**Exhibit10.1**

 

**EXECUTIVESUPPLEMENTAL RETIREMENT**

**INCOMEAGREEMENT**

**FOR MICHAELSANCHEZ**

 

**FIRSTNATIONAL BANK OF NASSAU COUNTY**

**FernandinaBeach, Florida**

 

**October 20,2004**

 

 

**FinancialInstitution Consulting Corporation**

**700Colonial Road, Suite 102**

**Memphis,Tennessee 38117**

**WATS:1-800-873-0089**

**FAX: (901)684-7414**

**(901)684-7400**

 

**EXECUTIVESUPPLEMENTAL RETIREMENT**

**INCOMEAGREEMENT****FOR MICHAEL SANCHEZ**

 

This Executive Supplemental Retirement IncomeAgreement (the “Agreement”), effective as of the 20th day ofOctober, 2004, formalizes the understanding by and between FIRST NATIONAL BANKOF NASSAU COUNTY (the “Bank”), a federally-chartered commercial bank having itsprincipal place of business in Florida, and MICHAEL SANCHEZ (hereinafterreferred to as “Executive”).

 

----

 

**W I T N E SS E T H :**

 

**WHEREAS**, the Executive is employed by the Bank; and

 

**WHEREAS**, the Bank recognizes the valuable servicesheretofore performed by the Executive and wishes to encourage his continuedemployment; and

 

**WHEREAS**, the Executive wishes to be assured that hewill be entitled to a certain amount of additional compensation for somedefinite period of time from and after retirement from active service with theBank  or other termination of employmentand wishes to provide his beneficiary with benefits from and after death; and

 

**WHEREAS**, the Bank and the Executive wish to providethe terms and conditions upon which the Bank shall pay such additionalcompensation to the Executive after retirement or other termination ofemployment and/or death benefits to his beneficiary after death; and

 

**WHEREAS**, the Bank has adopted this ExecutiveSupplemental Retirement Income Agreement which controls all issues relating tobenefits as described herein;

 

**NOW, THEREFORE,** in consideration of the premises and of the mutualpromises herein contained, the Bank and the Executive agree as follows:

 

**SECTION I**

**DEFINITIONS**

 

When used herein, the following words and phrasesshall have the meanings below unless the context clearly indicates otherwise:

 

2

----

 

1.1                                 “Accrued Benefit Account” shall be representedby the bookkeeping entries required to record the Executive’s (i) PhantomContributions plus (ii) accrued interest, equal to the Interest Factor, earnedto-date on such amounts.  However,neither the existence of such bookkeeping entries nor the Accrued BenefitAccount itself shall be deemed to create either a trust of any kind, or afiduciary relationship between the Bank and the Executive or any Beneficiary.

 

1.2                                 “Act” means the Employee Retirement IncomeSecurity Act of 1974, as amended from time to time.

 

1.3                                 “Administrator” means the Bank.

 

1.4                                 “Bank” means FIRST NATIONAL BANK OF NASSAUCOUNTY and any successor thereto.

 

1.5                                 “Beneficiary” means the person or persons(and their heirs) designated as Beneficiary in Exhibit B of this Agreement towhom the deceased Executive’s benefits are payable.  If no Beneficiary is so designated, then theExecutive’s Spouse, if living, will be deemed the Beneficiary.  If the Executive’s Spouse is not living, thenthe Children of the Executive will be deemed the Beneficiaries and will take ona per stirpes basis.  If there are noChildren, then the Estate of the Executive will be deemed the Beneficiary.

 

1.6                                 “Benefit Age” means the Executive’ssixty-fifth (65th) birthday.

 

1.7                                 “Benefit Eligibility Date” means the date onwhich the Executive is entitled to receive any benefit(s) pursuant toSection(s) III or V of this Agreement. It shall be the first day of the month following the month in which theExecutive attains his Benefit Age.

 

1.8                                 “Board of Directors” means the board ofdirectors of the Bank.

 

1.9                                 “Cause” means personal dishonesty, willful orgrossly negligent misconduct, willful or grossly negligent malfeasance, breachof fiduciary duty involving personal profit, intentional failure to performstated duties, willful violation of any law, rule, regulation (other thantraffic violations or

 

3

----

 

similar offenses), or final cease-and-desist order,material breach of any provision of this Agreement, or gross negligence inmatters of material importance to the Bank.

 

1.10                           “Changein Control” means each of the events set forth in any one of the followingparagraphs:

(a)                                  any“Person” (as such term is used in Section 13(d) and 14(d) of theSecurities Exchange Act of 1934 (“Exchange Act”) as in effect as of the date ofthis Plan) other than (i) the Holding Company, (ii) a trustee or otherfiduciary holding securities under an employee benefit plan of the HoldingCompany, (iii) an underwriter temporarily holding securities pursuant to anoffering of such securities, or (iv) a corporation owned, directly orindirectly, by the shareholders of the Holding Company in substantially thesame proportions as their ownership of shares of the Holding Company (any suchperson is hereinafter referred to as “Person”), is or becomes the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of securities of the Holding Company representing more than 20% ofthe combined voting power of the Holding Company’s then outstanding securities(not including the securities beneficially owned by such Person any securitiesacquired directly from the Holding Company);

 

(b)                                 thereis consummated a merger or consolidation of the Holding Company with or intoany other corporation, other than a merger or consolidation which would resultin the holders of the voting securities of the Holding Company outstandingimmediately prior thereto holding securities which represent, in combinationwith the ownership of any trustee or other fiduciary holding securities underan employee benefit plan of the Holding Company, immediately after such mergeror consolidation, more than 60% of the combines voting power of the votingsecurities of either the Holding Company or the other entity which survivessuch merger or consolidation or the parent of the entity which survives suchmerger or consolidation;

 

(c)                                  theshareholders of the Holding Company approve any plan or proposal for theliquidation or dissolution of the Holding Company or an agreement for the saleor disposition by the Holding Company of all or substantially all the HoldingCompany’s assets; or

 

4

----

 

(d)                                 duringany period of two consecutive years (not including any period prior to the dateof the Agreement) individuals who at the beginning of such period constitutethe Board of Directors and any new director (other than a director designatedby a person who has entered into an agreement with the Holding Company toeffect a transaction described in (a), (b), or (c) above) whose election by theBoard or nomination for election by the Holding Company’s shareholders wasapproved by a vote of at least two-thirds (2/3) of the directors then still inoffice who either were directors at the beginning of the period or whoseelection or nomination for election was previously so approved, cease for anyreason to constitute a majority thereof.

 

(e)                                  anotice of an application is filed with the Florida Board of FinancialInstitutions or the Federal Reserve Board or any other bank or thriftregulatory approval (or notice of disapproval) is granted by the FederalReserve, Florida Board of Financial Institutions, the OCC, the Federal DepositInsurance Corporation, or any other regulatory authority for permission toacquire control of the Company or any of its banking subsidiaries; provided thtif the application is filed in connection with a transaction which has beenapproved by the Board, then the Change in Control shall not be deemed to occuruntil consummation of the transaction.

 

For purposes of thisPlan, where a change in control of the Holding Company results from a series ofrelated transactions, the change in control of the Holding Company shall bedeemed to have occurred on the date of the consummation of the first suchtransaction.

 

For purposes ofparagraph (a) above, the shareholders of another corporation (other than theBank or a corporation described in clause (iv) of paragraph (a)) shall bedeemed to constitute a Person.  Further,it is understood by the parties that the sale, transfer, or other dispositionof a subsidiary of the Holding Company, other than First National Bank ofNassau County or its successor, shall not constitute a change in control of thegiving rise to payments or benefits under this Plan.

 

1.11                           “Children” means all natural or adoptedchildren of the Executive and issue of any predeceased child or children.

 

5

----

 

1.12                           “Code” means the Internal Revenue Code of1986, as amended from time to time.

 

1.13                           “Contribution(s)” means those annualcontributions which the Bank is required to make to the Retirement Income TrustFund on behalf of the Executive in accordance with Subsection 2.1(a) andin the amounts set forth in Exhibit A of the Agreement.

 

1.14                           (a) “Disability Benefit” means the benefitpayable to the Executive following a determination, in accordance with Subsection 6.1(a),that he is no longer able, properly and satisfactorily, to perform his dutiesat the Bank.

(b) “Disability Benefit-Supplemental” (ifapplicable) means the benefit payable to the Executive’s Beneficiary upon theExecutive’s death in accordance with Subsection 6.1(b).

 

1.15                           “Effective Date” of this restated Agreementshall be October 20, 2004.

 

1.16                           “Estate” means the estate of the Executive.

 

1.17                           “Interest Factor” means monthly compounding,discounting or annuitizing, as applicable, at a rate set forth inExhibit A.

