8.2.

 

  (b) Claim Decision. Upon receipt of a claim, the Vice President of Human
Resources shall advise the Claimant that a reply will be forthcoming within 90
days and that the Vice President of Human Resources shall, in fact, deliver such
reply within such period. The Vice President of Human Resources may, however,
extend the reply period for an additional 90 days for reasonable cause, provided
that the Vice President of Human Resources provides the Claimant with a written
or electronic Notice of Extension, as defined in Section 8.2(c) of this Plan,
within the initial 90 day period. In no event shall an extension exceed a period
of 180 days from the date the claim was initially received by the Vice President
of Human Resources. Upon receipt of a Disability claim, the Vice President of
Human Resources shall advise the Claimant that a reply will be forthcoming
within 45 days and that the Vice President of Human Resources shall, in fact,
deliver such reply within such period. This period may be extended by the Vice
President of Human Resources for up to 30 days, provided that the Vice President
of Human Resources (i) determines that such extension is necessary due to
matters beyond his control, and (ii) provides a written or electronic Notice of
Extension to the Claimant prior to the termination of the initial 45-day period.
If, prior to the end of the first 30-day extension period, the Vice President of
Human Resources determines that, due to matters beyond his control, he cannot
make a determination within the extension period, the period for

 

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making a determination may be extended for an additional 30 days, provided that
the Vice President of Human Resources provides the Claimant with a Notice of
Extension prior to the expiration of the initial extension period. In the event
the Vice President of Human Resources extends the determination period of any
claim due to a Claimant’s failure to submit information necessary to decide the
claim, the period for making the determination shall be tolled from the date the
Notice of Extension is sent to the Claimant until the date the Vice President of
Human Resources receives the information. If a claim is denied in whole or in
part, the Vice President of Human Resources shall adopt a written opinion, using
language calculated to be understood by the Claimant, setting forth to the
extent applicable:

 

  (i) The specific reasons for such denial;

 

  (ii) Specific reference to pertinent provisions of this Plan on which such
denial is based;

 

  (iii) A description of any additional material or information necessary for
the Claimant to perfect his or her claim and an explanation why such material or
such information is necessary;

 

  (iv) Appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review;

 

  (v) The time limits for requesting a review under Section 8.2(d) and for
review under Section 8.2(e) of this Plan;

 

  (vi) A statement that the Claimant has the right to arbitrate under Section
8.3 of this Plan and to bring a civil action under Section 502(a) of ERISA
following an adverse determination on review;

 

  (vii) The date by which an appeal must be filed with respect to the adverse
determination; and

 

  (viii) If the adverse determination is in connection with a Disability claim
and if the Vice President of Human Resources relied on an internal rule,
guideline, protocol, or other similar criterion in making the adverse
determination, the Notice shall either (i) state the specific rule, guideline,
protocol, or other similar criterion, or (ii) include a statement that such
internal rule, guideline, protocol, or other similar criterion was relied upon
in making the adverse determination and that a copy of such internal rule,
guideline, protocol, or other similar criterion shall be provided free of charge
to the Claimant upon request.

 

  (c) Notice of Extension. For purposes of this Section 8.2, a “Notice of
Extension” means a notice provided to a Claimant that indicates (i) the date the
notice is sent to the Claimant, (ii) the special circumstances requiring an
extension of time, and (iii) the date by which the Vice President of Human

 

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Resources or the Plan Administrator, as the case may be, expects to render the
determination. In the case of a Disability claim, the Notice shall also (i)
explain the standards on which entitlement to benefits is based, (ii) explain
the unresolved issues that prevent a decision on the claim, (iii) specify the
additional information needed to resolve those issues, if any, and (iv) provide
the Claimant with at least 45 days to provide the specified information. If the
Notice of Extension is in connection with a Claimant’s failure to submit
information necessary to decide the claim, the Notice shall also state that the
determination period is tolled from the date the Notice is sent until the date
the Vice President of Human Resources or the Plan Administrator, as the case may
be, receives the information.

