exhibit10-1.htm


    
 

    WATERSTONE BANK SSB

     

    SECOND
AMENDMENT AND RESTATEMENT OF THE

    EXECUTIVE DEFERRED
COMPENSATION PLAN

     

    


     

    ARTICLE
I

     

    Establishment
of Plan and Purpose

     

    1.01   Establishment of
Plan.  WaterStone Bank SSB (formerly known as Wauwatosa Savings
Bank) (the “Company”) established this Executive Deferred Compensation Plan (the
“Plan”), effective as of September 1, 2006.  The Plan is a deferred
compensation arrangement intended to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).  Final Treasury
Regulations under Code Section 409A were issued in April 2007, and require
non-qualified deferred compensation plans to be in compliance with said Final
Treasury Regulations by no later than December 31, 2008.  Accordingly,
the Plan was amended and restated, effective September 1, 2006, to comply with
Final Treasury Regulations issued under Code Section 409A and a Form 8-K was
filed with the Securities and Exchange Commission.  This Second
Amendment and Restatement of the Plan, effective September 1, 2006, adds
specified payment dates as a new distribution feature of the Plan, in accordance
with the transition rules under Code Section 409A.

     

    1.02   Purpose of
Plan.  Under the Plan, selected senior management and highly
compensated employees are permitted to defer, until a future designated date, a
portion of the compensation which may otherwise be payable to them at an earlier
date.  By allowing key management employees to participate in the
Plan, the Company expects the Plan to benefit it and its Subsidiaries by
attracting and retaining the most capable individuals to fill its executive
positions.

     

    ARTICLE
II

     

    Definitions

     

    As used
herein, the following words shall have the following meanings:

     

    2.01   Definitions.

     

    (a) Account.  The
bookkeeping account maintained for each Participant pursuant to Article V
below.

     

    (b) Administrator.  The
person or persons selected pursuant to Article VIII below to control and manage
the operation and administration of the Plan.

     

    (c) Beneficiaries.  Those
persons or entities designated by a Participant on the Beneficiary Designation
Election Form (Exhibit A hereto) to receive his benefits under the Plan upon his
death.

     

    (d) Change of
Control.  (i) Any “person” (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) other than Lamplighter Financial, MHC (“MHC”) becomes the
beneficial owner, directly or indirectly, of a majority of the capital stock of
Waterstone Financial, Inc. (formerly known as Wauwatosa Holdings, Inc.) in a
transaction or transactions subject to either the notice provisions of the
Change in Bank Control Act of 1978 (12 U.S.C. § 1817 (j), as amended from time
to time), or approval under the Bank Holding Company Act of 1956 (12 U.S.C. §
1841, as amended from time to time); (ii) during any period of two consecutive
years, the individuals, who at the beginning of any such period constituted the
directors of Waterstone Financial, Inc., cease for any reason to constitute at
least a majority thereof; (iii) Waterstone Financial, Inc. files a report or
proxy statement with the Securities and Exchange Commission and/or the Federal
Reserve Board disclosing in response to Item 5.01 of Form 8-K or Item 5 of Part
II of Form 10-Q, each promulgated pursuant to the Exchange Act or Item 6(e) of
Schedule 14A promulgated thereunder, or successor Items, that a change in
control of Waterstone Financial, Inc. has or may have occurred pursuant to any
contract or transaction; or (iv) any person other than Waterstone Financial,
Inc. or MHC becomes the owner of more than 25% of the voting securities of the
Company.  However, notwithstanding the foregoing provisions, a
reorganization of Waterstone Financial, Inc. and MHC in which the shareholders
of Waterstone Financial, Inc. prior to such reorganization, the members of MHC
and any members of the public, which acquire shares of such entity pursuant to a
public offering of securities approved in advance by the board of directors of
MHC, together control the successor entity shall not constitute a “Change in
Control” hereunder.

     

    
      
        
        

      

      
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    (e) Company.  Waterstone
Bank, SSB, a Wisconsin-chartered savings bank, or a successor
thereof.