 

1.18                           “Payout Period” means the time frame duringwhich certain benefits payable hereunder shall be distributed.  Payments shall be made in monthlyinstallments commencing on the first day of the month following the occurrenceof the event which triggers distribution and continuing for one hundred eighty(180) months.  Should the Executive makea Timely Election to receive a lump sum benefit payment, the Executive’s PayoutPeriod shall be deemed to be one (1) month.

 

1.19                           “Phantom Contributions” means those annualContributions set forth in Exhibit A of the Agreement which the Bank isrequired to record to the Accrued Benefit Account once the Executive hasexercised the withdrawal rights provided for in Subsection 2.2.

 

1.20                           “Plan Year” shall mean the twelve (12) monthperiod commencing January 1 and ending December 31.

 

6

----

 

1.21                           “Retirement Income Trust Fund” means thetrust fund account established by the Executive and into which annualContributions will be made by the Bank on behalf of the Executive pursuant toSubsection 2.1.  The contractualrights of the Bank and the Executive with respect to the Retirement IncomeTrust Fund shall be outlined in a separate writing to be known as the MichaelSanchez Grantor Trust agreement.

 

1.22                           “Spouse” means the individual to whom theExecutive is legally married at the time of the Executive’s death, provided,however, that the term ASpouse@ shall not refer to an individual to whom theExecutive is legally married at the time of death if the Executive and suchindividual have entered into a formal separation agreement or initiated divorceproceedings.

 

1.23                           “Supplemental Retirement Income Benefit”means an annual amount (before taking into account federal and stateincome taxes), payable in monthly installments throughout the Payout Period.Such benefit is projected pursuant to the Agreement for the purpose ofdetermining the Contributions to be made to the Retirement Income Trust Fund(or Phantom Contributions to be recorded in the Accrued Benefit Account).   The annual Contributions and PhantomContributions have been actuarially determined, using the assumptions set forthin Exhibit A, in order to fund for the projected Supplemental Retirement IncomeBenefit.  The Supplemental Retirement IncomeBenefit for which Contributions (or Phantom Contributions) are being made (orrecorded) is set forth in Exhibit A.

 

1.24                           “Timely Election” means the Executive hasmade an election to change the form of his benefit payment(s) by filing withthe Administrator a Notice of Election to Change Form of Payment (Exhibit C ofthis Agreement).  In the case of benefitspayable from the Accrued Benefit Account, such election shall have been made atleast twelve (12) months prior to both (i) the event which triggersdistribution and (ii) the Executive’s Benefit Eligibility Date existing at thetime of such election.  In the case ofbenefits payable from the Retirement Income Trust Fund, such election may bemade at any time.

 

7

----

 

**SECTION II**

**BENEFITS -GENERALLY**

 

2.1                                 (a) Retirement Income Trust Fund andAccrued Benefit Account.  TheExecutive shall establish the Michael Sanchez Grantor Trust into which the Bankshall be required to make annual Contributions on the Executive’s behalf,pursuant to Exhibit A and this Section II of the Agreement.  A trustee shall be selected by the Executive.The trustee shall maintain an account, separate and distinct from the Executive’spersonal contributions, which account shall constitute the Retirement IncomeTrust Fund. The trustee shall be charged with the responsibility of investingall contributed funds.  Distributionsfrom the Retirement Income Trust Fund of the Michael Sanchez Grantor Trust maybe made by the trustee to the Executive, for purposes of payment of any incomeor employment taxes due and owing on Contributions by the Bank to theRetirement Income Trust Fund, if any, and on any taxable earnings associatedwith such Contributions which the Executive shall be required to pay from yearto year, under applicable law, prior to actual receipt of any benefit paymentsfrom the Retirement Income Trust Fund. If  the Executive exercises hiswithdrawal rights pursuant to Subsection 2.2, the Bank’s obligation tomake Contributions to the Retirement Income Trust Fund shall cease and the Bank’sobligation to record Phantom Contributions in the Accrued Benefit Account shallimmediately commence pursuant to Exhibit A and this Section II of theAgreement.  To the extent this Agreementis inconsistent with the Michael Sanchez Grantor Trust Agreement, the MichaelSanchez Grantor Trust Agreement shall supersede this Agreement.

 

The annual Contributions (or Phantom Contributions)required to be made by the Bank to the Retirement Income Trust Fund (orrecorded by the Bank in the Accrued Benefit Account) have been actuariallydetermined and are set forth in Exhibit A which is attached hereto andincorporated herein by reference. Contributions shall be made by the Bank to the Retirement Income TrustFund (i) within seventy-five (75) days of establishment of such trust, and (ii)within the first thirty (30) days of the beginning of each subsequent PlanYear, unless this Section expressly provides otherwise.  Phantom Contributions, if any, shall be recordedin the Accrued Benefit Account within the first thirty (30) days of thebeginning of each applicable Plan Year, unless this Section expresslyprovides otherwise.  PhantomContributions shall accrue interest at a rate equal to the Interest Factor, duringthe Payout Period, until the balance of the Accrued Benefit Account has beenfully distributed.  Interest on anyPhantom Contribution shall not commence until such Payout Period commences.

 

8

----

 

The Administrator shall review the schedule ofannual Contributions (or Phantom Contributions) provided for in Exhibit A (i)within thirty (30) days prior to the close of each Plan Year and (ii) if theExecutive is employed by the Bank until attaining Benefit Age, on orimmediately before attainment of such Benefit Age.  Such review shall consist of an evaluation ofthe accuracy of all assumptions used to establish the schedule ofContributions (or Phantom Contributions). Provided that (i) the Executive has not exercised his withdrawal rightspursuant to Subsection 2.2 and (ii) the investments contained in theRetirement Income Trust Fund have been deemed reasonable by the Bank, theAdministrator shall prospectively amend or supplement the schedule ofContributions provided for in Exhibit A should the Administrator determineduring any such review that an increase in or supplement to the schedule ofContributions is necessary in order to adequately fund the Retirement IncomeTrust Fund so as to provide an annual benefit (or to provide the lump sumequivalent of such benefit, as applicable) equal to the Supplemental RetirementIncome Benefit, on an after-tax basis, commencing at Benefit Age and payablefor the duration of the Payout Period.

 

(b) Withdrawal Rights Not Exercised.

(1) Contributions Made Annually

If the Executive does not exercise any withdrawalrights pursuant to Subsection 2.2, the annual Contributions to theRetirement Income Trust Fund shall continue each year, unless this Subsection 2.1(b)specifically states otherwise, until the earlier of (i) the last Plan Year thatContributions are required pursuant to Exhibit A, or (ii) the Plan Year of theExecutive’s termination of employment; provided, however, that in no eventshall the total Contributions be less than an amount which is sufficient toprovide the Executive with after-tax benefits (assuming a constant tax rateequal to the rate in effect as of the date of Executive’s termination)beginning at his Benefit Age, equal in amount to that benefit which would havebeen payable to the Executive if no secular trust had been implemented and thebenefit obligation had been accrued under APB Opinion No. 12, as amended by FAS106.

 

(2) Termination Following a Change in Control

If the Executive does not exercise his withdrawalrights pursuant to Subsection 2.2 and a Change in Control occurs at theBank, followed within thirty-six (36) months by either (i) the Executive’s

 

9

----

 

involuntary termination of employment, or (ii)Executive’s voluntary termination of employment after: (A) a material change inthe Executive’s function, duties, or responsibilities, which change would causethe Executive’s position to become one of lesser responsibility, importance, orscope from the position the Executive held at the time of the Change inControl, (B) a relocation of the Executive’s principal place of employment bymore than thirty (30) miles from its location prior to the Change in Control,or (C) a material reduction in the benefits and perquisites to the Executivefrom those being provided at the time of the Change in Control, theContribution set forth on Schedule A shall continue to be required of theBank.   The Bank shall be required tomake an immediate lump sum contribution to the Retirement Income Trust Fundequal to (i) the full Contribution required for the Plan Year in which suchtermination occurs, if not yet made, plus (ii) the present value (computedusing a discount rate equal to the Interest Factor) of all remainingContributions to the Retirement Income Trust Fund; provided, however, in noevent shall the Contribution be less than an amount which is sufficient toprovide the Executive with after-tax benefits (assuming a constant tax rateequal to the rate in effect as of the date of Executive’s termination)beginning at his Benefit Age, equal in amount to that benefit which would havebeen payable to the Executive if no secular trust had been implemented and thebenefit obligation had been accrued under APB Opinion No. 12, as amended by FAS106.

 

(3) Termination For Cause

If the Executive does not exercise his withdrawalrights pursuant to Subsection 2.2, and is terminated for Cause pursuant toSubsection 5.2, no further Contribution(s) to the Retirement Income TrustFund shall be required of the Bank, and if not yet made, no Contribution shallbe required for the Plan Year in which such termination for Cause occurs.