 

  (d) Request for Review. The Claimant may request in writing no later than 60
days from the date the notice provided under Section 8.2(b) of this Plan is sent
to the Claimant that the Plan Administrator review the determination of the Vice
President of Human Resources. Such request must be addressed to the Plan
Administrator at its then principal place of business. The date an appeal is
filed shall be the date the Plan Administrator receives the written request from
the Claimant, without regard to whether all the information necessary to make a
benefit determination is filed with such request. The Plan Administrator shall
issue its written decision on each appeal no later than the date of the
regularly scheduled meeting of the Plan Administrator that immediately follows
the Claimant’s request for a review, unless the request for review is filed
within 30 days preceding the date of such meeting, in which event the Plan
Administrator shall make a determination no later than the date of the second
regularly scheduled meeting of the Plan Administrator following the receipt of
the request for review by the Plan Administrator. If special circumstances (such
as the need to hold a hearing or obtain additional information) require an
extension of the time for processing the appeal, the Plan Administrator shall
issue its decision as soon as possible but not later than the Board of
Director’s third regularly scheduled meeting after the date on which the appeal
is filed. The Plan Administrator shall provide a Claimant with a written Notice
of Extension prior to the commencement of the extension. If the Vice President
of Human Resources denies a Disability claim in whole or in part, a request for
review must be filed with the Plan Administrator no later than 180 days from the
date the notice provided under Section 8.2(b) is sent to the Claimant. The Plan
Administrator shall issue its written decision on each appeal of a Disability
claim within 45 days after the receipt thereof, unless special circumstances
(such as the need to hold a hearing or obtain additional information) require an
extension of the time for processing the appeal, in which event the Plan
Administrator shall issue its decision as soon as possible but not later than 90
days from the date the appeal is filed. If the Plan Administrator determines
that an extension of time for processing is required, a Notice of Extension
shall be provided to the Claimant prior to the termination of the 45-day period.
In the event the Plan Administrator requires an extension of time to make its
determination due to a Claimant’s failure to submit information necessary to
decide a claim, the period for making a benefit determination

 

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shall be tolled from the date the Notice of Extension is sent to the Claimant
until the date the Plan Administrator receives the information. If the Claimant
does not request a review of the adverse determination within the applicable
time limitations, he or she shall be barred and estopped from challenging the
determination.

 

  (e) Review of Decision. The Plan Administrator shall provide the Claimant an
opportunity to submit written comments, documents, records, and other
information relating to the claim for benefits. The Plan Administrator shall
review and take into account all comments, documents, records, and other
information submitted by the Claimant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination. The Claimant shall be provided upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimant’s claim for benefits. A document, record,
or other information shall be considered relevant for purposes of the preceding
sentence if such document, record, or information was (i) relied upon by the
Vice President of Human Resources in making the benefit determination, (ii) was
submitted, considered, or generated in the course of making the benefit
determination, without regard to whether such document, record, or other
information was relied upon by the Vice President of Human Resources in making
the benefit determination, or (iii) demonstrates compliance with the
administrative processes and safeguards required under Department of Labor
Regulation Section 2560.501-1. In addition, in the event of an adverse
determination of a Disability claim, (i) any member of the Plan Administrator
who is either the Vice President of Human Resources who issued the initial
adverse determination or a subordinate of such individual shall not participate
with the Plan Administrator for purposes of the review of such claim, and (ii)
the Plan Administrator shall not provide any deference to the initial adverse
determination of the Vice President of Human Resources. If the appeal of a
Disability claim is based in whole or in part on a medical judgment, the Plan
Administrator shall consult with a health care professional who has appropriate
training and experience in the field of medicine involved in the medical
judgment. Any health care professional the Plan Administrator engages for
purposes of such consultation shall be an individual who is neither an
individual who was consulted in connection with the adverse benefit
determination that is the subject of the appeal nor the subordinate of any such
individual. The Vice President of Human Resources shall provide the
identification of the medical or vocational experts whose advice was obtained on
behalf of the Plan in connection with the Claimant’s adverse benefit
determination, without regard to whether the advice was relied upon by the Vice
President of Human Resources in making the adverse determination.

 

  (f) Adverse Benefit Determination on Appeal-Information Access. In the event
of an adverse benefit determination by the Plan Administrator, the Plan
Administrator shall provide the Claimant access to, and copies of, documents,
records, and other information relating to the adverse benefit determination on
appeal, whether or not such information was relied on by the Plan Administrator
in reaching a determination on the claim.