     

    (f) Compensation.  The
total of the Participant’s base salary, commissions, bonuses and other cash
incentive pay, which shall include amounts deferred by the Participant under
this Plan or any other employee benefit plan of the Company. In all cases,
Compensation shall include only compensation paid while a Participant in the
Plan and employed by the Company or a Subsidiary.  Compensation shall
not include any severance or salary continuation payments.

     

    (g) Participants.  Such
senior management and highly compensated employees of the Company or a
Subsidiary whom the Administrator has identified as eligible to defer
Compensation hereunder and who elect to participate by deferring
Compensation.

     

    (h) Plan.  The
Waterstone Bank SSB Executive Deferred Compensation Plan, as stated herein and
as amended from time to time.

     

    (i) Plan
Year.  The period beginning on September 1, 2006 and ending on
December 31, 2006, and, thereafter, each 12-month period ending on each
subsequent December 31.

     

    (j) Separation from
Service.  Separation from Service means the Participant’s retirement
or other termination of employment with the Company within the meaning of Code
Section 409A.  No Separation from Service shall be deemed to occur due
to military leave, sick leave or other bona fide leave of absence if the period
of such leave does not exceed six months or, if longer, so long as the
Participant’s right to reemployment is provided by law or
contract.  If the leave exceeds six months and the Participant’s right
to reemployment is not provided by law or by contract, then the Participant
shall have a Separation from Service on the first date immediately following
such six-month period.

     

    Whether a
Separation from Service has occurred is determined based on whether the facts
and circumstances indicate that the Company and the Participant reasonably
anticipated that no further services would be performed after a certain date or
that the level of bona fide services the Participant would perform after such
date (whether as an employee or as an independent contractor) would permanently
decrease to no more than 50% of the average level of bona fide services
performed over the immediately preceding 36 months (or such lesser period of
time in which the Participant performed services for the
Company).  The determination of whether a Participant has had a
Separation from Service shall be made by applying the presumptions set forth in
the Treasury Regulations under Code Section 409A.

     

    (k) Subsidiary.  An
entity of which the Company is the direct or indirect beneficial owner of not
less than 50% of all issued and outstanding equity interest of such
entity.

     

    (l) Unforeseeable
Emergency.  A severe financial hardship of a Participant
resulting from an illness or accident of the Participant or of the Participant’s
spouse or dependent (as defined in Code Section 152(a)), loss of the
Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances beyond the control of the
Participant.  The existence of an Unforeseeable Emergency shall be
determined by the Administrator in its sole discretion.

     

    ARTICLE
III

     

    Eligibility

     

    3.01   Conditions of
Eligibility.  The Administrator shall, from time to time,
specify the senior management and highly compensated employees of the Company or
a Subsidiary eligible to participate herein. Eligibility to participate in the
Plan for one Plan Year does not guarantee eligibility for a subsequent Plan
Year.

     

    3.02   Commencement of
Participation.  An individual identified as eligible to
participate in the Plan for that Plan Year shall, by electing a deferral of
Compensation on the Deferral Election Form (Exhibit B hereto) provided by the
Administrator, commence participation as of (a) the first day of such Plan Year
or (b) such later date in that Plan Year as he first becomes eligible to
participate in the Plan.

     

    3.03   Termination of
Participation.  A Participant’s right to defer Compensation
hereunder shall cease as of the earlier of the (a) termination of his employment
with the Company and all Subsidiaries or (b) failure of the Administrator to
designate him as eligible to participate herein.

     

    


    
      
        
        

      

      
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    ARTICLE
IV

     

    Compensation
Deferral and Distribution Elections

     

    4.01   Amount and Manner of
Deferral.

     

    (a) Each
Participant must make an annual election with respect to his Compensation
deferrals.  The Participant must return the Deferral Election Form to
the Administrator no later than the date specified by the Administrator, which
date shall be prior to (i) the first day of the Plan Year for which the
Compensation is to be deferred, (ii) in the case of a new Participant, the
30th
day after first becoming eligible to participate in the Plan, with respect to
Compensation earned for services performed subsequent to the election, or (iii)
in the case of the first Plan Year, September 30, 2006, with respect to
Compensation earned for services performed subsequent to the
election.  The Deferral Election Form shall become irrevocable as of
the date it is to be effective.