 

(4) Involuntary Termination of Employment.

If the Executive does not exercise his withdrawalrights pursuant to Subsection 2.2, and the Executive’s employment with theBank is involuntarily terminated for any reason, including a termination due todisability of the Executive but excluding termination for Cause, or terminationfollowing a Change in Control within thirty-six (36) months of such Change inControl, within thirty (30) days of such involuntary termination of employment,the Bank shall be required to make an immediate lump sum Contribution to theExecutive’s Retirement Income Trust Fund in an amount equal to the: (i) thefull Contribution required for the Plan Year in which such involuntarytermination occurs, if not yet made, plus (ii) the present value (computed using a discount rate equal to the

 

10

----

 

Interest Factor) of all remaining Contributions tothe Retirement Income Trust Fund; provided however, that, if necessary, anamount shall be contributed to the Retirement Income Trust Fund which issufficient to provide the Executive with after tax benefits (assuming aconstant tax rate equal to the rate in effect as of the date of the Executive’stermination) beginning at his Benefit Age, equal in amount to that benefitwhich would have been payable to the Executive if no secular trust had beenimplemented and the benefit obligation had been accrued under APB Opinion No.12, as amended by FAS 106.

 

(5) Death During Employment.

If the Executive does not exercise any withdrawalrights pursuant to Subsection 2.2, and dies while employed by the Bank,and if, following the Executive’s death, the assets of the Retirement IncomeTrust Fund are insufficient to provide the Supplemental Retirement IncomeBenefit to which the Executive is entitled, the Bank shall be required to makea Contribution to the Retirement Income Trust Fund that, when annuitized (usingthe Interest Factor) is sufficient to provide a death benefit to the Executive’sbeneficiaries equal to the Supplemental Retirement Income Benefit reduced bythe annuitized value (using the Interest Factor) of any proceeds received underany life insurance policies that may have been obtained on Executive’s life bythe Retirement Income Trust Fund; provided, however, that such Contributionshall not be in excess of the sum of the remaining Contributions set forth inExhibit A.   Such final contributionshall be payable in a lump sum to the Retirement Income Trust Fund withinthirty (30) days of the Executive’s death.

 

(6) Voluntary Termination of Employment

If the Executive does not exercise his withdrawal rightspursuant to Subsection 2.2 and voluntarily terminates his employment forany reason excluding disability or following a Change in Control withinthirty-six (36) months of such Change in Control, no further Contribution(s) tothe Retirement Income Trust Fund shall be required of the Bank and, if not yetmade, no Contribution shall be required for the Plan Year in which suchvoluntary termination occurs; provided however, that, if necessary, an amountshall be contributed to the Retirement Income Trust Fund which is sufficient toprovide the Executive with after tax benefits (assuming a constant tax rateequal to the rate in effect as of the date of the Executive’s termination)beginning at his Benefit Age, equal in amount to that benefit which would havebeen payable to the Executive if no secular trust had been implemented and thebenefit obligation had been accrued under APB Opinion No. 12, as amended by FAS106.

 

11

----

 

(c) Withdrawal Rights Exercised.

(1)  PhantomContributions Made Annually.

If the Executive exercises his withdrawal rightspursuant to Subsection 2.2, no further Contributions to the RetirementIncome Trust Fund shall be required of the Bank.  Thereafter, Phantom Contributions shall berecorded annually in the Executive’s Accrued Benefit Account within thirty (30)days of the beginning of each Plan Year, commencing with the first Plan Yearfollowing the Plan Year in which the Executive exercises his withdrawalrights.  Such Phantom Contributions shallcontinue to be recorded annually, unless this Subsection 2.1(c)specifically states otherwise, until the earlier of (i) the last Plan Year thatPhantom Contributions are required pursuant to Exhibit A, or (ii) the Plan Yearof the Executive’s termination of employment.

 

(2) Termination Following a Change in Control

If the Executive exercises his withdrawal rightspursuant to Subsection 2.2, Phantom Contributions shall commence in thePlan Year following the Plan Year in which the Executive first exercises hiswithdrawal rights.  If a Change inControl occurs at the Bank, and within thirty-six (36) months of such Change inControl, the Executive’s employment is either (i) involuntarily terminated, or(ii) voluntarily terminated by the Executive after: (A) a material change inthe Executive’s function, duties, or responsibilities, which change would causethe Executive’s position to become one of lesser responsibility, importance, orscope from the position the Executive held at the time of the Change inControl, (B) a relocation of the Executive’s principal place of employment bymore than thirty (30) miles from its location prior to the Change in Control,or (C) a material reduction in the benefits and perquisites to the Executivefrom those being provided at the time of the Change in Control, the PhantomContribution set forth below shall be required of the Bank. The Bank shall berequired to record a lump sum Phantom Contribution in the Accrued BenefitAccount within ten (10) days of the Executive’s termination of employment.  The amount of such final Phantom Contributionshall be actuarially determined based on the Phantom Contribution required, atsuch time, in order to provide a benefit via this Agreement equivalent to theSupplemental Retirement Income Benefit, on an after-tax basis, commencing onthe Executive’s Benefit Eligibility Date and continuing for the duration of thePayout Period.  (Such actuarialdetermination shall reflect the fact that amounts shall be payable from boththe Accrued Benefit Account as well as the Retirement Income Trust Fund andshall also reflect

 

12

----

 

the amount and timing of any withdrawal(s) made bythe Executive from the Retirement Income Trust Fund pursuant to Subsection 2.2.)

 

(3) Termination For Cause

If the Executive is terminated for Cause pursuant toSubsection 5.2, the entire balance of the Executive’s Accrued BenefitAccount at the time of such termination, which shall include any PhantomContributions which have been recorded plus interest accrued on such PhantomContributions, shall be forfeited.

 

(4) Involuntary Termination of Employment.

If the Executive exercises his withdrawal rightspursuant to Subsection 2.2, and the Executive’s employment with the Bank isinvoluntarily terminated for any reason including termination due to disabilityof the Executive, but excluding termination for Cause, or termination followinga Change in Control, within thirty (30) days of such involuntary termination ofemployment, the Bank shall be required to record a final Phantom Contributionin an amount equal to: (i) the full Phantom Contribution required for the PlanYear in which such involuntary termination occurs, if not yet made, plus (ii)the present value (computed using a discount rate equal to the Interest Factor)of all remaining Phantom Contributions.

 

(5) Death During Employment.

If the Executive exercises his withdrawal rightspursuant to Subsection 2.2, and dies while employed by the Bank, PhantomContributions included on Exhibit A shall be required of the Bank.  Such Phantom Contributions shall commence inthe Plan Year following the Plan Year in which the Executive exercises hiswithdrawal rights and shall continue through the Plan Year in which theExecutive dies.  The Bank shall also berequired to record a final Phantom Contribution within thirty (30) days of theExecutive’s death.  The amount of suchfinal Phantom Contribution shall be actuarially determined based on the PhantomContribution required at such time (if any), in order to provide a benefit viathis Agreement equivalent to the Supplemental Retirement Income Benefitcommencing within thirty (30) days of the date the Administrator receivesnotice of the Executive’s death and continuing for the duration of the PayoutPeriod.  (Such actuarial determinationshall reflect

 

13

----

 

the fact that amounts shall be payable from theAccrued Benefit Account as well as the Retirement Income Trust Fund, shall bereduced by the annuitized value (using the Interest Factor) of any proceedsreceived under any life insurance policies that may have been obtained on theExecutives’ life by the Retirement Income Trust Fund, and shall also reflectthe amount and timing of any withdrawal(s) made by the Executive pursuant toSubsection 2.2.)

 

(6) Voluntary Termination of Employment

If the Executive exercises his withdrawal rightspursuant to Subsection 2.2 and thereafter voluntarily terminates hisemployment for any reason excluding death, disability, or following a Change inControl, no further Phantom Contributions to the Accrued Benefit Account shallbe required of the Bank and, if not yet made, no Phantom Contribution shall berequired for the Plan Year in which such voluntary termination occurs.

 

2.2                                 Withdrawals From Retirement Income TrustFund.

Exercise of withdrawal rights by the Executivepursuant to the Michael Sanchez Grantor Trust agreement shall terminate theBank’s obligation to make any further Contributions to the Retirement IncomeTrust Fund, and the Bank’s obligation to record Phantom Contributions pursuantto Subsection 2.1(c) shall commence. For purposes of this Subsection 2.2,Aexercise of withdrawal rights@ shall mean those withdrawal rights to whichthe Executive is entitled under Article III of the Michael Sanchez GrantorTrust agreement and shall exclude any distributions made by the trustee of theRetirement Income Trust Fund to the Executive for purposes of payment of incometaxes in accordance with Subsection 2.1 of this Agreement and the taxreimbursement formula contained in the trust document, or other trust expensesproperly payable from the Michael Sanchez Grantor Trust pursuant to theprovisions of the trust document.