 

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  (g) Notice of an Adverse Benefit Determination on Appeal. If the claim is
granted on review, the Plan Administrator shall provide the Claimant written
notice of such determination and the appropriate distribution, adjustment, or
other action shall be made or taken within a reasonable period of time. If the
Plan Administrator denies the claim in whole or in part, the Plan Administrator
shall provide the Claimant with written notification of its determination as
soon as possible, but no later than 5 days after the adverse benefit
determination is made. The written notice issued by the Plan Administrator shall
set forth, in a manner calculated to be understood by the Claimant, the
following:

 

  (i) The specific reasons for the adverse determination;

 

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

 

  (iii) A statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records, and
other information relevant to the Claimant’s claim for benefits; and

 

  (iv) A statement of the Claimant’s right to arbitrate under Section 8.3 of
this Plan and to bring a civil action under Section 502(a) of ERISA.

 

If the adverse benefit determination is in connection with a Disability claim,
the notice shall also provide the following:

 

  (v) If the Plan Administrator relied on an internal rule, guideline, protocol,
or other similar criterion in making the adverse determination, the notice shall
either (i) state the specific rule, guideline, protocol, or other similar
criterion, or (ii) include a statement that such internal rule, guideline,
protocol, or other similar criterion was relied upon in making the adverse
determination and that a copy of such internal rule, guideline, protocol, or
other similar criterion shall be provided free of charge to the Claimant upon
request; and

 

  (vi) The following statement: “You and your plan may have other voluntary
alternative dispute resolution options, such as mediation. One way to find out
what may be available is to contact your local U.S. Department of Labor Office
and your State insurance regulatory agency.”

 

8.3. Arbitration. Any claim or controversy between the parties which the parties
are unable to resolve themselves, and which is not resolved through the claims
procedure set forth in Section 8.2, including any claim arising out of a
Participant’s on appeal, whether or not such information was relied on by the
Plan Administrator in reaching a determination on the claim.

 

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employment or the termination of that employment, and including any claim
arising out of, connected with, or related to the formation, interpretation,
performance or breach of any provision of this Plan, and any claim or dispute as
to whether a claim is subject to arbitration, shall be submitted to and resolved
exclusively by expedited arbitration by a single arbitrator in accordance with
the following procedures:

 

  (a) In the event of a claim or controversy subject to this arbitration
provision, the complaining party shall promptly send written notice to the other
party identifying the matter in dispute and the proposed remedy. Following the
giving of such notice, the parties shall meet and attempt in good faith to
resolve the matter. In the event the parties are unable to resolve the matter
within 21 days, the parties shall meet and attempt in good faith to select a
single arbitrator acceptable to both parties. If a single arbitrator is not
selected by mutual consent within 10 business days following the giving of the
written notice of dispute, an arbitrator shall be selected from a list of nine
persons each of whom shall be an attorney who is either engaged in the active
practice of law or a recognized arbitrator and who, in either event, is
experienced in serving as an arbitrator in disputes between employers and
employees, which list shall be provided by the main Orange County office of the
American Arbitration Association (“AAA”) or of the Federal Mediation and
Conciliation Service. If, within three business days of the parties’ receipt of
such list, the parties are unable to agree upon an arbitrator from the list,
then the parties shall each strike names alternatively from the list, with the
first to strike being determined by the flip of a coin. After each party has had
four strikes, the remaining name on the list shall be the arbitrator. If such
person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.

 

  (b) Unless the parties agree otherwise, within 60 days of the selection of the
arbitrator, a hearing shall be conducted before such arbitrator at a time and a
place in Orange County agreed upon by the parties. In the event the parties are
unable to agree upon the time or place of the arbitration, the time and place
within Orange County shall be designated by the arbitrator after consultation
with the parties. Within 30 days of the conclusion of the arbitration hearing,
the arbitrator shall issue an award, accompanied by a written decision
explaining the basis for the arbitrator’s award.

 

  (c) In any arbitration hereunder, the Corporation shall pay all administrative
fees of the arbitration and all fees of the arbitrator, except that the
Participant or Beneficiary may, if he wishes, pay up to one-half of those
amounts. Each party shall pay its own attorneys’ fees, costs, and expenses,
unless the arbitrator orders otherwise. The prevailing party in such
arbitration, as determined by the arbitrator, and in any enforcement or other
court proceedings, shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party’s costs
(including but not limited to the arbitrator’s compensation), expenses, and
attorneys’ fees. The arbitrator shall have no authority to add to or to modify
this Plan, shall apply all applicable law, and shall have no lesser and no

 

- 22 -

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greater remedial authority than would a court of law resolving the same claim or
controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim
without an evidentiary hearing if the party bringing the motion establishes that
it would be entitled to summary judgment if the matter had been pursued in court
litigation. The parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator.

