Document:

CERTIFICATE OF FORMATION

Exhibit 10(i)

 

MARKETING AND SERVICING AGREEMENT

 

                This Marketing and Servicing Agreement (this

“Agreement”) is dated as of March 21, 2001 between First Community Bank of

Washington, a bank organized under the laws of the State of Washington and a

FDIC insured institution (the “Bank”), and Advance America Servicing of

Arkansas, Inc., a Delaware corporation (“Advance America”).

 

                WHEREAS, the Bank is a bank organized under

the laws of the State of Washington with its principal location in Lacey,

Washington, and insured by the Federal Deposit Insurance Corporation (the

“FDIC”), and as such, is authorized to extend credit to borrowers, subject to

the federal and Washington financial institution and credit regulations in

effect and as applicable;

 

                WHEREAS, Advance America is a duly authorized

and validly existing Delaware Corporation, authorized to do business in

Arkansas;

 

                WHEREAS, in accordance with its established

lending criteria as may be amended from time to time, the Bank desires to make

short-term small loans (“Loans”) to consumers (“Borrowers”); and

 

                WHEREAS, Advance America desires to market

and service the Loans, while retaining authority and control over, and

responsibility for, its own employees and methods of operation;

 

                NOW, THEREFORE, in consideration of the

foregoing and of the mutual promises contained in this Agreement, and other

valuable consideration, the sufficiency of which is hereby acknowledged, and

intending to be legally bound, the Bank and Advance America (together, the

“Parties”) agree as follows:

 

                1.             Bank’s

Making and Ownership of Loans

 

                                (a)           The

Bank in its sole discretion shall determine all of the conditions, terms and

features of the Loans, including, without limitation, loan amounts, fees and

charges, interest rates, credit limits, credit standards and all other terms

and conditions of the Loans.  The Bank

shall make Loans to all Applicants (as that term is defined in Section 2(a)

below) who meet such credit standards. 

Neither the Bank, nor Advance America, nor their respective employees

shall suggest to Applicants that Loans are made or approved by Advance America

or that Advance America (or any employee of Advance America) can improve an

Applicant’s prospect of obtaining a Loan.

 

                                (b)           Advance

America shall not in any way fund, or purchase any share or “participation

interest” in, any Loan.

 

                                (c)           The

Bank may sell any portion of any Loan to a third party or parties.  Any sale by the Bank of any such Loan shall

comply with applicable federal law.

 

 

                2.             Advance

America’s Services

 

                                (a)           General

Duties of Advance America; Standards of Performance:  Advance America shall perform all services

required to market and service the Loans, including without limitation the

establishment of retail stores where Loan applicants (“Applicants”) may submit

Loan applications (“Applications”) and receive disclosures required by

applicable law and where Borrowers may execute and deliver Loan documentation

and repay Loans.  In performing its

services hereunder, Advance America shall at all times and in all material

respects comply with applicable law. 

Further, Advance America shall use the documentation and follow the

reasonable and lawful practices, policies and procedures established by the

Bank and communicated in writing to Advance America from time to time (the

“Bank Policies”).

 

                                (b)           Marketing

of Loans:

 

                                                (i)            The

Bank hereby authorizes Advance America to market and service Loans and to use

the name, and any trade name and logo, of the Bank in connection with such

marketing and servicing.  Advance

America may use letters, print advertisements, the Internet and television and

radio commercials for such purposes. 

All advertising and promotions for the Loans shall appropriately

identify the Bank as the lender. 

Advance America shall submit all advertising materials to the Bank for

the Bank’s prior approval, which shall not be unreasonably withheld.

 

                                                (ii)           Advance

America shall maintain and operate stores for the purpose of marketing and

servicing the Loans.

 

                                                (iii)          In

connection with Advance America’s performance of its obligations under this

Agreement, it is expressly agreed that (A) the Bank shall not hold any

ownership or leasehold interest in any Advance America store or any personal

property located therein, except for Repayment Checks, Notes (as those terms

are defined in Section 2(c) below), and cash reflecting Loan repayments as may

be located at such stores from time to time, (B) no Bank employees shall work

in any Advance America store, except as provided in Section 2(f), and (C) the

Bank shall exercise no authority or control over Advance America’s employees or

methods of operation, except as set forth in this Agreement.

 

                                (c)           Servicing

of Loan Applications:

 

                                                (i)            Advance

America employees shall take Applications from Applicants, using an Application

form approved by the Bank.  Advance

America shall not discourage any prospective Applicant from submitting an

Application, and shall provide reasonable assistance to each prospective

Applicant in completing an Application. 

Without limiting the generality of the foregoing, Advance America shall

not discriminate against any Applicant in the credit application process on any

“prohibited basis,” as such term is defined in 

 

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the federal Equal Credit

Opportunity Act (“ECOA”) and Regulation B. 

Advance America shall forward all completed Applications to the Bank (or

its designated loan processing agent) electronically, by telephone, or by other

appropriate means agreeable to both Parties.

 

                                                (ii)           Based

upon the information provided by Applicants to the Bank through Advance America

and such other credit-related information as obtained by Advance America at the

direction of the Bank, and pursuant to the credit granting standards adopted by

the Bank, the Bank shall be solely responsible for determining whether to

extend credit to Applicants.  The Bank

shall, either itself or through its designated loan processing agent,

communicate to Advance America its credit decision on any Application, together

with the reason for any negative credit decision, electronically, by telephone

or by other means acceptable to both Parties. 

Advance America shall provide an appropriately completed adverse action

notice to any Applicant whose Application is rejected by the Bank.

 

                                                (iii)          The

Bank’s Loans hereunder shall be evidenced by an agreement comprised of a

Consumer Loan Agreement and Federal Truth in Lending Disclosures (“Note”).  The Note shall include an Arbitration

Agreement.  The Note shall be electronically

signed by the officer of the Bank in the Bank’s name.

 

                                                (iv)          For

each Loan to a Borrower, Advance America shall:  (A) have the Borrower sign the Note; (B) deliver a copy of the

Note to the Borrower; (C) obtain from the Borrower the executed Note, and the

Borrower’s signed, postdated personal check made payable to the Bank (the

“Repayment Check”), which Repayment Check shall be for the Total of Payments

set forth in the Agreement; and (D) upon receipt (and only upon receipt) of the

signed Note and Repayment Check, deliver to the Borrower a check,

electronically signed by an officer of the Bank in the Bank’s name for the

Amount Financed set forth on the Note (the “Proceeds Check”).  Pursuant to Washington state law and in

accordance with the policy of the Bank, Advance America will not allow any

Borrower to roll-over a Loan made pursuant to this Agreement.

 

                                (d)           Monitoring,

Inventorying and Auditing of Proceeds Checks:  As part of its servicing of the Loans, Advance America shall

monitor and inventory the Proceeds Checks, ensuring that all Proceeds Checks

are issued as the result of Applications approved by the Bank and are given to

Borrowers for Loans.

 

                                (e)           Additional

Servicing:  Advance America shall

perform all necessary servicing functions with respect to the Loans.  Without limiting the foregoing:

 

                                                (i)            Advance

America shall use its reasonable best efforts to collect payments on the Loans

prior to, at and after maturity thereof. 

In collecting payments owed under the Notes, Advance America shall

comply in all material respects with applicable law, including without

limitation the Fair Debt Collection Practices Act (the “FDCPA”) and applicable

debt collection regulations and consumer protection laws applicable to Advance

America in the State or States in which Advance America is marketing and

servicing the loans, and the Best Practices 

 

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of the Community Financial

Services Association of America. 

Advance America shall not encourage or allow its employees to threaten

or imply that failure to honor any payment instrument in connection with any

Loan shall subject the Borrower to potential criminal prosecution that Advance

America does not reasonably believe will in fact result from such failure.  The Bank has established a standard to

monitor the effectiveness of the collection efforts of Advance America. Bank

requires that loan losses to the Bank on the Loans shall be eight percent (8%)

or less of the amount of the finance charge on the Loans, as the finance charge

is disclosed in the federal Truth in Lending box contained in the Notes (“Loss

Rate Standard”).  Advance America agrees

to meet the Loss Rate Standard in its collections.  If Advance America’s collection efforts do not meet this Loss

Rate Standard established by the Bank, the Fees (as that term is defined in

Section 2(g) below) to be paid Advance America will be reduced by the dollar

amount that the loan losses exceed the Loss Rate Standard.  The Fees will be adjusted in accordance with

this Section on a quarterly basis based on the calendar year to date loss

experience.

 

                                                (ii)           On

each day Advance America operates its stores for regular business, Advance

America shall deposit in a Bank account designated by the Bank (the “Bank

Deposit Account”) all cash receipts for that day and all Repayment Checks

required to be deposited on that day. 

Advance America shall reconcile the Bank Deposit Account on a monthly

basis.

 

                                                (iii)          Advance

America shall maintain and retain all original Applications and copies of all

Adverse Action Notices and other documents relating to rejected Applications

for the period required by applicable law. 

Advance America shall maintain originals or copies, as applicable, of

all Applications, Notes, Proceeds Checks, Repayment Checks and other documents

provided to or received from Borrowers (all such documents referred to

collectively as “Loan Documents”) for the period required by applicable

law.  Prior to repayment or charge-off a

Loan, the Loan Documents shall be maintained by Advance America in a secure

environment.  Advance America will work

with the Bank’s designated loan processing agent to ensure that Bank is

provided timely information concerning the basis for each Adverse Action Notice

relating to a rejected Application.

 

                                (f)            Reports:  Access to Stores, Books and Records and

Employees:  During the term of this

Agreement, Advance America shall provide to the Bank data submissions and

reports reasonably required by the Bank and its advisors in order to maintain

effective internal controls and to monitor results under this Agreement,

including without limitation the performance of the Loans and Advance America

obligations hereunder.  Such reports

shall include a daily report showing Loans made, repaid and outstanding each

day, as agreed upon by the Bank and Advance America.  During the term of this Agreement and at all times thereafter,

the Bank and banking agencies with regulatory authority over the Bank and its

auditors shall have reasonable access to Advance America stores and to the

books and records of Advance America and the officers, employees and

accountants of Advance America for the same purposes.

 

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                                (g)           Fee

and Costs; Number of Locations

 

                                                (i)            In

consideration for Advance America’s performance of its obligations under this

Agreement, the Bank shall pay Advance America the marketing and servicing fees

set forth on Exhibit A attached hereto (the “Fees”).  Advance America will be responsible for all costs associated with

its stores and its services under this Agreement, including without limitation

rental and occupancy costs; costs of up-fit and leasehold improvements;

equipment costs; processing costs; printing costs; maintenance costs; staffing

costs; taxes assessed to Advance America; signage costs; and advertising costs.