 

2.3                                 Benefits Payable From Retirement Income TrustFund

Notwithstanding anything else to the contrary inthis Agreement, in the event that the trustee of the Retirement Income TrustFund purchases a life insurance policy with the Contributions to and, ifapplicable, earnings of the Trust, and such life insurance policy is intendedto continue in force beyond the Payout Period for the disability or retirementbenefits payable from the Retirement Income

 

14

----

 

Trust Fund pursuant to this Agreement, then thetrustee shall have discretion to determine the portion of the cash value ofsuch policy available for purposes of annuitizing the Retirement Income TrustFund (it being understood that for purposes of this Section 2.3, Aannuitizing@ does not mean surrender of such policy andannuitizing of the cash value received upon such surrender) to provide thedisability or retirement benefits payable under this Agreement, after takinginto consideration the amounts reasonably believed to be required in order to maintainthe cash value of such policy to continue such policy in effect until the deathof the Executive and payment of death benefits thereunder.

 

**SECTION III**

**RETIREMENTBENEFIT**

 

3.1                                 (a)  Normalform of payment.

If (i) the Executive is employed with the Bank untilreaching his Benefit Age, and (ii) the Executive has not made a Timely Electionto receive a lump sum benefit, this Subsection 3.1(a) shall be controllingwith respect to retirement benefits.

 

The Retirement Income Trust Fund, measured as of theExecutive’s Benefit Age, shall be annuitized (using the Interest Factor) intomonthly installments and shall be payable for the Payout Period.  Such benefit payments shall commence on theExecutive’s Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate ofreturn, following the date such balance is annuitized, which is less than therate of return used to annuitize the Retirement Income Trust Fund, noadditional contributions to the Retirement Income Trust Fund shall be requiredby the Bank in order to fund the final benefit payment(s) and make up for anyshortage attributable to the less-than-expected rate of return.  Should Retirement Income Trust Fund assetsactually earn a rate of return, following the date such balance is annuitized,which is greater than the rate of return used to annuitize the RetirementIncome Trust Fund, the final benefit payment to the Executive (or hisBeneficiary) shall distribute the excess amounts attributable to thegreater-than-expected rate of return. The Executive may at anytime during the Payout Period request to receivethe unpaid balance of his Retirement Income Trust Fund in a lump sumpayment.  If such a lump sum payment isrequested by the Executive, payment of the balance of the Retirement IncomeTrust Fund in such lump sum form shall be made only if the

 

15

----

 

Executive gives notice to both the Administrator andtrustee in writing.  Such lump sumpayment shall be payable within thirty (30) days of such notice.  In the event the Executive dies at any timeafter attaining his Benefit Age, but prior to commencement or completion of allmonthly payments due and owing hereunder, (i) the trustee of the RetirementIncome Trust Fund shall pay to the Executive’s Beneficiary the monthlyinstallments (or a continuation of such monthly installments if they havealready commenced) for the balance of months remaining in the Payout Period, or(ii) the Executive’s Beneficiary may request to receive the unpaid balance ofthe Executive’s Retirement Income Trust Fund in a lump sum payment.  If a lump sum payment is requested by theBeneficiary, payment of the balance of the Retirement Income Trust Fund in suchlump sum form shall be made only if the Executive’s Beneficiary notifies boththe Administrator and trustee in writing of such election within ninety (90)days of the Executive’s death.  Such lumpsum payment shall be payable within thirty (30) days of such notice.

 

The Executive’s Accrued Benefit Account (ifapplicable), measured as of the Executive’s Benefit Age, shall be annuitized(using the Interest Factor) into monthly installments and shall be payable forthe Payout Period.  Such benefit paymentsshall commence on the Executive’s Benefit Eligibility Date.  In the event the Executive dies at any timeafter attaining his Benefit Age, but prior to commencement or completion of allthe payments due and owing hereunder, (i) the Bank  shall pay to the Executive’s Beneficiary thesame monthly installments (or a continuation of such monthly installments ifthey have already commenced) for the balance of months remaining in the PayoutPeriod, or (ii) the Executive’s Beneficiary may request to receive theremainder of any unpaid benefit payments in a lump sum payment.  If a lump sum payment is requested by theBeneficiary, the amount of such lump sum payment shall be equal to the unpaidbalance of the Executive’s Accrued Benefit Account.  Payment in such lump sum form shall be madeonly if the Executive’s Beneficiary (i) obtains Board of Director approval, and(ii) notifies the Administrator in writing of such election within ninety (90)days of the Executive’s death.  Such lumpsum payment, if approved by the Board of Directors, shall be made within thirty(30) days of such Board of Director approval.

 

16

----

 

(b) Alternative payout option.

If (i) the Executive is employed with the Bank untilreaching his Benefit Age, and (ii) the Executive has made a Timely Election toreceive a lump sum benefit, this Subsection 3.1(b) shall be controllingwith respect to retirement benefits.

 

The balance of the Retirement Income Trust Fund,measured as of the Executive’s Benefit Age, shall be paid to the Executive in alump sum on his Benefit Eligibility Date. In the event the Executive dies after becoming eligible for such payment(upon attainment of his Benefit Age), but before the actual payment is made,his Beneficiary shall be entitled to receive the lump sum benefit in accordancewith this Subsection 3.1(b) within thirty (30) days of the date theAdministrator receives notice of the Executive’s death.

 

The balance of the Executive’s Accrued BenefitAccount (if applicable), measured as of the Executive’s Benefit Age, shall bepaid to the Executive in a lump sum on his Benefit Eligibility Date.  In the event the Executive dies afterbecoming eligible for such payment (upon attainment of his Benefit Age), butbefore the actual payment is made, his Beneficiary shall be entitled to receivethe lump sum benefit in accordance with this Subsection 3.1(b) withinthirty (30) days of the date the Administrator receives notice of the Executive’sdeath.

 

**SECTION IV**

**PRE-RETIREMENTDEATH BENEFIT**

 

4.1                                 (a)  Normalform of payment.

If (i) the Executive dies while employed by theBank, and (ii) the Executive has not made a Timely Election to receive a lumpsum benefit, this Subsection 4.1(a) shall be controlling with respect topre-retirement death benefits.

 

The balance of the Executive’s Retirement IncomeTrust Fund, measured as of the later of (i) the Executive’s death, or (ii) thedate any final lump sum Contribution is made pursuant to Subsection 2.1(b),shall be annuitized (using the Interest Factor) into monthly installments andshall be payable

 

17

----

 

for the Payout Period.  Such benefits shall commence within thirty(30) days of the date the Administrator receives notice of the Executive’sdeath.  Should Retirement Income TrustFund assets actually earn a rate of return, following the date such balance isannuitized, which is less than the rate of return used to annuitize theRetirement Income Trust Fund, no additional contributions to the RetirementIncome Trust Fund shall be required by the Bank in order to fund the finalbenefit payment(s) and make up for any shortage attributable to theless-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate ofreturn, following the date such balance is annuitized, which is greater thanthe rate of return used to annuitize the Retirement Income Trust Fund, thefinal benefit payment to the Executive’s Beneficiary shall distribute theexcess amounts attributable to the greater-than-expected rate of return.  The Executive’s Beneficiary may request toreceive the unpaid balance of the Executive’s Retirement Income Trust Fund in alump sum payment.  If a lump sum paymentis requested by the Beneficiary, payment of the balance of the RetirementIncome Trust Fund in such lump sum form shall be made only if the Executive’sBeneficiary notifies both the Administrator and trustee in writing of suchelection within ninety (90) days of the Executive’s death.  Such lump sum payment shall be made withinthirty (30) days of such notice.

 

The Executive’s Accrued Benefit Account (ifapplicable), measured as of the later of (i) the Executive’s death or (ii)the date any final lump sum Phantom Contribution is recorded in the AccruedBenefit Account pursuant to Subsection 2.1(c), shall be annuitized (usingthe Interest Factor) into monthly installments and shall be payable to theExecutive’s Beneficiary for the Payout Period. Such benefit payments shall commence within thirty (30) days of the datethe Administrator receives notice of the Executive’s death, or if later, withinthirty (30) days after any final lump sum Phantom Contribution is recorded inthe Accrued Benefit Account in accordance with Subsection 2.1(c).  The Executive’s Beneficiary may request toreceive the remainder of any unpaid monthly benefit payments due from theAccrued Benefit Account in a lump sum payment. If a lump sum payment is requested by the Beneficiary, the amount ofsuch lump sum payment shall be equal to the balance of the Executive’s AccruedBenefit Account.  Payment in such lumpsum form shall be made only if the Executive’s Beneficiary (i) obtains Board ofDirector approval, and (ii) notifies the Administrator in writing of suchelection within ninety (90) days of the Executive’s death.  Such lump sum payment, if

 

18

----

 

approved by the Board of Directors, shall be payablewithin thirty (30) days of such Board of Director approval.