 

  (d) The decision of the arbitrator shall be final, binding, and
non-appealable, and may be enforced as a final judgment in any court of
competent jurisdiction.

 

  (e) This arbitration provision of the Plan shall extend to claims against any
parent, subsidiary, or affiliate of each party, and, when acting within such
capacity, any officer, director, shareholder, Participant, Beneficiary, or agent
of each party, or of any of the above, and shall apply as well to claims arising
out of state and federal statutes and local ordinances as well as to claims
arising under the common law or under this Plan.

 

  (f) Notwithstanding the foregoing, and unless otherwise agreed between the
parties, either party may, in an appropriate matter, apply to a court for
provisional relief, including a temporary restraining order or preliminary
injunction, on the ground that the arbitration award to which the applicant may
be entitled may be rendered ineffectual without provisional relief.

 

  (g) Any arbitration hereunder shall be conducted in accordance with the
employee benefit plan claims rules and procedures of the AAA then in effect;
provided, however, that, (i) all evidence presented to the arbitrator shall be
in strict conformity with the legal rules of evidence, and (ii) in the event of
any inconsistency between the employee benefit plan claims rules and procedures
of the AAA and the terms of this Plan, the terms of this Plan shall prevail.

 

  (h) If any of the provisions of this Section 8.3 are determined to be unlawful
or otherwise unenforceable, in whole or in part, such determination shall not
affect the validity of the remainder of this Section 8.3, and this Section 8.3
shall be reformed to the extent necessary to carry out its provisions to the
greatest extent possible and to insure that the resolution of all conflicts
between the parties, including those arising out of statutory claims, shall be
resolved by neutral, binding arbitration. If a court should find that the
provisions of this Section 8.3 are not absolutely binding, then the parties
intend any arbitration decision and award to be fully admissible in evidence in
any subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.

 

  (i) In the case of a Disability claim, the timeframes provided for an appeal
under Section 8.2 of this Plan shall apply for purposes of this Section 8.3.
Arbitration of a Disability claim under this Section 8.3 shall (i) be considered
one of the two levels of mandatory appeals permitted under Department of Labor
Regulation Section 2560.503-1 and (ii) shall not preclude the Claimant from
challenging the decision of the arbitrator under Section 502(a) of ERISA.

 

- 23 -

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8.4. Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Plan shall be in writing and shall be signed by the
party giving or making the same. If such notice, consent or demand is mailed, it
shall be sent by United States certified mail, postage prepaid, addressed to the
addressee’s last known address as shown on the records of the Corporation. The
date of such mailing shall be deemed the date of notice consent or demand. Any
person may change the address to which notice is to be sent by giving notice of
the change of address in the manner aforesaid.

 

ARTICLE 9

 

AMENDMENT OR TERMINATION

 

9.1. Amendment or Termination.

 

  (a) This Plan may be amended or terminated by the Corporation at any time,
without notice to or consent of any person, pursuant to resolutions adopted by
its Board of Directors. Any such amendment or termination shall take effect as
of the date specified therein and, to the extent permitted by law.

 

However, no such amendment or termination shall reduce:

 

  (i) the amount then credited to the Participant’s Deferral Account, or

 

  (ii) his or her vested percentage under Section 5.1.

 

If the Plan is terminated, each Participant’s Accrued Benefit shall be
distributed as and when such portion of such Accrued Benefit would have been
distributed if the Plan had not terminated.

 

  (b) Any other provision of this Plan to the contrary notwithstanding, the Plan
may be amended by the Corporation at any time, to the extent that, in the
opinion of the Corporation, such amendment shall be necessary in order to ensure
that the Plan will be characterized as a plan maintained for a select group of
management or highly compensated employees, as described in sections 201(2),
301(a)(3) and 401(a)(1) of ERISA, or to conform the Plan to the requirements of
any applicable law, including ERISA and the Code. No such amendment shall be
considered prejudicial to any interest of a Participant or Beneficiary
hereunder.

 

- 24 -

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ARTICLE 10

 

THE TRUST

 

10.1. Establishment of Trust. The Corporation shall establish a grantor trust,
of which the Corporation is the grantor, within the meaning of subpart E, part
I, subchapter J, subtitle A of the Code, to pay benefits under this Plan (the
“Trust”).