 

                                                (ii)           The

Parties agree that Advance America may service and market the Loans for the

Bank pursuant to this Agreement in twenty-five (25) locations in the State of

Arkansas.  Advance America agrees that

it shall give thirty days’ written notice to the Bank if it intends to open any

additional locations in Arkansas and will give the Bank the right of first

refusal to offer the Loans in any such new location.  If the Bank does not wish to offer Loans in any new location,

Advance America may market and service Loans for another federally insured

financial institution in that new location or do business in some other lawful

manner.

 

                3.             Representations,

Warranties and Covenants

 

                                (a)           The

Bank hereby represents warrants and covenants to Advance America, as of the

date hereof and on a continuing basis throughout the term of this Agreement,

that:

 

                                                (i)            The

Bank is a duly organized and validly existing state bank organized under the

laws of the State of Washington, with its headquarters office located in Lacey,

Washington.  The Bank is insured by the

FDIC, and has the power and authority and all requisite licenses, permits and

authorizations to execute and deliver this Agreement and perform hereunder.

 

                                                (ii)           The

Bank is authorized to make Loans as contemplated by this Agreement and to

contract with a third party to provide the services which Advance America will

provide under this Marketing and Servicing Agreement.

 

                                                (iii)          The

Bank is authorized under applicable law to contract with a third party to

provide loan processing services not covered by this Marketing and Servicing

Agreement, and transmission by and between Advance America and such third party

of information required for processing the Loans does not violate Washington

state law or federal law.

 

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                                                (iv)          The

Bank is authorized under applicable law to sell participation interest(s) in

the Loans, or to sell the Loans to a third party or third parties prior to the

maturity date on such Loans.

 

                                                (v)           This

Agreement has been duly authorized by the Bank’s Board of Directors, executed

and delivered by the Bank and constitutes the legal, valid and binding

agreement of the Bank, enforceable against the Bank in accordance with its

terms, except as enforceability may be limited by bankruptcy, insolvency,

reorganization or other laws affecting creditors’ rights and remedies generally

and by general principles of equity (regardless of whether such enforceability

is considered in a proceeding in equity or at law).

 

                                                (vi)          The

execution, delivery and performance of this Agreement and the consummation of

the transactions contemplated hereby will not (A) violate or conflict with any

provision of the articles of incorporation or other governance documents of the

Bank; or (B) violate or conflict with, constitute a breach of or default under,

result in the loss of any material benefit under, or permit the acceleration of

or entitle any party to accelerate any obligation under or pursuant to, any

material mortgage, lien, lease, agreement, instrument, order, law, arbitration

award, judgment or decree to which the Bank is party or by which the Bank or

any of its assets may be bound.

 

                                                (vii)         During

the term of this Agreement, Bank shall provide to Advance America data

submissions and reports reasonably required by Advance America and its advisors

in order to maintain effective internal controls and to monitor results under

this Agreement, including without limitation the performance of the Loans and

the Banks obligation hereunder.

 

                                                (viii)        During

the term of this Agreement, but only to the extent permissible under applicable

laws, regulations and regulatory practices, Advance America and its auditors

shall have reasonable access to the Bank’s accounting records relating to Loans

made in Arkansas.  Subject to the

foregoing limitations, Advance America will also have access to the officers,

employees and accountants of the Bank for the same purposes as set forth in

(vii) to discuss such records.

 

                                                (ix)           The

bank shall use its reasonable best efforts to comply in all material respects

with the CFSA Best Practices in effect of the date of this Agreement, in the

form provided to it by Advance America, and any reasonable Best Practices, or

modifications to such practices approved and adopted by the Community Financial

Services Association of America (the “CFSA”) during the term of this Agreement;

provided the practices comply in all respects with applicable law, and the

interpretation of such law by federal, state, or other regulatory authorities

with jurisdiction.

 

                                                (x)            There

are no regulatory actions or lawsuits against Bank relating to the marketing

and Servicing of Loans.

 

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                                (b)           Advance

America hereby represents and warrants to the Bank, as of the date hereof and

on a continuing basis throughout the term of this Agreement, that:

 

                                                (i)            Advance

America is duly organized and validly existing, and licensed to do business as

a corporation under the laws of the State of Delaware, and is duly qualified to

do business as contemplated under this Agreement, and in good standing in,

Arkansas.

 

                                                (ii)           Advance

America has the corporate power and authority, and all requisite licenses,

permits and authorizations, to execute and deliver the Agreement and to perform

their duties hereunder.  This Agreement

has been duly authorized by Advance America’s Board of Directors, executed and

delivered by it and constitutes its legal, valid and binding agreements,

enforceable against them in accordance with their terms, except as

enforceability may be limited by bankruptcy, insolvency, reorganization or

other laws affecting creditors’ rights and remedies generally and by general

principles of equity (regardless of whether such enforceability is considered

in a proceeding in equity or at law).

 

                                                (iii)          The

execution, delivery and performance of this Agreement will not (A) violate or

conflict with any provision of the articles of organization, operating

agreement or other governance documents of Advance America; or (B) violate or

conflict with, constitute a breach of or default under, result in the loss of

any material benefit under, or permit the acceleration of or entitle any party

to accelerate any obligation under or pursuant to, any material mortgage, lien,

lease, agreement, instrument, order, law, arbitration award, judgment or decree

to which Advance America is a party or by which Advance America assets may be

bound.

 

                                                (iv)          Advance

America will market and service the Loans in accordance with this Agreement and

in accordance with the policies and procedures established and approved by the

Bank pursuant to this Agreement.

 

                                                (v)           Advance

America will operate its stores in Arkansas in accordance with this Agreement

and will follow its normal operating procedures in operating these stores

including providing adequate security measures, hiring appropriate employees,

and being open for business during its normal business operating hours.

 

                                                (vi)          There are no

regulatory actions, investigations, or lawsuits against Advance America or its

affiliates relating to the marketing and servicing of Loans.

 

                                                (vii)         To

the best of its knowledge, Advance America represents that written information

and financial statements provided to the Bank in contemplation of this

Agreement did not contain any material omissions of fact and were materially

correct.

 

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                4.             Indemnification

 

                                (a)           For

a period of eighteen (18) months from the date of this Agreement, Advance

America hereby indemnifies and agrees to hold harmless the Bank, its affiliates

and the officers, directors, members, employees, representatives, shareholders,

agents and attorneys of such entities (the “Bank Indemnified Parties”) against

any and all claims, losses, liabilities, damages, penalties, demands,

judgments, settlements, costs and expenses (“Losses”) suffered or incurred by

such Bank Indemnified Parties as a result of, or with respect to, or arising

from (i) any claim or allegation made by or on behalf of any Applicant or

Borrower relating to the Loans, including any actions brought during that time

on behalf of any Applicant or Borrower by any regulatory or governmental

authority or agency, and (ii) any and all Losses identified in section 4(b)

below.

                

                                (b)           For

the period of time following the first eighteen (18) months after the date of

this Agreement and except as to Losses for which Advance America is indemnified

by Bank as set forth below in section 4(d), Advance America hereby indemnifies

and agrees to hold harmless the Bank Indemnified Parties against any and all

Losses suffered or incurred by such Bank Indemnified Parties as a result of, or

with respect to, or arising from (i) any breach by Advance America of any

Representation, Warranty or covenant contained herein, or any negligence or

misconduct by Advance America or its employees; (ii) any burglary, robbery,

fraud, or theft at the Advance America locations marketing and servicing the Loans;

or (iii) any claim or allegation made by or on behalf of any Applicant or

Borrower arising from or relating to the Loans in which Bank is named a party

and that asserts that Advance America has acted in violation of the law.

 

                                (c)           Notwithstanding

the foregoing, Advance America shall not indemnify the Bank under this

Agreement for: (A) Losses caused by the Bank’s breach of this Agreement

(including but not limited to the breach by the Bank of any Representation,

Warranty, or covenant contained herein); (B) Losses caused by the burglary,

robbery, fraud, theft, negligence or misconduct of the Bank or its employees;

(C) Losses relating from any claim, investigation or allegation made by any

regulatory or governmental authority or agency arising from or relating to the

Loans except as set forth in section 4(a) above; (D) except as set forth in

section 4(a) above, Losses arising from the settlement of any claim, or a

judgment or ruling by a court, arbitrator or regulatory authority on such

claim, that the Bank has violated state or federal usury laws, state or federal

consumer protection laws, state or federal racketeering laws (including the

federal Racketeering Influenced and Corrupt Organizations Act), or federal

Truth in Lending laws, or is liable for fraud or unconscionability; (E) the

loss of the Bank’s Washington bank charter, or the loss of any license or

permit required by the Bank to transact business as a federally insured

financial institution; (F) claims that any Bank Indemnified Party is in violation

of federal or state securities or corporate laws; (G) claims brought by

employees or shareholders of any Bank Indemnified Party; (H) a decline in the

value of the stock of any Bank Indemnified Party. (I) adverse publicity or

customer relations problems encountered by any Bank Indemnified Party; (J)

non-monetary sanctions by any court or regulatory agency; (K) loss of non-Loan

related business or profits of any Bank Indemnified Party; (L) management time

relating to

 

8

 

attending hearings and meetings

with respect to indemnified matters; or (M) any action by Advance America

against Bank.

 

                                (d)           Except

as to Losses for which Bank is indemnified by Advance America as set forth

above in sections 4(a) and (b), the Bank hereby indemnifies and agrees to hold

harmless Advance America, its affiliates, and the officers, directors, members,

employees, representatives, shareholders, agents and attorneys of Advance

America and its affiliates (the “Advance America Indemnified Parties”) against

any and all Losses suffered or incurred by such Advance America Indemnified

Parties as a result of, or with respect to, or arising from (i) any breach of

this Agreement by the Bank (including, but not limited to the breach by the Bank

of any Representation, Warranty, or covenant contained herein), (ii) any

burglary, robbery, fraud, theft, negligence or misconduct by the Bank or its

employees, or (iii) any error or omission in the information or services

rendered by any other third party with whom the Bank contracts to provide

services not covered by this Agreement, including loan processing services.