 

(b) Alternative payout option.

If (i) the Executive dies while employed by theBank, and (ii) the Executive has made a Timely Election to receive a lump sumbenefit, this Subsection 4.1(b) shall be controlling with respect topre-retirement death benefits.

 

The balance of the Executive’s Retirement IncomeTrust Fund, measured as of the later of (i) the Executive’s death, or (ii) thedate any final lump sum Contribution is made pursuant to Subsection 2.1(b),shall be paid to the Executive’s Beneficiary in a lump sum within thirty (30)days of the date the Administrator receives notice of the Executive’s death.

 

The balance of the Executive’s Accrued BenefitAccount (if applicable), measured as of the later of (i) the Executive’s death,or (ii) the date any final Phantom Contribution is recorded pursuant to Subsection 2.1(c),shall be paid to the Executive’s Beneficiary in a lump sum within thirty (30)days of the date the Administrator receives notice of the Executive’s death.

 

**SECTION V**

**BENEFIT(S)IN THE EVENT OF TERMINATION OF SERVICE**

**PRIOR TOBENEFIT AGE**

 

5.1                                 Voluntary or Involuntary Termination ofService Other Than for Cause.  In the event the Executive’s service with theBank  is voluntarily or involuntarilyterminated prior to Benefit Age, for any reason including a Change in Control,but excluding (i) any disability related termination for which the Board ofDirectors has approved early payment of benefits pursuant to Subsection 6.1,(ii) the Executive’s pre-retirement death, which shall be covered in Section IV,or (iii) termination for Cause, which shall be covered in Subsection 5.2,the Executive (or his Beneficiary) shall be entitled to receive benefits inaccordance with this Subsection 5.1. Payments of benefits pursuant to this Subsection 5.1 shall be madein accordance with Subsection 5.1 (a) or 5.1 (b) below, as applicable.

 

19

----

 

(a) Normal form ofpayment.

(1)Executive Lives Until Benefit Age

If (i) after suchtermination, the Executive lives until attaining his Benefit Age, and (ii) theExecutive has not made a Timely Election to receive a lump sum benefit, thisSubsection 5.1(a)(1) shall be controlling with respect to retirement benefits.

 

The Retirement Income TrustFund, measured as of the Executive’s Benefit Age, shall be annuitized (usingthe Interest Factor) into monthly installments and shall be payable for thePayout Period.  Such payments shallcommence on the Executive’s Benefit Eligibility Date.  Should Retirement Income Trust Fund assetsactually earn a rate of return, following the date such balance is annuitized,which is less than the rate of return used to annuitize the Retirement IncomeTrust Fund, no additional contributions to the Retirement Income Trust Fundshall be required by the Bank in order to fund the final benefit payment(s) andmake up for any shortage attributable to the less-than-expected rate of return.  Should Retirement Income Trust Fund assetsactually earn a rate of return, following the date such balance is annuitized,which is greater than the rate of return used to annuitize the RetirementIncome Trust Fund, the final benefit payment to the Executive (or hisBeneficiary) shall distribute the excess amounts attributable to thegreater-than-expected rate of return. The Executive may at anytime during the Payout Period request to receivethe unpaid balance of his Retirement Income Trust Fund in a lump sumpayment.  If such a lump sum payment isrequested by the Executive, payment of the balance of the Retirement IncomeTrust Fund in such lump sum form shall be made only if the Executive givesnotice to both the Administrator and trustee in writing.  Such lump sum payment shall be payable withinthirty (30) days of such notice. In the event the Executive dies at any timeafter attaining his Benefit Age, but prior to commencement or completion of allmonthly payments due and owing hereunder, (i) the trustee of the RetirementIncome Trust Fund shall pay to the Executive’s Beneficiary the monthlyinstallments (or a continuation of the monthly installments if they havealready commenced) for the balance of months remaining in the Payout Period, or(ii) the Executive’s Beneficiary may request to receive the unpaid balance ofthe Executive’s Retirement Income Trust Fund in a lump sum payment.  If a lump sum payment is requested by theBeneficiary, payment of the balance of the Retirement Income Trust Fund in suchlump sum form shall be made only if the

 

20

----

 

Executive’s Beneficiarynotifies both the Administrator and trustee in writing of such election withinninety (90) days of the Executive’s death. Such lump sum payment shall be made within thirty (30) days of suchnotice.

 

The Executive’s AccruedBenefit Account (if applicable), measured as of the Executive’s Benefit Age,shall be annuitized (using the Interest Factor) into monthly installments andshall be payable for the Payout Period. Such benefit payments shall commence on the Executive’s BenefitEligibility Date.  In the event theExecutive dies at any time after attaining his Benefit Age, but prior tocommencement or completion of all the payments due and owing hereunder, (i) theBank  shall pay to the Executive’sBeneficiary the same monthly installments (or a continuation of such monthlyinstallments if they have already commenced) for the balance of monthsremaining in the Payout Period, or (ii) the Executive’s Beneficiary may requestto receive the remainder of any unpaid benefit payments in a lump sumpayment.  If a lump sum payment isrequested by the Beneficiary, the amount of such lump sum payment shall beequal to the unpaid balance of the Executive’s Accrued Benefit Account.  Payment in such lump sum form shall be madeonly if the Executive’s Beneficiary (i) obtains Board of Director approval, and(ii) notifies the Administrator in writing of such election within ninety (90)days of the Executive’s death.  Such lumpsum payment, if approved by the Board of Directors, shall be made within thirty(30) days of such Board of Director approval.

 

(2) Executive Dies Priorto Benefit Age

 

If (i) after suchtermination, the Executive dies prior to attaining his Benefit Age, and (ii)the Executive has not made a Timely Election to receive a lump sum benefit,this Subsection 5.1(a)(2) shall be controlling with respect to retirementbenefits.

 

The Retirement Income TrustFund, measured as of the date of the Executive’s death, shall be annuitized(using the Interest Factor) into monthly installments and shall be payable forthe Payout Period.  Such payments shallcommence within thirty (30) days of the date the Administrator receives noticeof the Executive’s death.  ShouldRetirement Income Trust Fund assets actually earn a rate of return, followingthe date such balance is annuitized, which is less than the rate of return usedto annuitize the Retirement Income Trust Fund, no additional contributions tothe Retirement Income

 

21

----

 

Trust Fund shall be requiredby the Bank in order to fund the final benefit payment(s) and make up for anyshortage attributable to the less-than-expected rate of return.  Should Retirement Income Trust Fund assetsactually earn a rate of return, following the date such balance is annuitized,which is greater than the rate of return used to annuitize the RetirementIncome Trust Fund, the final benefit payment to the Executive’s Beneficiaryshall distribute the excess amounts attributable to the greater-than-expectedrate of return.  The Executive’sBeneficiary may request to receive the unpaid balance of the Executive’sRetirement Income Trust Fund in the form of a lump sum payment.  If a lump sum payment is requested by theBeneficiary, payment of the balance of the Retirement Income Trust Fund in suchlump sum form shall be made only if the Executive’s Beneficiary notifies boththe Administrator and trustee in writing of such election within ninety (90)days of the Executive’s death.  Such lumpsum payment shall be made within thirty (30) days of such notice.

 

The Executive’s AccruedBenefit Account (if applicable), measured as of the date of the Executive’sdeath, shall be annuitized (using the Interest Factor) into monthlyinstallments and shall be payable for the Payout Period.  Such payments shall commence within thirty(30) days of the date the Administrator receives notice of the Executive’sdeath.  The Executive’s Beneficiary may requestto receive the unpaid balance of the Executive’s Accrued Benefit Account in theform of a lump sum payment.  If a lumpsum payment is requested by the Beneficiary, payment of the balance of theAccrued Benefit Account in such lump sum form shall be made only if theExecutive’s Beneficiary (i) obtains Board of Director approval, and (ii)notifies the Administrator in writing of such election within ninety (90) daysof the Executive’s death.  Such lump sumpayment, if approved by the Board of Directors, shall be made within thirty(30) days of such Board of Director approval.

 

(b) Alternative PayoutOption.

(1) Executive Lives UntilBenefit Age

If (i) after suchtermination, the Executive lives until attaining his Benefit Age, and (ii) theExecutive has made a Timely Election to receive a lump sum benefit, thisSubsection 5.1(b)(1) shall be controlling with respect to retirement benefits.