 

10.2. Interrelationship of the Plan and the Trust. The provisions of the Plan
shall govern the rights of a Participant to receive distributions pursuant to
the Plan. The provisions of the Trust shall govern the rights of the Participant
and the creditors of the Corporation to the assets transferred to the Trust. The
Corporation shall at all times remain liable to carry out its obligations under
the Plan. The Corporation’s obligations under the Plan may be satisfied with
Trust assets distributed pursuant to the terms of the Trust.

 

10.3. Contribution to the Trust. Amounts may be contributed by the Corporation
to the Trust in the sole discretion of the Corporation.

 

ARTICLE 11

 

MISCELLANEOUS

 

11.1. Governing Law. The Plan and the rights and obligations of all persons
hereunder shall be governed by and construed in accordance with the laws of the
State of California, other than its laws regarding choice of law, to the extent
that such state law is not preempted by federal law.

 

11.2. Withholding. Any and all payments to be made to Participant or
Participant’s Beneficiaries pursuant to this Plan shall be subject to all
federal, state and local income and employment taxes and such taxes may be
withheld accordingly by the Corporation from benefits under this Plan or from
salary, bonuses or other amounts due to the Participant as determined by the
Plan Administrator.

 

IN WITNESS WHEREOF, the Corporation has executed this Plan as of the day and
year above first written.

 

The “Corporation” WILLIAM LYON HOMES By:  

/s/    WADE H. CABLE        

--------------------------------------------------------------------------------

    Wade H. Cable Title:   President and Chief Operating Officer

 

- 25 -

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WILLIAM LYON HOMES

2004 Executive Deferred Compensation Plan

Participant Enrollment and Election Form

 

EXHIBIT A

 

This Agreement is entered into this      day of December, 2004 between WILLIAM
LYON HOMES, hereinafter referred to as the “Corporation,” and
                    , hereinafter referred to as the “Participant”.

 

I acknowledge that, as an Executive of the Corporation, I have been offered an
opportunity to participate in the Corporation’s 2004 Executive Deferred
Compensation Plan for the Plan year beginning January 1, 2005. I further
acknowledge that the Plan is intended to comply with the provisions of the
American Jobs Creation Act of 2004 (the “New Law”), and that some provisions of
the New Law as they apply to the Plan may not yet be clear.

 

I am electing the alternatives set forth as indicated below:

 

I. ELECTION TO DEFER

(Please check all that apply)

 

  ¨ I WILL participate in the Corporation’s 2004 Executive Deferred Compensation
Plan for the forthcoming Plan Year and duly authorize the Corporation to make
the appropriate deductions from my paycheck.

 

I hereby elect to defer receipt of salary and/or bonus for the forthcoming Plan
Year as set forth below (up to a maximum of 20% of base salary and bonus, but
not less than $10,000):

 

  ¨         % or $             of my base annual salary to be withdrawn from my
salary in equal amounts during 2005.

 

  ¨         % or $             of my bonus which is determined by the
Compensation Committee of the Corporation’s Board of Directors after my
election, to be withdrawn as applicable during 2005.

 

I acknowledge that, at present, it is not clear whether the New Law permits my
election to apply to my bonus which is paid in 2005. Pending IRS regulations or
other guidance interpreting the New Law, the Plan’s Administrator will apply my
election to any bonus which is paid in 2005, but I am aware that IRS regulations
or other guidance may require the Plan’s Administrator to “unwind” my election
as it applies to any bonus paid in 2005, and require me to receive the bonus –
and pay tax on it – in 2005.

 

  ¨         % or $             of my bonus which is determined by the
Compensation Committee of the Corporation’s Board of Directors based on my
service to the Corporation in 2005, even if that bonus is paid in 2006, to be
withdrawn as applicable when paid.

 

- A-1 -

--------------------------------------------------------------------------------

  ¨ I will NOT participate in the Corporation’s 2004 Executive Deferred
Compensation Plan for the forthcoming Plan Year.

 

NOTE: This election is irrevocable for the forthcoming Plan Year.

 

II. DISTRIBUTION OF BENEFITS ELECTION (PER ARTICLE 5):

 

(Please check one of A (Retirement Benefits) OR B (Fixed Payment Date Benefits)

 

- A-2 -

--------------------------------------------------------------------------------

  ¨ A. Retirement or Disability Benefits. I hereby elect to have my retirement
or disability benefits earned in 2005 and later years distributed to me in the
following manner:

 

Distribution to be paid (check one):

 

  ¨ Lump Sum

 

  ¨ Monthly over 2 years

 

  ¨ Monthly over 5 years

 

  ¨ Monthly over 10 years

 

  ¨ Monthly over 15 years

 

  ¨ Monthly over 20 years

 

NOTE: Under the New Law, a Participant’s ability to change this election once it
is made is very limited. No change can be made which would accelerate payments
that a Participant has elected above. A change to delay payments is effective
only if the change is made by the Participant by giving written notice to the
Corporation not later than one year before Retirement or Disability, and if the
first payment affected by the change is deferred by at least five years.