     

    (b) The
Participant must indicate on the Deferral Election Form the amount of his
Compensation for such Plan Year, or portion thereof, which he elects to defer
hereunder.  A Participant may defer (i) up to 80% of his salary or
commissions and/or (ii) up to 100% of his bonus or incentive pay; provided,
however, that (A) the Participant may not defer less than $5,000 in a Plan Year
(or a prorated amount for any period shorter than a full Plan Year) and (B) the
Participant’s deferral election for a Plan Year shall relate to Compensation
earned by him during such Plan Year, whether or not paid during that Plan
Year.

     

    (c) If a
Participant elects to defer a portion of his salary or commissions, the Company
shall reduce the Participant’s salary or commissions by an equal amount in each
pay period during the Plan Year of deferral. If a Participant elects to defer
all or a portion of his bonus or incentive pay, the Company shall reduce each
such Compensation payment by the percentage elected by the
Participant.

     

    (d) Effective
January 1, 2009, no deferrals with respect to Compensation earned on or after
January 1, 2009 shall be permitted under this Plan.

     

    4.02   Cessation of
Deferral.  In the event of an Unforeseeable Emergency, a
Participant may request in writing that deferrals elected by the Participant
hereunder cease for the then current Plan Year. If the Administrator determines
that such an Unforeseeable Emergency exists, the Participant’s deferrals for
such Plan Year shall cease for the remainder of the Plan Year.  In
addition, if required in order for a Participant to receive a hardship
distribution under any tax-qualified retirement plan subject to Code Section
401(k) maintained by the Company or a Subsidiary, the Participant’s deferrals
under this Plan shall cease for the remainder of the Plan Year.

     

    4.03   Distribution of
Account.

     

    (a) Each
Participant shall elect, at the time the Participant files his Deferral Election
Form, the date on which such Compensation deferrals, as well as any investment
earnings attributable to such Compensation deferrals, are to be distributed to
him.  All payments shall be made in the form of a cash lump sum in
accordance with Section 7.01.  The date of distribution must be in a
calendar year subsequent to the calendar year of
deferral.  Notwithstanding the foregoing, if the Participant fails to
elect a time for distribution, such amount will be distributed no later than 60
days after the date on which the Participant Separates from Service with the
Company and all Subsidiaries.

     

    (b) A
Participant may change the date as of which any portion of his Account is to be
distributed to him by filing a Change of Distribution Date Form (Exhibit C
hereto) with the Administrator, provided that (i) the election shall not take
effect until at least 12 months after the date on which the election is made and
(ii) the first payment with respect to which such election is made is deferred
for at least five years from the date such payment would otherwise have been
made.

     

    (c) Notwithstanding
anything in the Plan to the contrary, a Participant who previously designated
the date on which his or her Compensation deferrals shall be distributed may
elect to change the date on which the Participant receives his or her
Compensation deferrals by filing with the Company a Transition Year Election
Form (Exhibit D hereto), provided that such election is made by December 31,
2008.  For elections after December 31, 2008, please refer to Section
4.03(b).

     

    
      
        
        

      

      
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ARTICLE V

                      

    Participant
Accounts

     

    5.01   Establishment of
Account.  The Company shall credit the amounts deferred by a
Participant under Section 4.01 to the Participant’s Account.

     

    5.02   Investment
Elections.

     

    (a) A
Participant may file an Investment Election Form (Exhibit E hereto) with the
Administrator setting forth the investment alternatives used to value his
Account.  The initial investment options available to each Participant
are (i) the Moody’s A Long-Term Corporate Bond Rate, adjusted as of the first
day of each Plan Year to equal the average yield for the month of September of
the previous Plan Year and (ii) the total return of the Standard & Poor’s
500 Index for the applicable calendar quarter.

     

    (b) All
investment elections must be in increments of 10%.  If a Participant
does not file an Investment Election Form, the Account shall be deemed to be
invested in the Moody’s A Long-Term Corporate Bond Rate option, or such similar
option as designated by the Administrator.

     

    (c) The
Participant may change his investment options as of each January 1 or July 1 by
delivering to the Administrator a new Investment Election Form at least 15 days
prior to such effective date.