 

22

----

 

The balance of theRetirement Income Trust Fund, measured as of the Executive’s Benefit Age, shallbe paid to the Executive in a lump sum on his Benefit Eligibility Date.  In the event the Executive dies afterbecoming eligible for such payment (upon attainment of his Benefit Age), butbefore the actual payment is made, his Beneficiary shall be entitled to receivethe lump sum benefit in accordance with this Subsection 5.1(b)(1) within thirty(30) days of the date the Administrator receives notice of the Executive’sdeath.

 

The balance of the Executive’sAccrued Benefit Account (if applicable), measured as of the Executive’s BenefitAge, shall be paid to the Executive in a lump sum on his Benefit EligibilityDate.  In the event the Executive diesafter becoming eligible for such payment (upon attainment of his Benefit Age),but before the actual payment is made, his Beneficiary shall be entitled toreceive the lump sum benefit in accordance with this Subsection 5.1(b)(1)within thirty (30) days of the date the Administrator receives notice of theExecutive’s death.

 

(2) Executive Dies Priorto Benefit Age

If (i) after suchtermination, the Executive dies prior to attaining his Benefit Age, and (ii)the Executive has made a Timely Election to receive a lump sum benefit, thisSubsection 5.1(b)(2) shall be controlling with respect to pre-retirement deathbenefits.

 

The balance of theRetirement Income Trust Fund, measured as of the date of the Executive’s death,shall be paid to the Executive’s Beneficiary within thirty (30) days of thedate the Administrator receives notice of the Executive’s death.

 

The balance of the Executive’sAccrued Benefit Account (if applicable), measured as of the date of theExecutive’s death, shall be paid to the Executive’s Beneficiary within thirty(30) days of the date the Administrator receives notice of the Executive’sdeath.

 

5.2                                 Termination For Cause.

If the Executive isterminated for Cause, all benefits under this Agreement, other than those whichcan be paid from previous Contributions to the Retirement Income Trust Fund(and earnings on such

 

23

----

 

Contributions), shall beforfeited.  Furthermore, no furtherContributions (or Phantom Contributions, as applicable) shall be required ofthe Bank for the year in which such termination for Cause occurs (if not yetmade).  The Executive shall be entitledto receive a benefit in accordance with this Subsection 5.2.

 

The balance of the Executive’sRetirement Income Trust Fund shall be paid to the Executive in a lump sum onhis Benefit Eligibility Date.  In theevent the Executive dies prior to his Benefit Eligibility Date, his Beneficiaryshall be entitled to receive the balance of the Executive’s Retirement IncomeTrust Fund in a lump sum within thirty (30) days of the date the Administratorreceives notice of the Executive’s death.

** **

**SECTION VI**

**OTHER BENEFITS**

 

6.1                                 (a) Disability Benefit.

If the Executive’s serviceis terminated prior to Benefit Age due to a disability which meets the criteriaset forth below, the Executive may request to receive the Disability Benefit inlieu of the retirement benefit(s) available pursuant to Section 5.1 (which is(are) not available prior to the Executive’s Benefit Eligibility Date).

 

In any instance in which:(i) it is determined by a duly licensed, independent physician selected by theBank, that the Executive is no longer able, properly and satisfactorily, toperform his regular duties as an officer, because of ill health, accident,disability or general inability due to age, (ii) the Executive requests paymentunder this Subsection in lieu of Subsection 5.1, and (iii) Board of Directorapproval is obtained to allow payment under this Subsection, in lieu ofSubsection 5.1, the Executive shall be entitled to the following lump sumbenefit(s). The lump sum benefit(s) to which the Executive is entitled shallinclude:  (i) the balance of theRetirement Income Trust Fund, plus (ii) the balance of the Accrued BenefitAccount (if applicable).  The benefit(s)shall be paid within thirty (30) days following the date of the Executive’srequest for such benefit is approved by the Board of Directors.  In the event the Executive dies afterbecoming eligible for such payment(s) but before the actual payment(s) is

 

24

----

 

(are) made, his Beneficiaryshall be entitled to receive the benefit(s) provided for in this Subsection6.1(a) within thirty (30) days of the date the Administrator receives notice ofthe Executive’s death.

 

(b) Disability Benefit -Supplemental.

Furthermore, if Board ofDirector approval is obtained within thirty (30) days of the Executive’s death,the Bank shall make a direct, lump sum payment to the Executive’s Beneficiaryin an amount equal to the sum of all remaining Contributions (or PhantomContributions) set forth in Exhibit A, but not required pursuant to Subsection2.1(b) (or 2.1(c)) due to the Executive’s disability-related termination. Suchlump sum payment, if approved by the Board of Directors, shall be payable tothe Executive’s Beneficiary within thirty (30) days of such Board of Directorapproval.

 

6.2                                 Additional Death Benefit - Burial Expense.  Inaddition to the above-described benefits, upon the Executive’s death, theExecutive’s Beneficiary shall be entitled to receive a one-time lump sum deathbenefit in the amount of Ten Thousand ($10,000.00) Dollars.  This benefit shall be provided specificallyfor the purpose of providing payment for burial and/or funeral expenses of theExecutive.  Such death benefit shall bepayable within thirty (30) days of the Executive’s death.  The Executive’s Beneficiary shall not beentitled to such benefit under this Plan (i) if the Executive is terminated forCause prior to death or (ii) the Executive’s Beneficiary receives asupplemental $10,000 death benefit under any other non-qualified deferredcompensation plan sponsored by the Bank.

 

**SECTION VII**

**BENEFICIARY DESIGNATION**

 

The Executive shall make aninitial designation of primary and secondary Beneficiaries upon execution ofthis Agreement and shall have the right to change such designation, at anysubsequent time, by submitting to (i) the Administrator, and (ii) thetrustee of the Retirement Income Trust Fund, in substantially the form attachedas Exhibit B to this Agreement, a written designation of primary and secondaryBeneficiaries.  Any Beneficiarydesignation made subsequent to execution of this Agreement shall becomeeffective only when receipt thereof is acknowledged in writing by theAdministrator.

 

25

----

 

**SECTION VIII**

**NON-COMPETITION**

 

8.1                                 Non-Competition During Employment.

In consideration of theagreements of the Bank contained herein and of the payments to be made by theBank pursuant hereto, the Executive hereby agrees that, for as long as heremains employed by the Bank, he will devote substantially all of his time,skill, diligence and attention to the business of the Bank, and will notactively engage, either directly or indirectly, in any business or otheractivity which is, or may be deemed to be, in any way competitive with oradverse to the best interests of the business of the Bank, unless the Executivehas the prior express written consent of the Bank.

 

8.2                                 Breach of Non-Competition Clause.

In the event of any materialbreach by the Executive of the agreements and covenants described in Subsection8.1 occurs all further Contributions to the Retirement Income Trust Fund (orPhantom Contributions recorded in the Accrued Benefit Account) shallimmediately cease, and all benefits under this Agreement, other than those whichcan be paid from previous Contributions to the Retirement Income Trust Fund(and earnings on such Contributions), shall be forfeited.  The Executive (or his Beneficiary) shall beentitled to receive a benefit from the Retirement Income Trust Fund in accordancewith this Subsection 8.2.

 

The balance of the Executive’sRetirement Income Trust Fund shall be paid to the Executive in a lump sum onhis Benefit Eligibility Date.  In theevent the Executive dies prior to his Benefit Eligibility Date, his Beneficiaryshall be entitled to receive the balance of the Executive’s Retirement IncomeTrust Fund in a lump sum within thirty (30) days of the date the Administratorreceives notice of the Executive’s death.

 

8.3                                 Non-Competition Following Employment.

Executive furtherunderstands and agrees that, following Executive’s termination of employment,  other than following a Change in Control, andcontinuing for a period of twelve (12) months thereafter, the Executive shallnot, without the prior written consent of the Bank, engage in the

 

26

----

 

financial institutions’business as a director, officer, employee or consultant for, or acquiring ormaintaining more than a 1% passive investment in, any business or enterprise whichcompetes with the principal business of the Bank or any of its subsidiaries whichhas one or more offices or branches located within a thirty-five (35) mileradius of the principal business location of the Bank’s corporate offices.  In the event of the Executive’s breach of thecovenants and agreements contained herein, the Bank’s obligation, if any, tomake payments to the Executive from the Accrued Benefit Account shall cease andthe Executive’s right to amounts credited to the Accrued Benefit Account shallbe forfeited.