 

  ¨ B. Fixed Payment Date Benefits. I hereby elect to have my fixed payment date
benefits distributed to me in the following manner:

 

Date for fixed payments to commence                                         
             (This date may be no earlier than the January 1 of the sixth
calendar year after the calendar year in which this election is made.

 

Distribution to be paid (check one):

 

  ¨ Lump Sum

 

  ¨ Monthly over 2 years

 

  ¨ Monthly over 5 years

 

  ¨ Monthly over 10 years

 

  ¨ Monthly over 15 years

 

  ¨ Monthly over 20 years

 

NOTE: This election may be changed to extend the payment date to a later date so
long as (a) you make the election to so extend the date at least one year before
the original date, and (b) the extended date of the first payment is no earlier
than January 1 of the sixth calendar year after you make the election to extend.
Such dates may not be accelerated.

 

PARTICIPANT

 

 

--------------------------------------------------------------------------------

<<First Name>> <<Last Name>>

 

- A-3 -

--------------------------------------------------------------------------------

William Lyon Homes

Executive Deferred Compensation Plan

Deemed Investment Elections

 

EXHIBIT B

 

This agreement is entered into effective as of December 31, 2004 between William
Lyon Homes, hereinafter referred to as the “Corporation” and
                                , hereinafter referred to as the “participant.”

 

Investment Elections

 

This Investment Election shall supersede any prior election which I have made
and shall continue until such time as I make a new Investment Election in
accordance with the terms of the Plan. Please see accompanying material and
prospectus for a detailed explanation of investment options.

 

     Allocation

--------------------------------------------------------------------------------

Hartford HLS Sub-Accounts:    _______ Advisers Fund (005-505)    _______ Bond
Fund (004-504)    _______ Capital Appreciation (006-506)    _______ Dividend and
Growth Fund (017-517)    _______ Disciplined Equity Fund (025-525)    _______
Growth Opportunities Fund (141-541)    _______ Index Fund (003-503)    _______
International Opportunities Fund (007-507)    _______ International Small
Company Fund (142-542)    _______ MidCap Value Fund (143-543)    _______ Money
Market Fund (001-501)    _______ Mortgage Securities Fund (002-502)    _______
Small Company Fund (028-528)    _______ Stock Fund (008-508)    _______ Value
Opportunities Fund (144-544)    _______ Hartford Fixed Account (019-519)   
_______ Fidelity VIP Sub-Accounts:    _______ Equity-Income Portfolio (022-522)
   _______ American Funds Insurance Sub-Accounts:    _______ Asset Allocation
Fund (605-615)    _______ Blue Chip Income & Growth Fund (606-616)    _______
Bond Fund (609-619)    _______ Global Growth Fund (601-611)    _______ Global
Small Capitalization Fund (602-612)    _______ Growth Fund (603-613)    _______
Growth-Income Fund (604-614)    _______ International Fund (607-617)    _______
New World Fund (608-618)    _______ AIM V. I. Sub-Accounts:    _______ Mid Cap
Core Equity Fund (149-549)    _______ Premier Equity Fund (148-548)    _______
Putnam VT Sub-Accounts:    _______ Capital Opportunities Fund (155-555)   
_______ Equity Income Fund (154-554)    _______ Global Equity Fund (157-557)   
_______ Growth & Income Fund (156-556)    _______ High Yield Bond Fund (161-561)
   _______ Income Fund (162-562)    _______ International Equity Fund (158-558)
   _______ New Opportunities Fund (159-559)    _______ Voyager Fund (160-560)   
_______

 

- B-1 -

--------------------------------------------------------------------------------

     Allocation

--------------------------------------------------------------------------------

  MFS Sub-Accounts:    _______   New Discovery Series (151-551)    _______  
Total Return Series (150-550)    _______   Franklin Templeton Sub-Accounts:   
_______   Mutual Shares Securities Fund (147-547)    _______   Franklin Small
Cap Value Sec Fund (146-546)    _______        _______   Hartford 2004 Ibbotson
Model Portfolios:    _______   Conservative    _______   Moderate Conservative
   _______   Moderate    _______   Moderate Aggressive    _______   Aggressive
   _______        _______        _______   Grand Total – All Investment
Elections    100 %