 

                                (e)           Notwithstanding

the foregoing, the Bank shall not indemnify Advance America under this

Agreement for: (A) Losses caused by Advance America’s breach of this Agreement

(including but not limited to the breach by Advance America of any

Representation, Warranty, or covenant contained herein); (B) Losses caused by

burglary, robbery, fraud, or theft at the Advance America locations marketing

and servicing the Loans by persons other than the Bank or its employees; (C)

negligence or misconduct of Advance America or its employees; (D) Losses

resulting from any claim, investigation or allegation made by any regulatory or

governmental authority or agency arising from or relating to the Loans; (E)

Losses arising from the settlement of any claim, or a judgment or ruling by a

court, arbitrator or regulatory authority on such claim, that Advance America

has violated state or federal usury laws, state or federal consumer protection

laws, state or federal racketeering laws (including the federal Racketeering

Influenced and Corrupt Organization Act), or federal Truth in Lending laws, or

is liable for fraud or unconscionability; (F) claims that any Advance America

Indemnified Party is in violation of federal or state securities or corporate

laws; (G) claims brought by employees or shareholders of any Advance America

Indemnified Party; (H) a decline in the value of the stock of any Advance

America Indemnified Party; (I) adverse publicity or customer relations problems

encountered by any Advance America Indemnified Party; (J) non-monetary

sanctions by any court or regulatory agency; (K) loss of non-Loan related

business or profits of any Advance America Indemnified Party; (L) management

time relating to attending hearings and meetings with respect to indemnified

matters; or (M) any action by the Bank against Advance America.

 

                                (f)            The

Bank Indemnified Parties and the Advance America Indemnified Parties are

sometimes referred to herein as the “Indemnified Parties” and Advance America

or the Bank, as indemnitor hereunder, is sometimes referred to herein as the

“Indemnifying Party.”

 

                                (g)           Any

Indemnified Party seeking indemnification hereunder shall promptly notify the

Indemnifying Party, in writing, of any indemnified Loss hereunder, specifying

in reasonable detail the nature of the Loss, and, if known, the amount, or an

estimate of the amount, of the Loss, provided that failure to promptly give

such notice shall only limit the liability of the 

 

9

 

Indemnifying Party to the

extent of the actual prejudice, if any, suffered by such Indemnifying Party as

a result of such failure. The Indemnified Party shall provide to the

Indemnifying Party as promptly as practicable thereafter information and

documentation reasonably requested by such Indemnifying Party to support and

verify the claim asserted.

 

                                (h)           The

Indemnifying Party may assume the defense of a claim which it is indemnifying,

or prosecute a claim resulting from such indemnified claim, and may employ

counsel chosen by the Indemnifying Party (which counsel shall be reasonably

acceptable to the Indemnified Party), at the Indemnifying Party’s sole cost and

expense. The Indemnifying Party shall have the right, at its own expense, to

employ counsel separate from counsel employed by the Indemnifying Party in any

such action and to participate therein. The Indemnifying Party shall not be

liable for any settlement of any claim effected without its prior written

consent, which shall not be unreasonably withheld. However, if the Indemnifying

Party does not assume the defense or prosecution of a claim within thirty (30)

days after notice thereof, the Indemnifying Party may settle such claim without

the Indemnifying Party’s consent. The Indemnifying Party shall not agree to

settlement of any claim which provides for any relief other than the payment of

monetary damages by the Indemnifying Party without the Indemnifying Party’s

prior written consent, which shall not be unreasonably withheld. Whether or nor

the Indemnifying Party chooses to so defend or prosecute such claim, all the

parties hereto shall cooperate in the defense or prosecution thereof and shall

furnish such records, information and testimony, and attend such conferences,

discovery proceedings, hearings, trials and appeals, as may be reasonably

requested in connection therewith, all at the Indemnifying Party’s sole cost

and expense.

 

                                (i)            The

Parties agree that, if both Parties are named as defendants in the same

lawsuit, the Parties will enter into a Joint Defense Agreement reasonably

accepted to the Parties.

 

                5.             Termination

 

                                (a)           This

Agreement shall terminate: (i) three (3) years after the date of this Agreement;

(ii) upon six (6) months written notice of termination to the other Party;

(iii) upon an Event of Default that is not cured after notice is given as

provided in Section 5(b); (iv) upon a decrease in the fees and or interest that

can be charged by the Bank on the Loans pursuant to a change in federal or

state law or the interpretation thereof by a regulatory agency asserting

jurisdiction as to that issue; or (v) upon the termination by the Bank’s

designated loan processing agent of the Bank’s agreement with such agent to

provide the services contemplated in his Agreement. In the event this Agreement

is terminated pursuant to (iv) above, the Parties agree to negotiate in good

faith as to the terms of a new agreement.

 

                                (b)           Upon

the occurrence of an Event of Default (as hereinafter defined) by either party,

the other Party may terminate this Agreement by giving written notice at least

thirty (30) days in advance of termination and an opportunity for the

defaulting Party to cure the Event of Default, provided that: (i) the

non-defaulting Party may suspend this Agreement during the period prior to any

cure of the Event of Default; and (ii) the thirty (30) day written notice 

 

10

 

requirement shall not apply if

the Even of Default is the Bank’s failure to fund a Loan marketed by Advance

America which meets the criteria established by the Bank for Loans. Either

party may immediately terminate this Agreement if either Party is advised by

the Federal Deposit Insurance Corporation (or any successor to such agency), or

by regulatory agency which has or asserts jurisdiction over either Party or the

Loans, that its making of the Loans or the performance its obligations under

this Agreement is or may be unlawful or an unsafe or unsound banking practice

or that such activity may jeopardize the Bank’s standing with or any Bank

rating from any agency.

 

                (c)           It

shall constitute an Event of Default by the Bank hereunder if (a) the Bank

shall be in material breach of any Representation, Warranty or covenant

hereunder or if the Bank fails to make any payment due hereunder, (b) Advance

America has not defaulted hereunder and the Bank nonetheless discontinues

making Loans, (c) the Bank shall fail to fund a Loan marketed by Advance America

which meets the criteria established by the Bank for Loans; or (d) the Bank

shall file for protection under any state or federal liquidation provision, or

where the FDIC or any other regulatory authority takes control of the Bank. It

shall constitute an Even of Default by Advance America hereunder if (a) Advance

America shall be in material breach of any Representation, Warranty, or

covenant hereunder, (b) the Bank has not defaulted hereunder and Advance

America nonetheless discontinues marketing and servicing the Loans, or (c)

Advance America files for protection under any chapter of the federal

Bankruptcy Code.

 

                (d)           Sections

4 through 8 hereof shall survive the termination of this Agreement. However,

upon the Bank’s written request, Advance America shall continue to service

outstanding Loans following termination of this Agreement until all Loans are

repaid or charged off in accordance with the Bank’s standards practices and

policies.

 

                6.             Notice

 

                Any notice hereunder by either Party shall be

given to the other Party at its address act forth below or at such other

address designated by notice in the manner provided in this Section 6, by

personal delivery, certified mail or overnight courier, or by facsimile with a

confirmation copy by first class mail, postage prepaid. Such notice shall be

deemed to have been given when received. Unless otherwise agreed, notice shall

be sent to the contact persons at the addresses or facsimile numbers, as the

case may be, set forth below:

 

                If to Advance America:

 

                                Mr. John T. Egeland, President
                                Ms. Monica

Allie, Esquire
                                Advance

America Servicing of Arkansas, Inc. 961 East Main Street
                                Spartanburg,

SC 29302
                                (864)

515-5600

 

11

 

                with a copy to:

 

                                John C. Stophel, Esquire

                                Chambliss, Bahner & Stophel P.C.

                                1000 Tallan Square, Two Union Square

                                Chattanooga, Tennessee 37402-2500

                                (423) 756-3000If to the Bank:

 

                                First Community Bank

                                Ken F. Parsons, Sr., President/CEO

                                721 College St. SE

                                P.O. Box 3800

                                Lacey, Washington 98509-3800

                                (360) 412-2100

 

                7.             Confidentiality

and Use of Customer Information; Non-Solicitation of Employees

 

                                (a)           The

Parties agree that the use of the information regarding all Borrowers and

Applicants (“Customer Information”), including without limitation names,

addresses, demographic information and financial information, is subject to, or

may become subject to, federal and state privacy laws.  The Parties agree that the use of such

Customer Information shall be in compliance with all such applicable laws, and

with any privacy policy adopted by the Bank to comply with such laws, and that

the Parties will keep such Customer Information confidential in accordance with

such laws and policy.

 

                                (b)           The

Bank agrees not to target the Borrowers for any solicitation of any product or

service, and not to provide any Customer Information to any person or entity

not a party to this Agreement, except to the extent required to do so under

applicable law or judicial, administrative or regulatory process or except

incident to its normal marketing efforts in the State of Washington, without

the prior written consent of Advance America. 

The Bank shall use reasonable care to ensure that its agents do not

violate this provision.

 

                                (c)           The

Bank and Advance America agree to treat in confidence the provisions of this

Agreement and all documents, materials and other information related to this

Agreement, which shall have been obtained during the course of the negotiations

leading to, and, during the performance of, this Agreement (collectively,

“Confidential Information”), and not to communicate Confidential Information to

any third party, except that Confidential Information may be provided to a

Party’s affiliates, as such term is defined in the Securities Exchange Act of

1934, regulatory authorities, counsel, accountants, financial or tax advisors

without the consent of the other Party, provided that such parties agree to

hold such Confidential Information in confidence.  As used herein, the term “Confidential Information” shall not

include any information which (i) is or becomes available to a Party (the

“Restricted Party”) from a source 

 

12

 

other than the other Party,

(ii) is or becomes available to the public other than as a result of disclosure

by the Restricted Party or its agents, or (iii) is required to be disclosed

under applicable law or judicial, administrative or regulatory process (but

only to the extent it must be disclosed).

 

                                (d)           The

Parties agree that monetary damages would not be adequate compensation in the

event of a breach by a Restricted Party of its obligation under this Section 7

and, therefore, the Parties agree that in the event of any such breach the

Restricted Party, in addition to its other remedies at law or in equity, shall

be entitled to an order requiring the Restricted Party to specifically perform

its obligations under Section 7 or enjoining the Restricted Party from

breaching Section 7, and the Restricted Party shall not plead in defense

thereto that there would be an adequate remedy at law.

 

                                (e)           Each

Party agrees that it shall not directly or indirectly solicit, hire or

otherwise retain or engage, whether as an employee, independent contractor or

otherwise, any employee or other personnel of the other Party.

 

                8.             Miscellaneous

 

                                (a)           Neither

the existence of this Agreement and the other Agreements, nor their execution,

is intended to be, nor shall it be construed to be, the formation of a

partnership or joint venture between the Bank and Advance America.

 

                                (b)           This

Agreement and the other Agreements supersede any negotiations, discussions or

communications between the Bank and Advance America and constitute the entire

agreement of the Bank and Advance America with respect to the Loans and the

Loan Documents.