 

**SECTION IX**

**EXECUTIVE’S RIGHT TO ASSETS**

 

The rights of the Executive,any Beneficiary, or any other person claiming through the Executive under thisAgreement, shall be solely those of an unsecured general creditor of the Bank.The Executive, the Beneficiary, or any other person claiming through theExecutive, shall only have the right to receive from the Bank  those payments or amounts so specified underthis Agreement.  The Executive agreesthat he, his Beneficiary, or any other person claiming through him shall haveno rights or interests whatsoever in any asset of the Bank, including anyinsurance policies or contracts which the Bank may possess or obtain toinformally fund this Agreement.  Anyasset used or acquired by the Bank in connection with the liabilities it hasassumed under this Agreement shall not be deemed to be held under any trust forthe benefit of the Executive or his Beneficiaries, unless such asset iscontained in the rabbi trust described in Section XII of this Agreement.  Any such asset shall be and remain a general,unpledged asset of the Bank in the event of the Bank’s insolvency.

 

**SECTION X**

**RESTRICTIONS UPON FUNDING**

 

The Bank shall have noobligation to set aside, earmark or entrust any fund or money with which to payits obligations under this Agreement, other than those Contributions requiredto be made to the Retirement Income Trust Fund. The Executive, his Beneficiaries or any successor in interest to himshall be and remain simply a general unsecured creditor of the Bank in the samemanner as any other creditor having a general

 

27

----

 

claimfor matured and unpaid compensation.  TheBank  reserves the absolute right in itssole discretion to either purchase assets to meet its obligations undertaken bythis  Agreement or to refrain from thesame and to determine the extent, nature, and method of such assetpurchases.  Should the Bank decide topurchase assets such as life insurance, mutual funds, disability policies orannuities, the Bank reserves the absolute right, in its sole discretion, toreplace such assets from time to time or to terminate its investment in suchassets at any time, in whole or in part. At no time shall the Executive be deemed to have any lien, right, titleor interest in or to any specific investment or to any assets of the Bank.  If the Bank elects to invest in a lifeinsurance, disability or annuity policy upon the life of the Executive, thenthe Executive shall assist the Bank by freely submitting to a physicalexamination and by supplying such additional information necessary to obtainsuch insurance or annuities.

 

**SECTION XI**

**ACT PROVISIONS**

 

11.1                           Named Fiduciary and Administrator.  TheBank, as Administrator, shall be the Named Fiduciary of this Agreement.  As Administrator, the Bank shall beresponsible for the management, control and administration of the Agreement asestablished herein.  The Administratormay delegate to others certain aspects of the management and operationalresponsibilities of the Agreement, including the employment of advisors and thedelegation of ministerial duties to qualified individuals.

 

11.2                           Claims Procedure and Arbitration.  Inthe event that benefits under this Agreement are not paid to the Executive (orto his Beneficiary in the case of the Executive’s death) and such claimantsfeel they are entitled to receive such benefits, then a written claim must bemade to the Administrator within sixty (60) days from the date payments arerefused.  The Administrator shall reviewthe written claim and, if the claim is denied, in whole or in part, it shallprovide in writing, within ninety (90) days of receipt of such claim, itsspecific reasons for such denial, reference to the provisions of this Agreementupon which the denial is based, and any additional material or informationnecessary to perfect the claim.  Suchwriting by the Administrator shall further indicate the additional steps whichmust be undertaken by claimants if an additional review of the claim denial isdesired.

 

28

----

 

If claimants desire a secondreview, they shall notify the Administrator in writing within sixty (60) daysof the first claim denial.  Claimants mayreview this Agreement or any documents relating thereto and submit any issuesand comments, in writing, they may feel appropriate.  In its sole discretion, the Administratorshall then review the second claim and provide a written decision within sixty(60) days of receipt of such claim.  Thisdecision shall state the specific reasons for the decision and shall includereference to specific provisions of this Agreement upon which the decision isbased.

 

If claimants continue todispute the benefit denial based upon completed performance of this Plan andthe Joinder Agreement or the meaning and effect of the terms and conditionsthereof, then claimants may submit the dispute to mediation in the state ofFlorida, administered by the American Arbitration Association (“AAA”) (or a mediator selected by the parties)in accordance with the AAA’s Commercial Mediation Rules.  If mediation is not successful in resolvingthe dispute, it shall be settled by arbitration administered by the AAA underits Commercial Arbitration Rules, and judgment on the award rendered by thearbitrator(s) may be entered in any court having jurisdiction thereof.

 

**SECTION XII**

**MISCELLANEOUS**

** **

12.1                           No Effect on Employment Rights. Nothing contained herein will confer upon the Executive the right to beretained in the service of the Bank nor limit the right of the Bank  to discharge or otherwise deal with theExecutive without regard to the existence of the Agreement.

 

12.2                           State Law.  The Agreement is establishedunder, and will be construed according to, the laws of the state of Florida, tothe extent such laws are not preempted by the Act and valid regulationspublished thereunder.

 

12.3                           Severability.  Inthe event that any of the provisions of this Agreement or portion thereof, areheld to be inoperative or invalid by any court of competent jurisdiction, then:(1) insofar as is reasonable, effect will be given to the intent manifested inthe provisions held invalid or inoperative, and (2) the validity andenforceability of the remaining provisions will not be affected thereby.

 

29

----

 

12.4                           Incapacity of Recipient.  Inthe event the Executive is declared incompetent and a conservator or otherperson legally charged with the care of his person or Estate is appointed, anybenefits under the Agreement to which such Executive is entitled shall be paidto such conservator or other person legally charged with the care of his personor Estate.

 

12.5                           Unclaimed Benefit.  TheExecutive shall keep the Bank informed of his current address and the currentaddress of his Beneficiaries.  The Bank shallnot be obligated to search for the whereabouts of any person.  If the location of the Executive is not madeknown to the Bank as of the date upon which any payment of any benefits fromthe Accrued Benefit Account may first be made, the Bank shall delay payment ofthe Executive’s benefit payment(s) until the location of the Executive is madeknown to the Bank; however, the Bank shall only be obligated to hold suchbenefit payment(s) for the Executive until the expiration of thirty-six (36)months.  Upon expiration of thethirty-six (36) month period, the Bank may discharge its obligation by paymentto the Executive’s Beneficiary.  If thelocation of the Executive’s Beneficiary is not made known to the Bank by theend of an additional two (2) month period following expiration of thethirty-six (36) month period, the Bank may discharge its obligation by paymentto the Executive’s Estate.  If there isno Estate in existence at such time or if such fact cannot be determined by theBank, the Executive and his Beneficiary(ies) shall thereupon forfeit any rightsto the balance, if any, of the Executive’s Accrued Benefit Account provided forsuch Executive and/or Beneficiary under this Agreement.

 

12.6                           Limitations on Liability. Notwithstanding any of the preceding provisions of the Agreement, noindividual acting as an employee or agent of the Bank, or as a member of theBoard of Directors shall be personally liable to the Executive or any otherperson for any claim, loss, liability or expense incurred in connection withthe Agreement.

 

12.7                           Gender.  Whenever in this Agreementwords are used in the masculine or neuter gender, they shall be read andconstrued as in the masculine, feminine or neuter gender, whenever they shouldso apply.

 

12.8                           Effect on Other Corporate Benefit Agreements. Nothing contained in this Agreement shall affect the right of theExecutive to participate in or be covered by any qualified or non-qualifiedpension, profit

 

30

----

 

sharing, group, bonus orother supplemental compensation or fringe benefit agreement constituting a partof the Bank’s existing or future compensation structure.

 

12.9                           Suicide.  Notwithstanding anything tothe contrary in this Agreement, if the Executive’s death results from suicide,whether sane or insane, within twenty-four (24) months after execution of thisAgreement, all further Contributions to the Retirement Income Trust Fund (orPhantom Contributions recorded in the Accrued Benefit Account) shall thereuponcease, and no Contribution (or Phantom Contribution) shall be made by theBank  to the Retirement Income Trust Fund(or recorded in the Accrued Benefit Account) in the year such death resulting from suicide occurs (if not yet made).  All benefits other than those available fromprevious Contributions to the Retirement Income Trust Fund under this Agreementshall be forfeited, and this Agreement shall become null and void.  The balance of the Retirement Income TrustFund, measured as of the Executive’s date of death, shall be paid to theBeneficiary within thirty (30) days of the date the Administrator receivesnotice of the Executive’s death.

 

12.10                     Inurement.  This Agreement shall bebinding upon and shall inure to the benefit of the Bank, its successors andassigns, and the Executive, his successors, heirs, executors, administrators,and Beneficiaries.

 

12.11                     Headings.  Headings and sub-headings inthis Agreement are inserted for reference and convenience only and shall not bedeemed a part of this Agreement.

 

12.12                     Source of Payments.  Allpayments provided in this Agreement shall be timely paid in cash or check fromthe general funds of the Bank or the assets of the rabbi trust, to the extentmade from the Accrued Benefit Account.