     

    (d) The
Company can change, add or eliminate investment options in its sole discretion
upon advance notice to each Participant, in which case the Participant shall be
given an opportunity to reallocate his investments among the available
alternatives; provided, however, that upon a Change of Control, the Company may
not change the investment choices available to Participants hereunder without
the consent of a majority of the Participants.

     

    (e) A
Participant’s Account shall reflect only the performance of such investment
options and the Participant shall have no property right or security interest in
the actual investment performance of any assets that may be invested by the
Company to provide for the payment of benefits under this Plan.

     

    5.03   Maintenance of
Account.  Not less frequently than at the end of each calendar
quarter (i.e., more frequent adjustments, such as daily or monthly are
permitted), the Administrator shall (i) increase the Account of each Participant
by (A) the amount, if any, of his Compensation deferred since the last Account
adjustment was made, (B) any income or gains resulting as if the Account were
invested pursuant to the timely-filed Investment Election Form in effect for
such period and (ii) decrease the Account by (A) any withdrawals from the
Account during that period and (B) any losses resulting from the investment
election in effect for such period.

     

    ARTICLE
VI

     

    Vesting

     

    6.01  Vesting.  Subject
to the rights of the Company’s creditors as described in Article XI, the Account
of a Participant, including all earnings and losses attributable thereto, shall
at all times be fully vested and nonforfeitable.

     

    
      
        
        

      

      
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    ARTICLE
VII

     

    Distributions

     

    7.01   Distribution of Account
Pursuant to Election.  Each Participant’s Account, or portion
thereof, shall be distributed to him in a lump sum cash payment on the date set
forth in the Participant’s election that was made in accordance with Section
4.03 of the Plan.  If the Participant does not have a valid election
in place, then the Participant’s Account shall be distributed to him in a lump
sum cash payment 60 days after the date of his Separation from
Service.

     

    7.02   Distribution of Account Due
to Death.

     

    (a) Upon the
Participant’s death, any balance remaining in his Account shall be paid to his
Beneficiary or Beneficiaries in a lump sum cash payment within 60 days after the
date of the Participant’s death.

     

    (b) Each
Participant may designate a Beneficiary or Beneficiaries to whom the
Participant’s Account shall be distributed in the event he dies before his
entire Account is distributed to him.  Any such designation shall be
made in writing on a form provided by the Company.  The Participant
may make or change the Beneficiary designation under this Section 7.02 at any
time prior to death.  If the Participant has not designated a
Beneficiary under the Plan, or if no designated Beneficiary is living on the
date of distribution hereunder, the Account shall be paid to the personal
representative of the Participant to be distributed in accordance with his will
or applicable intestacy law, or in the event that there shall be no such
representative within six months after the date of death, then to such persons
who, at the date of the Participant’s death, would be entitled to share in the
distribution of his personal estate under the provisions of the applicable
statute then in force governing the descent of intestate property, in the
proportions specified in such statute.

     

    7.03   Unforeseeable
Emergency.  In the event of an Unforeseeable Emergency, a
Participant may request in writing, using the Hardship Distribution Form
(Exhibit F hereto), that all or any portion of his Account be paid prior to the
normal time for payment of such amount. The Administrator shall, in its
reasonable judgment, determine whether the Participant could not satisfy the
emergency through reimbursement or compensation by insurance or otherwise, by
liquidation of other assets (provided such liquidation, in itself, would not
create a financial hardship) or by ceasing deferrals hereunder. Only if the
Administrator determines that such an Unforeseeable Emergency exists, the
Company shall pay to the Participant an amount equal to the lesser of (a) the
amount requested or (b) the amount reasonably necessary to alleviate the
hardship, which in each case may include amounts necessary to pay federal, state
or local income taxes and penalties reasonably anticipated to result from the
distribution.

     

    7.04   Delay of
Distribution.  Notwithstanding the foregoing:

     

    (a) If any
Account or portion thereof is distributable in connection with the Participant’s
Separation from Service with the Company or a Subsidiary, and if at the time of
such Separation from Service the Participant is a “Key Employee” as defined in
Code Section 416(i) (without reference to paragraph 5 thereof), payment of such
amounts shall not be made until the first day of the seventh month following the
Participant’s Separation from Service.