 

                                (c)           Advance

America shall on a timely basis provide the Bank with its monthly financial

statements, and its annual audited financial statements.  Bank shall on a timely basis provide Advance

America with its quarterly financial statements, and its annual audited

financial statements.

 

                                (d)           Failure

of any Party to insist, in one or more instances, on performance by any other

Party in accordance with the terms and conditions of this Agreement shall not

be deemed a waiver or relinquishment of any right granted hereunder or of the

future performance of any such term or condition or of any other term or

condition of this Agreement unless and to the extent that such waiver is in a

writing signed by or on behalf of the Party alleged to have granted such

waiver.

 

                                (e)           Any

written notice or demand to be given under this Agreement shall be duly and

properly given if delivered as described in Section 6 herein.

 

13

 

                                (f)            This

Agreement and the rights and duties described herein shall be governed by, and

interpreted in accordance with, the laws of the State of Delaware, without

reference to Arkansas or Washington choice of law rules.

 

                                (g)           Any

controversy or claim arising out of or relating to this Agreement, or the

breach thereof, shall be settled by binding arbitration in a mutually

convenient location in accordance with the Commercial Arbitration Rules of the

American Arbitration Association (“AAA”). 

The arbitration shall be selected by agreement of the Parties or, if

they cannot agree on an arbitrator within thirty (30) days after written notice

of a Party’s desire to have a matter settled by arbitration, then the

arbitrator shall be selected by the AAA. 

Any arbitrator hereunder must be either a lawyer who has practiced law

for at least ten years or a retired judge. 

The arbitrator shall render his or her decision in writing in accordance

with applicable substantive laws.  The

determination reached in such arbitration shall be final and binding on all

Parties hereto without any right of appeal except as provided by the Federal

Arbitration Act.  Any court of competent

jurisdiction may enforce any determination or award of the arbitrator.  Unless otherwise agreed by the Parties, any

such arbitration shall be conducted in accordance with the rules of AAA.  The arbitrator shall have the right and

power to apportion the costs and expenses of the arbitration (including the

Parties’ attorneys’ fees and expenses) in his or her discretion.  THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT

TO TRAIL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SUBJECT TO

ARBITRATION HEREUNDER.

 

                                (h)           Advance

America shall not assign or delegate any of its rights and/or obligations

hereunder without the Bank’s prior written consent, which consent shall not be

unreasonably withheld.  The Bank shall

not assign any of its rights and/or obligations hereunder to any other party

without Advance America’s prior written consent, which consent shall not be

unreasonable withheld.

 

                                (i)            The

headings of the several sections and subsections of the Agreement are inserted

for convenience only and shall not in any way affect the meaning or

construction of any provision of the Agreement.

 

                                (j)            This

Agreement may be executed by the Parties in separate counterparts, each of

which is an original but all of which together shall constitute one and the

same document.

 

                                (k)           Advance

America shall use its reasonable best efforts to train and supervise its

employees to act in conformity with the Bank Policies provided in writing to

Advance America by the Bank and the requirements of applicable law pertaining

to their duties.

 

                                (l)            Neither

Party shall take or omit to take any action that would cause such Party to

violate any of its representatives or warranties hereunder.

 

                                (m)          The

Bank shall forward to Advance America within five (5) business days 

 

14

 

of receipt any written notices

it receives that bankruptcy proceedings have been initiated with respect to any

person known to be a Borrower.

 

                                (n)           This

Agreement may only be amended or modified by the written agreement of both

Parties.

 

                                (o)           To

the extent permissible by applicable law, the Parties agree to promptly notify

each other in the event either Party becomes aware of any threatened or actual

investigation, regulatory action, allegation, arbitration or lawsuit pertaining

to or having a material effect upon the Loans of this Agreement or any similar

marketing and servicing agreement of third parties, or makes any changes in

their respective business practices which would likely have a material effect

on this Agreement or the Loans contemplated by this Agreement.

 

                IN WITNESS WHEREOF, the Bank and Advance

America, intending to be legally bound hereby, have caused this Agreement to be

executed by their duly authorized officers as of the day and year first set

forth above.

 

	

  FIRST COMMUNITY BANK OF WASHINGTON

  	

  ADVANCE AMERICA SERVICING OF ARKANSAS, INC.

  
	

   

  	

   

  
	

  By: 

  	

  /s/ James F.

  Arneson

  	

   

  	

  By: 

  	

  /s/ John T.

  Egeland

  	

   

  
	

   

  	

  James F.

  Arneson

  	

   

  	

  John T.

  Egeland

  
	

   

  	

  Executive

  Vice President, CFO

  	

   

  	

  President

  
						

 

15

 

COMPUTATION OF SERVICING FEES

 

                1.             This

is Exhibit A to that certain Marketing and Servicing Agreement (the

“Agreement”) between First Community Bank of Washington (the “Bank”), and

Advance America Servicing of Arkansas, Inc. (“Advance America”).  All capitalized terms used herein and not

otherwise defined are defined in the Servicing Agreement.

 

                2.             As

Advance America’s sole compensation under the Servicing Agreement, the Bank

shall pay Advance America marketing and servicing fees of $11.50 per $100.00

loaned (“Fees”).

 

                3.             The

Fees shall be paid in bi-weekly installments, payable within one (1) day after

receipt of invoices therefor (“Bi-Weekly Invoices”), delivered by Advance

America to the Bank after the end of each week.

 

                4.             Each

Bi-Weekly Invoice shall show (a) the fees charges actually received by the Bank

during the calendar month on Loans that were repaid in full during such month;

and (b) the Fees owed by the Bank to Advance America.

 

                5.             Advance

America will be responsible for all costs associated with its storefronts and

its services under the Servicing Agreement, including without limitation rental

and occupancy costs; costs of up-fit and leasehold improvements; equipment

costs; processing costs; printing costs; taxes; maintenance costs; staffing

costs; signage costs; and advertising costs.

 

                6.             The

Bank shall be responsible for paying all fees and costs incurred on any bank

accounts which are held in the Bank’s name, from which Proceed Checks are

written or into which Repayment Checks or Loan repayments are deposited.

 

16

 

FIRST AMENDMENT TO MARKETING AND SERVICING

AGREEMENT DATED MARCH 21, 2001, BETWEEN FIRST

COMMUNITY BANK OF

WASHINGTON AND ADVANCE AMERICA SERVICING OF

ARKANSAS, INC.

 

                The First Amendment is between First

Community Bank of Washington, Lacey, Washington, a bank organized under the

laws of the State of Washington (the “Bank”), and Advance America Servicing of

Arkansas, Inc., a Delaware Corporation (“Advance America”).

 

                The parties to this First Amendment entered

into the Marketing and Servicing Agreement, dated March 21, 2001, the terms and

provisions of which set forth the respective duties, obligations and

responsibilities of the parties in connection with the Bank making short-term

small Loans to consumers.  Insofar as

the Marketing and Servicing Agreement is not inconsistent with the terms of

this First Amendment, such Marketing and Servicing Agreement is made a part of

this First Amendment and is incorporated herein by reference.  All capitalized terms used herein and not

otherwise defined are defined in the Marketing and Servicing Agreement.

 

                NOW, THEREFORE, in consideration of the

premises and the mutual promises, covenants and agreements set forth in this

First Amendment, the Bank and Advance America do hereby agree to amend Section

7 of the Marketing and Servicing Agreement as set for below:

 

                7.             Confidentiality and Use of Customer and Proprietary

Information; Non-Solicitation of Employees.

 

                                (a)                           The

Parties agree that the use of the information regarding all Borrowers and

Applicants (“Confidential Information”), including without limitation names,

addresses, demographic information and financial information, is subject to, or

may become subject to, federal and state privacy laws.  The Parties agree that the use of such

Confidential Information shall be in compliance with all such applicable laws,

and with any privacy policy adopted by the Bank to comply with such laws, and

that the Parties will keep such Confidential Information confidential in

accordance with such laws and policy.

 

                                (b)                           Advance

America may use Confidential Information in connection with its performance

under this Agreement, and Advance America may disclose Confidential Information

to its affiliates who may only use the Confidential Information to the same

extent which Advance

 

 

America may use and disclose

the Confidential Information.  Further.

Advance America may disclose and use the Confidential Information in its

ordinary course of business in order to service and carry out its duties under

this Agreement.  Any Confidential

Information shall be returned to the Bank as requested by the Bank once the

services contemplated by this Agreement have been completed.

 

                                (c)                           Except

as set forth and authorized under the Agreement, Advance America shall not

advertise, market or otherwise make known to others any information relating to

the subject matter of this Agreement. 

If Advance America proposes to disclose Confidential Information to a

non-affiliated third party in order to perform under this Agreement, Advance America

must first obtain the consent of the Bank to make such disclosure and Advance

America must enter into a confidentiality agreement with such third party under

which that third party would be restricted from disclosing, using or

duplicating such Confidential Information, except as consistent with this

paragraph.  Except as set forth in this

Agreement, if requested by the Bank, any employee, representative, agent or

subcontractor of Advance America shall enter into a non-disclosure agreement

with the Bank to protect the Confidential Information satisfactory to the Bank.

 

                                (d)                           The

Bank agrees not to target the Borrowers for any solicitation of any product or

service, and not to provide any Confidential Information to any person or

entity not a party to this Agreement, except to the extent required to do so

under applicable law or judicial, administrative or regulatory process or

except incident to its normal marketing efforts in the State of Washington,

without the prior written consent of Advance America.  The Bank shall use reasonable care to ensure that its agents do

not violate this provision.

 

                                (e)                           The

Bank and Advance America agree to treat in confidence the provisions of this

Agreement and all documents, materials and other information related to this

Agreement, which shall have been obtained during the course of the negotiations

leading to, and during the performance of this Agreement (collectively,

“Proprietary Information”), and not to communicate Proprietary Information to

any third party, except that Proprietary Information may be provided to a

Party’s affiliates, as such term is defined in the Securities Exchange Act of

1934, regulatory authorities, counsel, accountants, financial or tax advisors

without the consent of the other Party, provided that such parties agree to

hold such Proprietary Information in confidence.  As used herein, the term “Proprietary Information” shall not

include any Information which (i) is or becomes available to a Party (the

“Restricted Party”) from a source other than the other Party, (ii) is or

becomes available to the public other than as a result of disclosure by the

Restricted Party or its agents, or (iii) is required to be disclosed under

applicable law or judicial, administrative or regulatory process (but only to

the extent it must be disclosed).