 

31

----

 

**SECTION XIII**

**AMENDMENT/PLAN TERMINATION**

 

13.1                           Amendment or Plan Termination.  TheBank intends this Agreement to be permanent, but reserves the right to amend orterminate the Agreement when, in the sole opinion of the Bank, such amendmentor termination is advisable.  However,any termination of the Agreement which is done in anticipation of or pursuantto a “Change in Control”, as defined in Subsection 1.10, shall be deemed totrigger Subsection 2.1(b)(2) (or 2.1(c)(2), as applicable) of the Agreementnotwithstanding the Executive’s continued employment, and benefit(s) shall bepaid from the Retirement Income Trust Fund (and Accrued Benefit Account, ifapplicable) in accordance with Subsection 13.2 below and with Subsections2.1(b)(2) (or 2.1(c)(2), as applicable). Any amendment or termination of theAgreement by the Bank shall be made pursuant to a resolution of the Board ofDirectors of the Bank and shall be effective as of the date of such resolution. No amendment or termination of theAgreement by the Bank shall directly or indirectly deprive the Executive of allor any portion of the Executive’s Retirement Income Trust Fund (and AccruedBenefit Account, if applicable) as of the effective date of the resolutionamending or terminating the Agreement.

 

Notwithstanding the above,if the Executive does not exercise any withdrawal rights pursuant to Subsection2.2, and if at any time after the final Contribution is made to the RetirementIncome Trust Fund the Executive elects to terminate the Retirement Income TrustFund and receive a distribution of the assets of the Retirement Income TrustFund, then upon such distribution this Agreement shall terminate.

 

13.2                           Executive’s Right to Payment Following PlanTermination.  In the event of a termination of theAgreement, the Executive shall be entitled to the balance, if any, of hisRetirement Income Trust Fund (and Accrued Benefit Account, if applicable).  However, if such termination is done inanticipation of or pursuant to a “Change in Control,” such balance(s) shallinclude the final Contribution (or final Phantom Contribution) made (orrecorded) pursuant to Subsection 2.1(b)(2) (or 2.1(c)(2)).  Payment of the balance(s) of the Executive’sRetirement Income Trust Fund (and Accrued Benefit Account, if applicable) shallnot be dependent upon his continuation of employment with the Bank followingthe

 

32

----

 

termination date of theAgreement.  Payment of the balance(s) ofthe Executive’s Retirement Income Trust Fund (and Accrued Benefit Account, ifapplicable) shall be made in a lump sum within thirty (30) days of the date oftermination of the Agreement.

 

**SECTION XIV**

**EXECUTION**

 

14.1                           This Agreement and the Michael SanchezGrantor Trust Agreement set forth the entire understanding of the partieshereto with respect to the transactions contemplated hereby, and any previousagreements or understandings between the parties hereto regarding the subjectmatter hereof are merged into and superseded by this Agreement and the MichaelSanchez Grantor Trust Agreement.

 

14.2                           This Agreement shall be executed intriplicate, each copy of which, when so executed and delivered, shall be anoriginal, but all three copies shall together constitute one and the sameinstrument.

 

33

----

 

IN WITNESS WHEREOF, the Bankand the Executive have caused this Agreement to be executed on the day and datefirst above written.

 

 
| WITNESS: | FIRST NATIONAL BANK OF NASSAU  COUNTY: |
|----------|----------------------------------------|
|     |                                   |
|     |                                   |
|     |                                   | By: |   |   |
|     |                                   |
|     |                                   |
|     | Title:                                 |   |   |
|     |                                   |
|     |                                   |
|     |                                   |
| WITNESS: | EXECUTIVE:                             |
|     |                                   |
|     |                                   |
|     |                                   |   |   |
|          |                                        |  |  |  |  |

 

----

 

**Exhibit A**

 

**CONDITIONS, ASSUMPTIONS,**

**AND**

**SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS**

 

1.                                       Interest Factor - for purposes of:

 

a.                                       the Accrued Benefit Account  - shall be six percent (6%) per annum,compounded monthly.

 

b.                                      the Retirement Income Trust Fund - forpurposes of annuitizing the balance of the Retirement Income Trust Fund overthe Payout Period, the trustee of the Michael Sanchez Grantor Trust shall exercisediscretion in selecting the appropriate rate given the nature of theinvestments contained in the Retirement Income Trust Fund and the expectedreturn associated with the investments. For these purposes, if the trustee of the Retirement Income Trust Fundhas purchased a life insurance policy, the trustee shall have the discretion todetermine the portion of the cash value of such policy available for purposesof annuitizing the Retirement Income Trust Fund, in accordance with Section 2.3of the Agreement.

 

2.                                       The amount of the annual Contributions (orPhantom Contributions) to the Retirement Income Trust Fund (or Accrued BenefitAccount) has been based on the annual incremental accounting accruals whichwould be required of the Bank through the earlier of the Executive’s death orBenefit Age, (i) pursuant to APB Opinion No. 12, as amended by FAS 106 and (ii)assuming a discount rate equal to Six percent (6%) per annum, in order toprovide the unfunded, non-qualified Supplemental Retirement Income Benefit.

 

3.                                       Supplemental Retirement Income Benefit meansan actuarially determined annual amount equal to Seventy-Five Thousand Dollars($75,000) at age 65 if paid entirely from the Accrued Benefit Account orForty-Eight Thousand Dollars ($48,000) at age 65 if paid from the RetirementIncome Trust Fund.

 

The Supplemental RetirementIncome Benefit:

 

•                                          the definition of Supplemental RetirementIncome Benefit has been incorporated into the Agreement for the sole purpose ofactuarially establishing the amount of annual Contributions (or PhantomContributions) to the Retirement Income Trust Fund (or Accrued BenefitAccount).  The amount of any actualretirement, pre-retirement or disability benefit payable pursuant to theAgreement will be a function of (i) the amount and timing of Contributions(or  Phantom Contributions) to theRetirement Income Trust Fund (or Accrued Benefit Account) and (ii) the actualinvestment experience of such Contributions (or the monthly compounding rate ofPhantom Contributions).

 

----

 

4.                                       Schedule of Annual GrossContributions/Phantom Contributions

 
| **Plan  Year** | ** ** | **Amount** | ** ** |
|----------------|------------|------------|------------|
|           |       |       |       |
| 2004           |       | 34,597     |       |
| 2005           |       | 39,599     |       |
| 2006           |       | 45,143     |       |
| 2007           |       | 51,282     |       |
| 2008           |       | 58,073     |       |
| 2009           |       | 65,577     |       |
| 2010           |       | 73,863     |       |
| 2011           |       | 83,005     |       |
| 2012           |       | 93,082     |       |
| 2013           |       | 104,182    |       |
| 2014           |       | 75,070     |       |

 

----

 

**Exhibit B**

 

**EXECUTIVE SUPPLEMENTAL RETIREMENT**

**INCOME AGREEMENT**

**BENEFICIARY DESIGNATION**

 

The Executive, under theterms of the Executive Supplemental Retirement Income Agreement executed by theBank, dated the 20th  day of October,2004, hereby designates the following Beneficiary(ies) to receive anyguaranteed payments or death benefits under such Agreement, following hisdeath:
|                   |   |
|------------------------|--------|
| PRIMARY BENEFICIARY:   |   |
|                   |   |
| SECONDARY BENEFICIARY: |   |
|                   |   |

 

This Beneficiary Designationhereby revokes any prior Beneficiary Designation which may have been in effect.

 

Such Beneficiary Designationis revocable.

 
| DATE:                                            ,  20     |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                  |      |
|                                                                                                                                                                                                                                                                                                  |      |   |   |
| WITNESS                                                                                                                                                                                                                                                                                               | EXECUTIVE |
|                                                                                                                                                                                                                                                                                                       |           |  |  |

 

----

 

**Exhibit C**

 

**EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT**

**NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT**

 

TO:         Bank

 

Attention:

 

I hereby give notice of myelection to change the form of payment of my Supplemental Retirement IncomeBenefit, as specified below.  **I understand that such notice,****in order to be effective, must be submitted inaccordance with the time requirements described in my  Executive Supplemental Retirement IncomeAgreement.**

 

o                                    I hereby elect to change the form of paymentof my benefits from monthly installments throughout my Payout Period to a lumpsum benefit payment.

 

o                                    I hereby elect to change the form of paymentof my benefits from a lump sum benefit payment to monthly installmentsthroughout my Payout Period.  Suchelection hereby revokes my previous notice of election to receive a lump sumform of benefit payments.

 
|   |   |             |   |
|--------|--------|------------------|--------|
|   |   | Executive        |
|   |   |             |
|   |   |             |
|   |   |             |   |
|   |   | Date             |
|   |   |             |
|   |   |             |
|   |   |             |
|   |   | Acknowledged By: |
|   |   |             |
|   |   |             |   |
|   |   |             |
|   |   | Title:           |   |   |
|   |   |             |   |   |
|   |   | Date:            |   |   |
|        |        |                  |        |  |  |

 

----