 

PARTICIPANT

 

 

--------------------------------------------------------------------------------

Signature of Participant

 

 

--------------------------------------------------------------------------------

Printed Name of Participant

 

- B-2 -

--------------------------------------------------------------------------------

WILLIAM LYON HOMES

2004 Executive Deferred Compensation Plan

Designation of Beneficiary

 

EXHIBIT C

 

TO: William Lyon Homes (hereinafter referred to as the “Corporation”),

 

In accordance with the rights granted to me in the William Lyon Homes 2004
Executive Deferred Compensation Plan, between the Corporation and me, I do
hereby designate as Beneficiary thereunder to receive payments thereunder in the
event of my death:

 

Primary Beneficiary:                                          

Relationship:                                                      

1st Contingent Beneficiary:                             

Relationship:                                                      

 

I further reserve the privilege of changing the Beneficiary herein named at any
time or times without the consent of any such beneficiary.

 

This designation is made upon the following terms and conditions:

 

1. The word “Beneficiary” as used herein shall include the plural,
Beneficiaries, wherever the Plan permits.

 

2. For purposes of this Beneficiary Designation, no person shall be deemed to
have survived the Participant if that person dies within thirty (30) days of the
Participant’s death.

 

3. Beneficiary shall mean the Primary Beneficiary if such Primary Beneficiary
survives the Participant by at least thirty (30) days, and shall mean the 1st
Contingent Beneficiary if the Primary Beneficiary does not survive the
Participant by at least thirty (30) days.

 

4. If the Primary Beneficiary shall be deceased on any annual payment date
provided in said Agreement, any and all remaining annual payments shall be
payable to the 1st Contingent Beneficiary unless the executors or administrators
of said deceased Beneficiary are named as Primary Beneficiary hereinabove.

 

5. If more than one Beneficiary is named within the same class (i.e., Primary or
1st Contingent), then annual payments shall be made equally to such
Beneficiaries unless otherwise provided hereinabove. If any such Beneficiary
dies while receiving annual payments under said Agreement, any and all remaining
payments shall continue to be made to the surviving Beneficiaries of such class
and to the legal heirs of the deceased Beneficiary, which legal heirs shall
receive the amount which was being received by said deceased Beneficiary. If all
of the Beneficiaries of a class shall die, any and all remaining payments shall
be made to the next class of Beneficiaries, as provided under Paragraph 4 above.

 

6. If none of the Beneficiaries named hereinabove are living on any said annual
payment date, any and all remaining payments shall be made to my executors or
administrators, or upon their written request, to any person or persons so
designated by them.

 

7. If any such annual payments shall be payable to any trust, the Corporation
shall not be liable to see to the application by the Trustee of any payment
hereunder at any time, and may rely upon the sole signature of the Trustee to
any receipt, release or waiver, or to any transfer or other instrument to
whomsoever made purporting to affect this nomination or any right hereunder.

 

8. A Participant’s Beneficiary designation shall be deemed automatically revoked
if the Participant names a spouse as Beneficiary and the marriage is later
dissolved or the spouse dies. Without limiting the generality of the foregoing,
the interest in the benefits hereunder of a spouse of a Participant who has
predeceased the Participant or whose marriage with the Participant has been
dissolved shall automatically pass to the Participant and shall not be
transferable by such spouse in any manner, including but not limited to such
spouse’s will, nor shall such interest pass under the laws of intestate
succession.

 

- C-1 -

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This designation cancels and supersedes any Designation of Beneficiary
heretofore made by me with respect to said Plan and the right to receive
payments thereunder.

 

Dated:                                                                

 

--------------------------------------------------------------------------------

    Executive

 

I am the spouse of the Participant/Executive named above. I have read and
understood the foregoing Designation of Beneficiary, and especially paragraph 8
thereof. I understand that the Plan does not permit the assignment of my
spouse’s benefits to me in the event of the dissolution of my marriage. I also
understand that, even if my spouse names me as a Beneficiary, my rights may be
impaired in the event of the dissolution of my marriage or my death before my
spouse.

 

Dated:                                                            

 

--------------------------------------------------------------------------------

    Spouse Received this      day of                         , 20       By:  

 

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- C-2 -