 

                                (f)                            The

Parties agree that monetary damages would not be adequate compensation in the

event of a breach by a Restricted Party of its obligations under this Section 7

and, therefore, the Parties agree that in the event of such breach the

Restricted Party, in addition to its other remedies at law or in equity, shall

be entitled to an order  requiring the

Restricted Party to specifically perform its obligations under Section 7 or

enjoining the Restricted Party from breaching Section 7, and the Restricted Party

shall not plead in defense thereto that there would be an adequate remedy at

law.

 

2

 

                                (g)                           Each

Party agrees that is shall not directly or indirectly solicit, hire or

otherwise retain or engage, whether as an employee, independent contractor or

otherwise, any employee or other personnel of the other Party.

 

                Unless specifically amended herein, all of

the terms, conditions and provisions of the Marketing and servicing Agreement

remain in full force and effect.

 

                In the event of any conflict, inconsistency,

or incongruity between the provisions of this First Amendment and any of the

provisions of the Marketing and Servicing Agreement, the provisions of this

First Amendment shall in all respects govern and control.

 

	

  FIRST COMMUNITY BANK OF WASHINGTON

  
	

   

  
	

  By::

  	

  /s/ James F.

  Arneson

  	

   

  
	

            James F. Arneson

  
	

            Its:  Executive Vice President, CFO

  
	

   

  
	

  ADVANCE AMERICA SERVICING OF ARKANSAS, INC.

  
	

   

  
	

  By: 

  	

  /s/ John T.

  Egeland

  	

   

  
	

           John T. Egeland

  
	

          

  Its:  President

  
	

   

  

 

3

 

JOINDER AND GUARANTY AGREEMENT

 

                This Jointed and Guaranty Agreement (this

“Agreement”) is dated as of March 21, 2001 between First Community Bank of

Washington, a bank organized under the laws of the State of Washington and an

FDIC issued institution (the “Bank”), Advance America Servicing of Arkansas,

Inc.., a Delaware corporation (“Subsidiary”) and Advance America, Cash Advance

Centers, Inc., a Delaware corporation (the “Parent”) (collectively Subsidiary

and Parent are referred to herein as the “Advance Entities”).

 

                WHEREAS, Subsidiary and Bank are entering

into a Marketing and Servicing Agreement of even date herewith (the “Servicing

Agreement”) and all capitalized terms used herein and not otherwise defined are

defined in the Servicing agreement;

 

                WHEREAS, Subsidiary has agreed in the

Servicing Agreement to indemnify the Bank Indemnified Parties as to certain

Losses but the Bank Indemnified Parties wish to have additional assurances of

Subsidiary’s financial ability to satisfy all such obligations; and

 

                NOW, THEREFORE, in consideration of the

foregoing and of the mutual promises contained in this Agreement, and other

valuable consideration, the sufficiency of which is hereby acknowledged, and

intending to be legally bound, the Bank and the Advance Entities (together, the

“Parties”) agree as follows:

 

                1.             Joinder

in Indemnity Obligations and Guaranty

 

                                The

Advance Entities jointly and severally agree to indemnify and hold harmless the

Bank Indemnified Parties to the full extent that Subsidiary is indemnifying and

holding harmless such Bank Indemnified Parties under the Servicing

Agreement.  Parent agrees to act as a

guarantor and surety of the indemnity obligations of Subsidiary under the

Servicing Agreement and agrees that it will be jointly and severally liable

with Subsidiary.  Any Bank Indemnified

Party entitled to indemnification under the Servicing Agreement any proceed

directly against Parent in lieu of or in addition to proceeding against

Subsidiary under the Servicing Agreement.

 

                2.             Representations

and warranties

 

                Parent hereby represents and warrants to the

Bank, as of the date hereof and on a continuing basis throughout the term of

this Agreement, that:

 

                (a)           Parent

is duly organized and validly existing, and licensed to do business as a

corporation under the laws of the State of Delaware

 

                (b)           Parent

has the corporate power and authority, and all requisite licenses, permits and

authorizations, to execute and deliver the Agreement and to perform their

duties hereunder.  This Agreement has

been duly authorized by Parent’s Board of Directors, executed and delivered by

it and constitutes its legal, valid and binding agreements, enforceable against

them in accordance with their terms, except as enforceability may be limited by

bankruptcy, insolvency, reorganization or other laws affecting creditors’

rights and remedies generally and by general principles of equity (regardless

of whether such enforceability is considered in a proceeding in equity or at

law).

 

                (c)           The

execution, delivery and performance of this Agreement will not (A) violate or

conflict with any provision of the articles of organization, operating

agreement or other governance documents of parent; or (B) violate or conflict

with, constitute a breach of or default under, result in the loss of any

material benefit under, or permit the acceleration of or entitle and party to

accelerate any obligation under 

 

 

or pursuant to, any material

mortgage, lien, lease, agreement, instrument, order, law, arbitration award,

judgment or decree to which Parent is a party or by which Parent assets may be

bound

 

3.  Notices

 

	

  If to Advance Entities:

  	

   

  	

  If to the Bank;

  
	

  Mr. John T. Egeland, President

  	

   

  	

  Ken F. Parsons, Sr., President/CEO

  
	

  Ms. Monica Allie, Esquire

  	

   

  	

  721 College St. SE

  
	

  961 East Main Street

  	

   

  	

  P.O. Box 3800

  
	

  Spartanburg, SC 29302

  	

   

  	

  Lacey, Washington 98509-3800

  
	

  (864) 515-5600

  	

   

  	

  (360) 412-2100

  

 

4.  Termination

 

                This

Agreement shall terminate at the same time as the termination of the Servicing

Agreement.

 

5.  Miscellaneous

 

                (a)           Neither

the existence of the Agreement and the other Agreements, nor their execution,

is intended to be, nor shall it be construed to be, the formation of

partnership or joint venture between the Bank and Advance Entities.

 

                (b)           This

Agreement supersedes any negotiations, discussions or communications between

the Bank and Advance Entities and constitutes the entire agreement of the Bank

and Advance Entities with respect to the subject matter hereof.

 

                (c)           Failure

of any party to insist, in one or more instances, on performance by any other

Party in accordance with the terms and conditions of this Agreement shall not

be deemed a waiver or relinquishment of any right granted hereunder or of the

future performance of any such term or condition or of any other term or

condition of the Agreement unless and to the extent that such waiver is in a

writing signed by or on behalf of the Party alleged to have granted such waiver

 

                (d)           This

Agreement and the rights and duties described herein shall be governed by, and

interpreted in accordance with, the laws of the State of Delaware, without

reference to Alabama or Washington choice of law rules.

 

                (e)           Any

controversy or claim arising out to or relating to this Agreement, or the

breach thereof, shall be settled by binding arbitration in a mutually

convenient location in accordance with the Commercial Arbitration Rules of the

American Arbitration Association(“AAA”). 

The arbitrator shall be selected by agreement of the Parties or, if they

cannot agree on an arbitrator within thirty (30) days after written notice of a

Party’s desire to have a matter settled by arbitration, then the arbitrator

shall be selected by the AAA.  Any

arbitrator hereunder must be either a lawyer who has practiced law for at least

ten years or a retired judge.  The

arbitrator shall render his or here decision in writing in accordance with

applicable substantive laws.  The

determination reached in such arbitration shall be final and binding on all

Parties hereto without any right of appeal except as provided by the Federal

Arbitration Act.  Any court of competent

jurisdiction may enforce any determination or award of the arbitrator.  Unless otherwise agreed by the Parties, any

such arbitration shall be conducted in accordance with the rules of the

AAA.  The arbitrator shall have the

right and power to apportion the costs and expenses of the arbitration

(including the Parties' attorneys' fees and expenses) in his or her

discretion.  THE PARTIES HEREBY

EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR

CAUSE OF ACTION SUBJECT TO ARBITRATION HEREUNDER.

 

2

 

                (f)            The

headings of the several sections and subsections of this Agreement are inserted

for convenience only and shall not in any way affect the meaning or

construction of any provision of this Agreement.

 

                IN WITNESS WHEREOF, the Bank and Advance

Entities, intending to be legally bound hereby, have caused this Agreement to

be executed by their duly authorized officers as of the day and year firs set

forth above.

 

	

  FIRST COMMUNITY BANK

  	

  ADVANCE AMERICA Servicing of

  
	

   

  	

  Arkansas, Inc.

  
	

  OF WASHINGTON

  	

   

  
	

   

  	

   

  
	

  By: 

  	

  /s/ James F.

  Arneson

  	

   

  	

  By:

  	

  /s/ John T.

  Egeland

  	

   

  
	

  Its:  Executive Vice President, CFO

  	

  Its: 

  President

  
	

   

  	

   

  
	

  ADVANCE AMERICA, CASH 

  ADVANCE CENTERS, INC.

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ William

  M. Webster, IV

  	

   

  	

   

  
	

  Its:  President

  	

   

  

 

3FIRST COMMUNITY FINANCIAL GROUP, INC

Exhibit 10(K)

 

 

 

FIRST COMMUNITY FINANCIAL GROUP, INC.

 

EMPLOYEE STOCK OWNERSHIP PLAN

 

(With 401(k) Provisions)

 

Amended and Restated as of November, 2001

 

 

 

TABLE OF CONTENTS

 

	

  SECTION

  	

   

  
	

   

  	

   

  
	

  SECTION 1.    NATURE

  OF PLAN

  
	

  SECTION

  2.    DEFINITIONS

  
	

  SECTION 3.    ELIGIBILITY

  AND PARTICIPATION

  
	

  SECTION 4.    EMPLOYER

  AND EMPLOYEE CONTRIBUTIONS

  
	

  SECTION 5    

  INVESTMENT

  OF TRUST ASSTS

  
	

  SECTION 6.    ALLOCATIONS

  TO PARTICIPANT’S ACCOUNT

  
	

  SECTION 7.    EXPENSES

  OF THE PLAN AND TRUST

  
	

  SECTION 8.    VOTING

  COMPANY STOCK

  
	

  SECTION 9.    DISCLOSURE

  TO PARTICIPANTS

  
	

  SECTION 10.  CAPITAL

  ACCUMULATION

  
	

  SECTION 11.  RETIREMENT,

  DISABILITY, OR DEATH

  
	

  SECTION 12.  OTHER

  TERMINATION OF SERVICE, BREAK IN SERVICE, VESTING AND FORFEITURES

  
	

  SECTION 13.  CREDITED

  SERVICE

  
	

  SECTION 14.  WHEN

  CAPITAL ACCUMULATION WILL BE DISTRIBUTED

  
	

  SECTION 15.  HOW

  CAPITAL ACCUMULATION WILL BE DISTRIBUTED

  
	

  SECTION 16.  RIGHTS,

  OPTIONS AND RESTRICTIONS ON COMPANY STOCK

  
	

  SECTION 17.  No

  ASSIGNMENT OF BENEFITS, DIVIDENDS, HARDSHIP AND OPTIONAL DISTRIBUTIONS

  
	

  SECTION 18.  ADMINISTRATION

  
	

  SECTION 19.  CLAIMS

  PROCEDURE

  
	

  SECTION 20.  GUARANTIES

  
	

  SECTION 21.  FUTURE

  OF THE PLAN

  
	

  SECTION 22.  “TOP

  HEAVY” CONTINGENCY PROVISIONS

  
	

  SECTION 23.  DIVERSIFICATION

  
	

  SECTION 24.  QUALIFIED

  MILITARY SERVICE

  
	

  SECTION 25.  GOVERNING

  LAW

  
	

  SECTION 26.  EXECUTION

  

 

i

 

FIRST COMMUNITY FINANCIAL GROUP, INC.