     

    (b) If the
Company reasonably anticipates that any distribution to a Participant of any
portion of his Account would result in a limitation of the Company’s deduction
with respect to such payment under Code Section 162(m), the Company shall direct
the Administrator to delay the payment of such amount until the earliest date at
which the Company reasonably anticipates that its deduction under Code Section
162(m) will not be limited because of such payment, or the calendar year in
which the Participant Separates from Service with the Company and its
Subsidiaries.

     

     

    
      
         

      

      
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    ARTICLE
VIII

     

    Administration
of the Plan

     

    8.01   Appointment of
Administrator.  The Company shall, in writing, appoint one or
more persons to serve as the Plan Administrator.  Any person,
including an employee of the Company or a Subsidiary, shall be eligible to serve
as Administrator. Persons serving as Administrator may resign by written notice
to the Company and the Company may appoint or remove such persons by written
notice.  An Administrator consisting of more than one person shall act
by a majority of its members at the time in office and may authorize any one or
more of its members to execute any document or documents on behalf of the
Administrator, in which event the Administrator shall notify the Company of the
member or members so designated.  No person serving as Administrator
shall vote or decide upon any matter relating solely to himself or solely to any
of his rights or benefits pursuant to the Plan.

     

    8.02   Powers and Duties of
Administrator.  The Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan.  The Administrator shall interpret the Plan
and shall determine all questions arising in the administration, interpretation,
and application of the Plan, including, but not limited to, questions of
eligibility and the status and rights of employees, Participants and other
persons.  Any such determination by the Administrator shall be
conclusive and binding on all persons.  The regularly kept records of
the Company shall be conclusive and binding upon all persons with respect to a
Participant’s date and length of employment, time and amount of Compensation and
the manner of payment thereof, type and length of any absence from work and all
other matters contained therein relating to Participants.

     

    8.03   Plan
Expenses.  The expenses incurred by the Administrator in the
proper administration of the Plan shall be paid by the Company.

     

    8.04   Limitation of
Authority.  The Administrator shall not add to, subtract from,
or modify any of the terms of the Plan, change or add to any benefits prescribed
by the Plan, or waive or fail to apply any Plan requirement for benefit
eligibility.

     

    


    
      
        
        

      

      
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    ARTICLE
IX

     

    Claims
Procedures

     

    9.01   Procedure for Denial of
Benefits.  In the event that a claim for benefits under the
Plan of a Participant or Beneficiary (the “Claimant”) is denied in whole or in
part by the Administrator, the Administrator will notify the Claimant of the
denial.  Such notification will be in writing within 90 days of the
date the claim is received by the Administrator and will include:  (i)
the specific reason for the denial;  (ii) specific references to
pertinent Plan provisions on which denial is based;  (iii) a
description of any additional material and information necessary for the
Claimant to perfect his claim and an explanation of why the material or
information is necessary; and (iv) an explanation of the appeals
process.

     

    9.02   Appeal.  The
Claimant has 60 days from the date he receives notice of a claim denial to file
a written request for review of the denial with the
Administrator.  The Administrator will review the claim denial and
inform the Claimant in writing of its decision within 60 days of the date the
review request is received by the Administrator.  This decision will
be final.

     

    


     

    ARTICLE
X

     

    Amendment
or Termination of Plan

     

    10.01
Partial
Termination.  The board of directors of the Company may
partially terminate the Plan by freezing future accruals if, in its judgment,
the tax, accounting, or other effects of the continuance of the Plan, or
potential payments thereunder, would not be in the best interests of the
Company.

     

    10.02
Complete
Termination.  Subject to the requirements of Code Section 409A,
in the event of complete termination of the Plan, the Plan shall cease to
operate and the Company shall pay out to the Participant his or her benefit as
if the Participant had terminated employment as of the effective date of the
complete termination.  Such complete termination of the Plan shall
occur only under the following circumstances and conditions:

     

    (i) The
Administrator may terminate the Plan within 12 months of a corporate dissolution
taxed under Code Section 331, or with approval of a bankruptcy court pursuant to
11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are
included in the Participant’s gross income in the latest of (i) the calendar
year in which the Plan terminates; (ii) the calendar year in which the amount is
no longer subject to a substantial risk of forfeiture; or (iii) the first
calendar year in which the payment is administratively practicable.