EMPLOYEE STOCK OWNERSHIP PLAN

(With 401(k)

Provisions)

 

SECTION 1.  NATURE OF PLAN

 

The

purpose of this Plan is to enable participating Employees to share in the

growth and prosperity of the Company through Employer contributions to the Plan

and to provide Participants with an opportunity to accumulate capital for their

future economic security. The Plan is designed to permit both Employer and

Employee contributions to the Plan. The primary purpose of the Plan is to enable

Participants to acquire stock ownership interests in the Bank. Therefore, the

Trust Assets held under the Plan will be invested primarily in Company Stock.

 

The

Plan is also designed to be available as a technique of corporate finance to

the Bank. Accordingly, it may be used to accomplish the following objectives:

 

(a)                                  To meet general financing requirements of the

Bank, including capital growth and transfers in the ownership of Company Stock;

 

(b)                                 To provide Participants with beneficial

ownership of Company Stock and other assets through Employer and Employee

contributions to the Plan; and

 

(c)                                  To receive loans (or other extensions of

credit) to finance the acquisition of Company Stock (“Acquisition Loans”), with

such loans to be repaid by Employer Contributions to the Trust and dividends

received on such Company Stock.

 

The

Plan was initially effective as of January 1, 1980, as the First Community

Bancorp Employees Retirement plan. The Plan as herein restated is generally

effective as of January 1, 1997, except as otherwise provided. The Plan is a

stock bonus plan containing Section 401 (k) features that is intended to

qualify under Section 401(a) of the Internal Revenue Code. The Plan is also

designed to be an employee stock ownership plan under Section 4975(e)(7) of the

Code.

 

All

Trust Assets under the Plan will be administered, distributed, forfeited and

otherwise governed by the provisions of this Plan and the related Trust

Agreement. The Plan is administered by a Board of Trustees and an

Administrative Committee for the exclusive benefit of Participants (and their

Beneficiaries), except as otherwise provided and permitted by applicable 

law.

 

1.1

 

SECTION 2.   DEFINITIONS

 

In

this Plan, whenever the context so indicates, the singular or plural number and

the masculine, feminine or neuter gender shall be deemed to include the other,

the terms “‘hers,” “his,” and “him” shall refer to a Participant and the

capitalized terms shall have the following meanings:

 

Account

One of  the several

accounts maintained to record the interest of a Participant under the Plan. See

Section 6.

 

Acquisition Loan

A loan made to an Employee

Stock Ownership Plan with 401(k) Provisions (“KSOP”) by a disqualified person

or a loan to a KSOP which is guaranteed by a disqualified person. A direct loan

of cash, a purchase money transaction, and an assumption of the obligation of a

KSOP.

 

Adjusted Compensation

The total taxable salary or

wages paid to an Employee as a Participant in each Plan Year, as reported on

IRS Form W–2, plus the amount (if any) of his Salary Reduction Contributions

for the Plan Year and any deferrals made to an Internal Revenue Code Section

125 Cafeteria Plan and, for Plan Years beginning after 2000, any amounts excluded

from the Employee’s gross income by operation of Section 132(f)(4) of the Code.

For any Plan Years beginning after 1993, however Adjusted Compensation

exceeding $200,000 ($160,000 for Plan Years beginning before 2002) for any

Employee ( in any case as adjusted in accordance with the Section 415(d)(2) of

the Code for cost of living increases) shall not be taken into account.

 

Affiliated Company

First Community Bank of

Washington and any other corporation or business which is a member of a

controlled group of corporations or businesses with the Company pursuant to

Section 414(b), (c), (m) or (o) of the Code. All determinations related to a

controlled group of corporations or businesses which are under common control

shall consider any and all regulations promulgated by the Secretary of the

Treasury.

 

Anniversary Date

December 31, the last day of

each Plan Year.

 

Annuity Starting Date

The first day of the first

period for which an amount is payable as an annuity; or in the case of a

benefit not payable in the form of an annuity, the first day on which all

events have occurred which entitle the participant to such benefit.

 

Approved Absence

A leave of absence (without

pay) granted to an Employee by an Employer under its established leave policy.

Approved absences include leaves granted under the Family and Medical Leave

Act.

 

Beneficiary

The person (or persons)

entitled to receive any benefit under the Plan in the event of a Participants

death. See Section 15(b).

 

Board of Directors

The Board of Directors of

the Company.

 

2.1

 

Break in Service

A Plan Year in which a

Participant is not credited with more than 500 Hours of Service. The

computation period used for measuring eligibility service will also be used to

measure breaks in service. See Section 12(b).

 

Buyout

A transaction or series of

related transactions by which the Company is sold, either through the sale of a

Controlling Interest in the Company's voting stock or through the sale of

substantially all of the Company's assets to a party not having a Controlling

Interest in the Company's voting stock on the date of execution of this

Agreement.

 

Capital Accumulation

A Participant’s vested,

nonforfeitable interest in his Accounts under the Plan. See Section 10.

 

Change in Control

A Buyout, Merger or

Substantial Change in Ownership.

 

Code

The Internal Revenue Code of

1986, as amended.

 

Committee

The Administrative Committee

appointed by the Board of Directors to administer the Plan. See Section 18.

 

Company

First Community Financial

Group, Inc., a bank holding company organized under the laws of the state of

Washington.

 

Company Stock

Common stock issued by the

Employer (or by a corporation which is a member of the same control group)

which is readily tradable on an established securities market. If there is no

common stock which meets the requirements of the preceding sentence, the term “

Company Stock” means common stock issued by the Employer (or by a corporation

which is a member of the same control group) having a combination of voting

power and dividend rights equal to or in excess of (a) that class of common

stock of the Employer (or of any other such corporation) having the greatest

voting power, and (b) the class of common stock of the Employer (or of any such

corporation) having the greatest dividend rights.

 

Company Stock Account

The Account of a Participant

which reflects his interest in Company Stock held under the Plan. See Section

6.

 

Compensation

Compensation is wages,

salaries and fees from professional services and other amounts received

(without regard to whether or not an amount is paid in cash) for personal

service actually rendered in the course of employment with the Employer

maintaining the Plan to the extent that the amounts are includable in gross

income (including, but not limited to, commissions paid to salesmen,

compensation for services on the basis of a percentage of profits, commission

on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or

other expense allowances under a nonaccountable Plan) as described in

Regulation 1.62–2(c), and excluding the following:

 

(a)                  Employer Contributions to a plan of deferred

compensation which are not includable in the Employee’s gross income for the

taxable year in which contributed, or Employer contributions 

 

2.2

 

under a simplified employee

pension plan to the extent such contributions are deductible by the Employee,

or any distributions from a plan of deferred compensation;

 

(b)                 Amounts realized from the exercise of a

nonqualified stock option or restricted stock (or property) held by the

Employee which either becomes freely transferable or is no loner subject to a

substantial risk of forfeiture;

 

(c)                  Amounts realized from the sale exchange, or

other disposition of stock acquired under a qualified stock option plan; and

 

(d)                 Other amounts which receive special tax

benefits, or contributions made by the employer (whether or not under a salary

reduction agreement) towards the purchase of an annuity contract described in

Section 403(b) of the Code (whether or not the contributions are actually

excludable from the gross income of the Employee).

 

The Compensation that may be

taken into account in determining contributions on behalf of any Employee is

limited to no more than $160,000 for Plan Years beginning before 2002 and

$200,000 for Plan Years beginning after 2001, in each case as adjusted under

Code Section 401(a)(17)(B). If a determination period is less than 12 months,

this limit will be decreased proportionately based on the number of months in

the measuring period. For purposes of the ADP and ACP test provisions of the

Plan, a Participant’s Compensation may be limited to Compensation received for

the portion of the year for which the employee was an eligible Participant,

provided this limit is applied uniformly to all eligible employees under the

Plan for this purpose. Effective January 1, 2001, Compensation shall include

elective amounts that are not includable in the gross income of the employee by

reason of Code §132(f)(4).

 

Controlling Interest

The ownership, either

directly or indirectly, of more than twenty percent (20%) of the Company's

voting stock.

 

Credited Service

The number of Plan Years

during which an Employee is credited with at least 1,000 Hours of Service. See

Section 13.

 

Defined Contribution Dollar Limitation

The dollar amount of $30,000

for Plan Years beginning before 2002 and $40,000 for Plan Years beginning after

2001, in each case as adjusted from time to time by the Secretary of the

Treasury for purposes of Code Section 415.

 

Determination Year

The Plan Year for which the

determination of who is highly compensated is being made.

 

Direct Rollover

A payment by the Plan to the

Eligible Retirement Plan specified by the Distributee.

 

Distributee

A Distributee includes an

Employee or former Employee. In addition, the Employee’s or former Employee’s

surviving spouse and the Employee’s or former Employee’s spouse or former

spouse who is the alternate payee under a qualified domestic relations order,

as defined in Section 414(p) of the Code, are Distributees with regard to the

interests of the spouse or former spouse. In the case of a deceased

Participant, the term Distributee includes the Participant’s Beneficiary.

 

2.3

 

Eligible Retirement Plan

An individual retirement

account described in Section 408(a) of the Code, an individual retirement

annuity described in Section 408(b) of the Code, an annuity plan described in

Section 403(a) of the Code, or a qualified trust described in Section 401(a) of

the Code, that accepts the Distributee’s Eligible Rollover Distribution. For

distributions made after 2001, the term Eligible Retirement Plan shall also

include an annuity contract described in Code Section 403(b) and a governmental

plan described in Code Section 457. However, in the case of an Eligible

Rollover Distribution to the surviving spouse, for distributions made before

2002 an Eligible Retirement Plan includes only an individual retirement account

or individual retirement annuity.

 

Eligible Rollover Distribution

Any distribution of all or

any portion of the balance to the credit of the Distributee, except that an

Eligible Rollover Distribution does not include: any distribution that is one

of a series of substantially equal periodic payments (not less frequently than

annually) made for the life (or life expectancy) of the Distributee or the

joint lives (or joint life expectancies) of the Distributee and the

Distributee’s designated Beneficiary, or for a specified period of ten years or

more; any distribution to the extent such distribution is required under

Section 401(a)(9) of the Code; any hardship distribution described in Code

Section 401(k)(2)(B)(i)(iv) which is received after 1999; any hardship

distribution from any account received after 2001; and the portion of any

distribution that is not includable in gross income (determined without regard

to the exclusion for net unrealized appreciation with respect to Employer securities).

 

Employee

Any person considered by the

Employer to be a common law employee of an Employer. Any person not considered

by the Employer to be its common law employee for any particular period shall

not be eligible to participate in the Plan for that period, even if that

determination is later deemed inaccurate by any person, court, body or entity

other than the Employer. A Leased Employee shall not be eligible to participate

in the Plan. Notwithstanding the foregoing or any other provision of the Plan

to the contrary, for Plan Years during which the Plan would otherwise fail to

satisfy the minimum coverage requirements of Code section 410(b) because

Employer contributions have not been allocated to an appropriate group of

Employees, then the group of Employees eligible to share in the Employer’s

contribution and/or forfeiture allocation for such Plan Year shall be expanded

to include the minimum number of Participants who are not actively employed on

the last day of the Plan Year as are necessary to satisfy such coverage

requirements. The specific employees who shall become so eligible shall be

those Employees who, when compared to similarly situated Employees, have been

credited with the greatest number of hours of service for the Plan Year.

 

Employer

The Company, First Community

Financial Group, Inc. and any other Affiliated Company which is designated by

the Board of Directors as an Employer and which adopts the Plan for the benefit

of its Employees.

 

Employer Contributions

Payments made to the Trust

by an Employer which include Employer Discretionary Basic Contributions,

Employer Discretionary Matching Contributions. Qualified Employer Discretionary

Matching Contributions and Employer Discretionary Optional Contributions. See

Section 4.

 

Employer Discretionary Basic Contributions

Plan contributions made

pursuant to Plan Section 4(1)(a)(3).

 

Employer Discretionary Matching Contributions

Plan contributions made

pursuant to Plan Section 4(l)(a)(2).

 

2.4

 

Employer Discretionary Optional Contributions

Plan contributions made

pursuant to Plan Section 4(1)(a)(4).

 

Entry Date

The date an Employee becomes

a Participant for a particular purpose, as determined in Section 3.

 

ERISA

The Employee Retirement

Income Security Act of 1974 as amended.

 

Financed Shares

Shares of Company Stock

acquired by the Trust with the proceeds of an Acquisition Loan.

 

Forfeiture

Any portion of a

Participants Accounts which does not become a part of his Capital Accumulation

and which is reapplied in accordance with the Forfeiture provisions of the

Plan. See Section 12.

 

Highly Compensated Participant

An Employee who performs

service during the Determination Year and is described in one or more of the

following groups:

 

(1)          An Employee who is a more than five percent (5%) owner, as defined in

Section 416(i)(1)(A)(iii), at any time during the Determination Year or the

Look-Back Year, and

 

(2)          An Employee who receives Compensation in excess of $80,000 (indexed in

accordance with Section 415(d) except that the base period is the calendar

quarter ended September 30, 1996) during the Look-Back Year and was in the

top-paid group for the Look-Back Year. For this purpose, an employee is in the

top-paid group for a year if (s)he is in the top 20% of employees when ranked

on the basis of compensation received from the Employer for the year. For Plan

Years after 1997, compensation for this purpose means compensation for purposes

of Code Section 415(c)(3).

 

Employees

described in Section 414(q)(8) and Q & A 9(b) of Section 1.414(q)-1T of the

regulations are excluded.

 

A former employee will be

treated as a Highly Compensated Participant if such employee was a Highly

Compensated Participant when (s)he separated from service with the Employer, or

at any time after age fifty-five (55).

 

Hour of Service

Each hour of Service for

which an Employee is credited under the Plan as described in Section 3(d).

 

Key Employee

For Plan Years beginning

before 2002, an Employee who, and any time during the Plan Year or any of the

four (4) preceding Plan Years, is (i) an officer of the Employer having an

annual compensation greater than fifty percent (50%) of the amount in effect

under Section 415(b)(1)(A) for any such Plan Year, (ii) one of the ten

Employees having an annual compensation from the Employer of more than the

limitation in effect under Section 415(c)(1)(A) and owning (or considered as

owning within the meaning of Section 318) the largest interest in the Employer,

or (iii) a five percent (5%) owner of the Employer, or (iv) a one percent (1%)

owner of the Employer having an annual compensation from the Employer of more

than $150,000.

 

2.5

 

For Plan Years beginning

after 2001, an Employee who at any time during the Plan Year was (i) an officer

of the Employer having annual compensation in excess of $130,000, (ii) a five

percent (5%) owner of the Employer, or (iii) a one percent (1%) owner of the

Employer having annual compensation from the Employer in excess of $150,000.

 

For purposes of determining

five percent (5%) and one percent (1%) owners, neither the aggregation rules

nor the rules of subsections (b), (c) and (m) of Section 414 apply.

Beneficiaries of an Employee acquire the character of the Employee who performs

service for the Employer. Also, inherited benefits will retain the character of

the benefits of the Employee who performs services for the Employer.

 

Leased Employee

An individual who is not an

Employee but who, pursuant to an agreement between the Employer and any other

person, has performed services for the Employer and/or any Affiliate, on a

substantially full-time basis for at least a year under the primary direction

or control of the service recipient. Compensation for a Leased Employee

includes compensation from the leasing organization attributable to services

for the Employer.

 

Loan Suspense Account

The account to which

Financed Shares are credited and maintained while an Acquisition Loan is

outstanding. See Sections 5(b) and 6(e).

 

Look -Back Year

The twelve (12) months

period immediately preceding the Determination Year, or, if the Employer

elects, the calendar year ending with or within the Determination Year.

 

Merger

A transaction or series of

transactions wherein the Company is combined with another business entity, and

after which the persons or entities who had owned, either directly or

indirectly, a Controlling Interest in the Company's voting stock on the date of

execution of this Agreement own less than a Controlling Interest in the voting

stock of the combined entity.

 

Non-Key Employee

Any Employee or former

Employee not defined as a Key Employee.

 

Other Investments Account

The portion of the Account

of a Participant which reflects his interest under the Plan attributable to

Trust Assets other than Company Stock. See Section 6.

 

Participant

Any Employee who is

participating in this Plan. See Section 3.

 

Plan

First Community Financial

Group, Inc. Employee Stock Ownership Plan (With 401(k) Provisions), which

includes the Trust Agreement.

 

Plan Year

The twelve-month period

ending on each Anniversary Date.

 

Profit Sharing Account

The Account of a Participant

representing his interest in the Profit Sharing Plan.

 

2.6

 

Profit Sharing Plan

First Community Bancorp

Employees Retirement Plan, originally effective January 1, 1980, and of which

this Plan is a successor plan.

 

Qualified Discretionary Matching Contributions

Discretionary Matching

Contributions which are fully vested when made and which are    

subject to the distribution restrictions applicable to Salary Reduction

Contributions, and        which otherwise satisfy

the requirements of Treasury Regulation §1.401(k)-1(g)(13).

 

Rollover Contribution

A contribution made to the

Plan by a Participant in accordance with Section 4(5).

 

Rollover Contribution Account

The account maintained to

reflect a Participant’s Rollover Contributions to the Plan and adjustments

thereon reflecting investment experience.

 

Salary Reduction Account

The account balance of a

Participant attributable to Salary Reduction Contributions.

 

Salary Reduction Contributions

Plan contributions made as a

result of the salary reduction elections of Participants pursuant to Plan

Section 4(2).

 

Service

Employment with the Company

(or an Affiliated Company).

 

Substantial Change in Ownership

A transaction or series of

transactions in which a Controlling Interest in the Company is acquired by or

for a person or business entity, either of which did not own, either directly

or indirectly, a Controlling Interest in the Company on the date that this

Agreement was executed. The above shall not apply to stock purchased by the

Plan.

 

Treasury Regulation

A regulation promulgated

under Title 26 of the Code of Federal Regulations and formally adopted pursuant

to a Treasury Directive.

 

Trust

First Community Financial

Group, Inc. Employee Stock Ownership Trust created by the Trust Agreement

entered into between the Company and the Trustee.

 

Trust Agreement

The agreement between the

Company and the Trustee establishing the Trust and specifying the duties of the

Trustee.

 

Trust Assets

The Company Stock and other

assets held in the Trust for the benefit of Participants. See Section 5.

 

Trustee

The Board of Trustees (and

any successor Trustee) appointed by the Board of Directors to hold and invest

the Trust Assets. See Section 18.

 

2.7

 

Valuation Date

The last day of each Plan

Year (or more frequently at the Board’s discretion) on which the value of

Company Stock and/or other investments  of the Trust are determined.

 

Valuation Period

The twelve-month period (or

more frequently at the Board’s discretion) ending on each Valuation Date.

 

Vested Account

The fair market value of a

Participant’s nonforfeitable benefit under the Plan.

 

2.8

 

SECTION 3.   ELIGIBILITY AND PARTICIPATION

 

(a)  All current Participants in the Plan will

continue to participate in the Plan under this amendment and restatement of the

Plan.  All other Employees will be eligible to make Salary Reduction

Contributions as of the January 1 next following his initial date of hire. Each

Employee will become  eligible to share in Employer contributions for the

eligibility computation period in which he is credited with at least 1,000

Hours of Service. The initial eligibility computation period is the 12

consecutive month period beginning on the date the Employee first performs an

Hour of Service for the Employer (employment commencement date). The succeeding

12 consecutive month periods commence with the first Plan Year which commences

prior to the first anniversary of the Employees employment commencement date.