     

    (ii) The board
of directors of the Company may terminate the Plan within the 30 days preceding
a Change in Control (but not following a Change in Control), provided that the
Plan shall only be treated as terminated if all substantially similar
arrangements sponsored by the Company are terminated so that the Participant and
all participants under substantially similar arrangements are required to
receive all amounts of compensation deferred under the terminated arrangements
within 12 months of the date of the termination of the
arrangements.  For these purposes, “Change in Control” shall be
defined in accordance with the Treasury Regulations under Code Section
409A.

     

    (iii) The board
of directors of the Company may terminate the Plan provided that (i) the
termination and liquidation does not occur proximate to a downturn in the
financial health of the Company; (ii) all arrangements sponsored by the Company
that would be aggregated with this Plan under Treasury Regulations Section
1.409A-1(c) if the Participant covered by this Plan was also covered by any of
those other arrangements are also terminated; (iii) no payments other than
payments that would be payable under the terms of the arrangement if the
termination had not occurred are made within 12 months of the termination of the
arrangement; (iv) all payments are made within 24 months of the termination of
the arrangements; and (v) the Company does not adopt a new arrangement that
would be aggregated with any terminated arrangement under Treasury Regulations
Section 1.409A-1(c) if the Participant participated in both arrangements, at any
time within three years following the date of termination of the
arrangement.

     

    


    
      
        
        

      

      
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    ARTICLE
XI

     

    Plan
Funding

     

    11.01   Unfunded
Plan.  The Plan is intended to be an unfunded plan maintained
solely for the purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974.

     

    11.02   Unsecured
Rights.  The right of the Participant or his Beneficiary to
receive a distribution under the Plan will be an unsecured claim against the
general assets of the Company, and neither the Participant nor his Beneficiary
nor any other person will have any rights in or against any amount credited to
the Account or any other specific assets of the Company.  All amounts
credited to the Accounts will constitute general assets of the
Company.

     

    11.03   Trust
Agreement.  Notwithstanding the provisions of Section 11.02,
the Company may enter into a trust agreement whereby the Company will agree to
contribute amounts to a trust for the purpose of accumulating assets to fund
benefit payments to the Participants.  The Company has the sole
discretion to determine the amounts to contribute to the trust.  Such
trust agreement will be substantially in the form of a model trust agreement set
forth in Internal Revenue Service Revenue Procedure 92-64, or any subsequent
Revenue Procedure, and will include provisions required in such model trust
agreement that all assets of the trust will be subject to the creditors of the
Company in the event of insolvency.  The obligations of the Company to
the Participant thereunder may be satisfied in all or in part with the assets of
the trust.  Any assets of the trust remaining after all obligations
hereunder with respect to the Participant have been satisfied will be paid to
the Company.

     

    


     

    ARTICLE
XII

     

    General
Provisions

     

    12.01   Nontransferability.  No
Participant or Beneficiary may sell, assign, transfer encumber or otherwise
dispose of the right to receive payments hereunder. A Participant’s rights to
benefit payments under the Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of a Participant or a Beneficiary.

     

    12.02   Employment Not Guaranteed
Plan.  The establishment of this Plan and the designation of an
employee as a Participant shall not give any Participant the right to continued
employment with the Company or any Subsidiary or limit the right of the Company
or any Subsidiary to dismiss the Participant or modify the terms of employment
of any Participant.

     

    12.03   Notice.  Any
and all notices, designations or forms provided for herein shall be in writing
and delivered personally or by certified mail, return receipt requested,
addressed, in the case of the Company, to the Corporate Secretary at 11200 West
Plank Court, Suite 100, Wauwatosa, Wisconsin 53226 and, in the case of a
Participant or Beneficiary, to his home address as shown on the records of the
Company. The addresses referenced herein may be changed by a notice delivered in
accordance with the requirement of this Section 12.03.

     

    12.04   Limitation on
Liability.  In no event shall the Company, Administrator or any
employee, officer or director of the Company be liable to any Participant,
former Participant or Beneficiary or other person for any claim, loss, liability
or expense incurred with respect to the Plan, other than the payment of benefits
hereunder.

     

    12.05   Special Distribution
Provision.  Notwithstanding anything to the contrary contained
herein, in the event that (a) the Internal Revenue Service prevails in a claim
that all or any portion of the Participant’s Account constitutes taxable income
to the Participant or his Beneficiary for any taxable year of such Participant
prior to the taxable year in which such amount is distributed to him, or (b)
legal counsel satisfactory to the Company and the Participant renders an opinion
that the Internal Revenue Service would likely prevail in such a claim, the
affected portion of the Participant’s Account shall be immediately distributed
to the Participant (or his Beneficiary).  For purposes of this Section
12.05, the Internal Revenue Service shall be deemed to have prevailed in a claim
if such claim is upheld by a court of final jurisdiction, or if the Company or
the Participant, based upon an opinion of legal counsel satisfactory to the
Company and the Participant, fails to appeal a decision of the Internal Revenue
Service, or a court of applicable jurisdiction, with respect to such claim, to
an appropriate Internal Revenue Service appeals authority or to a court of
higher jurisdiction within the appropriate time period.

     

    
      
        
        

      

      
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    12.06   Taxes.  The
Company shall have the right to deduct from all amounts paid pursuant to the
Plan any amount required by law to be withheld to satisfy a tax
obligation.  The Participant, his Beneficiary or his estate shall be
solely liable for the payment of any tax obligation that arises from a payment
under the Plan.

     

    12.07   Incapacity of
Recipient.  Subject to applicable state law, if any person
entitled to a payment under the Plan is deemed by the Administrator to be
incapable of personally receiving and giving a valid receipt for such payment,
then, unless and until claim therefor shall have been made by a duly appointed
guardian or other legal representative of such person, the Administrator may
provide for such payment or any part thereof to be made to any other person or
institution then contributing toward or providing for the care and maintenance
of such person.  Any such payment shall be a payment for the account
of such person and a complete discharge of any liability of the Administrator,
the Company and the Plan therefor.

     

    12.08   Severability.  Any
provision of this Plan prohibited by law shall be ineffective to the extent of
any such prohibition, without invalidating the remaining provisions hereof. The
illegal or invalid provisions shall be fully severable and this Plan shall be
construed and enforced as if the illegal or invalid provisions had never been
inserted in this Plan.

     

    12.09   Headings.  All
articles and headings under this Plan are intended merely for convenience and
shall in no way be deemed to modify or supplement the actual terms and
provisions stated thereunder.

     

    12.10
Applicable
Law.  The Plan shall be construed and administered under the
laws of the State of Wisconsin except to the extent preempted by federal
law.

     

    12.11  Acceleration of
Payments.  Except as specifically permitted herein or in other
sections of this Plan, no acceleration of the time or schedule of any payment
may be made hereunder.  Notwithstanding the foregoing, payments may be
accelerated hereunder by the Company, in accordance with the provisions of
Treasury Regulation Section 1.409A-3(j)(4) and any subsequent guidance issued by
the United States Treasury Department.  Accordingly, payments may be
accelerated, in accordance with requirements and conditions of the Treasury
Regulations (or subsequent guidance) in the following circumstances: (i) as a
result of certain domestic relations orders; (ii) in compliance with ethics
agreements with the Federal government; (iii) in compliance with ethics laws or
conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the
limit under Code Section 402(g)(1)(B)); (v) in the case of certain distributions
to avoid a non-allocation year under Code Section 409(p); (vi) to apply certain
offsets in satisfaction of a debt of the Participant to the Company; (vii) in
satisfaction of certain bona fide disputes between the Participant and the
Company; or (viii) for any other purpose set forth in the Treasury Regulations
and subsequent guidance.

     


    
      
        
           

           

        

         


      

      
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    IN WITNESS WHEREOF, the
Company has amended and restated this Plan, effective September 1, 2006, by
signing on the date set forth below

     

    


     

    
      	 
      	
                                      
      WATERSTONE BANK SSB

            
	 
      	 
      
	
              Date:
      December 16, 2008

            	
              By:
      Richard C. Larson

            
	 
      	
              Its:
      Chief Financial Officer

            


    

    


     

    


    
      
        
        

      

      
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