 

(b)  A Participant is generally entitled to share

in the allocations of Employer Contributions and Forfeitures only for a Plan

Year in which he was an Employee (or on Approved Absence) on the Anniversary

Date and has completed 1,000 Hours of Service during that Plan Year. A

Participant shall also share in the allocations of Employer Contributions for

the Plan Year of his retirement, disability or death (as provided in Section

11), whether or not an Employee at the end of such Plan Year and without regard

to Hours of Service credited for that Plan Year. Notwithstanding the foregoing

or any other provision of the Plan to the contrary, for Plan Years during which

the Plan would otherwise fail to satisfy the minimum coverage requirements of

Code section 410(b) because Employer contributions have not been allocated to

an appropriate group of Employees, then the group of Employees eligible to

share in the Employer’s contribution and/or forfeiture allocation for such Plan

Year shall be expanded to include the minimum number of Participants who are

not actively employed on the last day of the Plan Year as are necessary to

satisfy such coverage requirements. The specific employees who shall become so

eligible shall be those Employees who, when compared to similarly situated

Employees, have been credited with the greatest number of hours of service for

the Plan Year.

 

(c)  A former Employee who is reemployed by an

Employer and has previously satisfied the eligibility requirements of Section

3(a) shall become a Participant as of his date of reemployment. An Employee who

is on an Approved Absence shall not become a Participant until the end of his

Approved Absence but a Participant who is on an Approved Absence shall continue

as a Participant during the period of his Approved Absence. Failure to return

to work by the end of the Approved Absence will terminate Service as of the

beginning of the Approved Absence.

 

(d)  Hours

of Service. For purposes of determining the Hours of Service to

be credited to an Employee under the Plan the following rules shall be applied:

 

(1)           Hours of Service shall include:

1.                                       each hour of Service for which an Employee is

paid, or entitled to payment for the performance of duties with such hours of

Service being credited in the Plan Year in which the duties are performed; and

2.                                       each hour of Service for which an Employee is

paid, or entitled to payment for a period during which no duties are performed

(irrespective of whether the employment relationship has terminated) due to

vacation holiday, illness, incapacity (including disability), layoff, jury

duty, military duty or leave of absence; provided that no more than 501 Hours

of Service need be credited for one continuous period during which an Employee

does not perform duties; and

3.                                       each hour of Service for which back pay,

irrespective of mitigation of damages, is either awarded or agreed to;

provided, however, that Hours of Service credited under either subparagraph (a)

or (b) above shall not be credited under this subparagraph (c). “These Hours of

Service will be credited to Employee for the Plan Year to which the award or

agreement pertains rather than the Plan Year in which the award agreement or

payment is made.

 

3.1

 

(2)                                  The crediting of Hours of Service shall be

determined by the Committee in accordance with the rules set forth in Section

2530.200b–2(b) and (c) of the regulations prescribed by the Department of

Labor, which rules shall be consistently applied with respect to all Employees

within the same job classification.

 

(3)                                  Hours of Service shall not be credited to an

Employee for a period during which no duties are performed if payment is made

or due under a plan maintained solely for the purpose of complying with

applicable worker’s compensation unemployment compensation or disability

insurance laws, and Hours of Service shall not be credited on account of any

payment made or due an Employee solely in reimbursement of medical or

medically–related expenses.

 

(4)                                  Hours of Service will be credited for

employment with other members of an affiliated service group (under Section

414(m) of the Code), a controlled group of corporations (under Section 414(b)

of the Code), a group of trades or businesses under common control (under

Section 414(c) of the Code), or a group described in the regulations

promulgated under Section 414(o) of the Code of which an Employer is, or may

become, a member.

 

(5)                                  For purposes of determining whether an

Employee has incurred a Break in Service and for vesting and participation

purposes, if an Employee begins a maternity/paternity leave of absence

described in Section 411(a)(6)(E)(i) of the Code his Hours of Service shall

include the Hours of Service that would have been credited to him if he had not

been so absent (or eight (8) Hours of Service for each day of such absence if

the actual Hours of Service cannot be determined). An Employee shall be

credited for such Hours of Service (up to a maximum of 501 Hours of Service) in

the Plan Year in which his absence begins (if such crediting will prevent him

from incurring a Break in Service in such Plan Year) or, in all other cases, in

the following Plan Year. For purposes of this provision, a maternity/paternity

leave of absence described in Section 411(a)(6)(E)(i) of the Code pertains to a

Participant who is absent from work for any period by reason of the pregnancy

of the Participant, by reason of the birth of a child of the Participant, by

reason of the placement of a child with the Participant in connection with the

adoption of such child by such Participant, or for purposes of caring for such

child for a period beginning immediately following such birth or placement.

 

3.2

 

SECTION 4   EMPLOYER AND EMPLOYEE CONTRIBUTIONS

 

1.             Employer

Contributions

(a)           The Employer shall or may, as

applicable, contribute the following amounts to the Plan each Plan Year:

 

1.                                       The amount of each Participants Salary

Reduction Contribution made pursuant to Section 4(2). As provided in Section

12(a), the interests of a Participant in the Salary Reduction Contributions

allocated to his account will always be 100% vested.

 

2.                                       An Employer Discretionary Matching

Contribution on behalf of each Participant up to a maximum of fifty percent

(50%) of the Participant’s Salary Reduction Contributions, provided however,

that the maximum Employer Discretionary Matching Contribution shall be based on

a percentage of a Participant’s Compensation selected by the Board of

Directors, which shall in no event exceed six percent (6%) . The Board may, in

its sole discretion, determine that the rate of Discretionary Matching

Contributions for a Plan Year will be zero percent (0%).  The Employer may

determine annually that additional Matching Contributions will be allocated to

non-Highly Compensated Participants’ accounts as Qualified Employer

Discretionary Matching Contributions, and thus will be fully vested when made,

will be subject to the distribution restrictions applicable to Salary Reduction

Contributions, and will meet such other requirements as may apply from time to

time under Treasury Regulation §1.401(k)-1(g)(13). The Employer Discretionary

Matching Contributions will vest in accordance with the schedule provided in

Section 12(a). All Participants will normally receive the same percentage match

of their Salary Reduction Contribution. Any Qualified Employer Discretionary

Matching Contributions for a Plan Year, however, will be allocated only to

non-Highly Compensated Participants, and consequently may cause the aggregate

rate of match for that group to exceed the rate of match for Highly Compensated

Participants.

 

3.                                       An Employer Discretionary Basic Contribution,

which shall be determined at the sole discretion of the Board of Directors.

Employer Discretionary Basic Contributions will only be made to non–Highly

Compensated Participants to the extent necessary to satisfy the actual deferral

percentage test and actual contribution percentage test under Sections 4(2) and

4(3) of the Plan, respectively, in order to satisfy the nondiscrimination

requirements of Code Sections 401(k) and 401(m). As provided in Section 12(a),

the interests of a Participant in the Employer Discretionary Basic

Contributions allocated to his account will always be 100% vested and will

otherwise satisfy the requirements for qualified nonelective employer

contributions under Code Section 401(m)(4)(C).

 

4.                                       An Employer Discretionary Optional

Contribution, which shall be determined in the sole discretion of the Board of

Directors. The interests of a Participant in the Employer Discretionary

Optional Contributions allocated to his account will become nonforfeitable

pursuant to the vesting schedule contained in Section 12(a).

 

(b)                                 Salary Reduction Contributions shall be paid

to the Trustee as promptly as such Contributions can reasonably be segregated

from the general assets of the Employer.

 

(c)                                  Employer Discretionary Matching, Qualified

Employer Discretionary Matching, Basic and Optional Contributions for each Plan

Year shall be paid to the Trustee not later than the due date (including

extensions) for filing the Employers Federal income tax return for that Plan

Year.

 

4.1

 

(d)                                 In the event Employer Contributions are paid

to the Trust by reason of a mistake of fact, such Employer Contributions may be

returned to the Employer (upon the request of the Employer) by the Trustee

within one (1) year after the payment to the Trust.

 

The

maximum amount that may be returned to the Employer in the case of a mistake of

fact is the excess of the amount contributed, over, as relevant the amount that

would have been contributed had no mistake of fact occurred. Earnings

attributable to excess contributions may not be returned to the Employer, but

losses attributable thereto must reduce the amount to be so returned.

Furthermore, if the withdrawal of the amount attributable to the mistaken

contribution would cause the balance of the individual account of any

Participant to be reduced to less than the balance which would have been in the

account had the mistaken amount not been contributed, then the amount to be

returned to the Employer must be limited so as to avoid such reduction.

 

5.  A Participant is entitled to share in the

allocations of Employer Contributions and Forfeitures as provided in Section

3(b).

 

2.             Employee Salary Reduction Contributions

(a)  A Participant may authorize his Employer to

contribute to the Trust on his behalf Salary Reduction Contributions. Such

Salary Reduction Contributions shall be stated as a whole percentage, and shall

not be less than 1%, or more than 15% (12% prior to January 1, 1999), of the

Participants Adjusted Compensation. The total amount of Salary Reduction

Contributions by a Participant for any calendar year shall not exceed $10,000,

multiplied by any cost of living adjustment factor prescribed by the Secretary

of the Treasury under Section 415(d) of the Code. This limit applies to all

salary reduction contributions taken into account under Code Section 402(g) to

all plans in which the Participant participates, whether or not maintained by

the Employer. Any Salary Reduction Contribution in excess of the aforementioned

limitation, plus any income allocable thereto, shall be returned to the

participant no later than the first April 15 following the close of the tax

year in which such contributions were made. In the event this limit is exceeded

as a result of contributions to this Plan and another plan(s), the Participant

must notify the Plan Administrator in writing by March 1 of the following

calendar year, allocating the excess between and among such plans, and state

that the applicable limit will be exceeded if the excess attributable to this

Plan is not distributed. In such event, the excess allocated to this Plan shall

be distributed to the Participant with allocable earnings, by April 15 of the

year following the calendar year in which the excess arose if practicable and

in any event by December 31 of such year. A Participant may make a separate

deferral election with respect to annual bonuses.

 

For Plan Years beginning

after 2001, catch-up contributions for persons age fifty (50) or older whose

Salary Reduction Contributions  are otherwise limited by the Code are

permitted, under the terms and conditions, and within the limits of Code

Section 414(v). Notwithstanding any other provision of the Plan to the

contrary, any such contribution shall be taken into account in applying the

remaining  contribution and discrimination provision of the Plan only to

the extent, if any, required by the Code and Regulations or other Treasury

Department issued thereunder. Further provided, and notwithstanding any other

provision of the Plan, the Company and each Employer may uniformly elect to

apply or not to apply the otherwise applicable matching contribution provisions

of the Plan to such catch-up contributions. In the absence of an election to

the contrary, the matching contribution provisions and determinations for a

Plan Year to Salary Reduction Contributions which are not catch-up

contributions will apply to catch-up contributions.

 

4.2

 

(b)  Each Participant electing to have his

Employer contribute Salary Reduction Contributions on his behalf during the

Plan Year shall file a written notice with the Plan Administrator at least

thirty (30) days prior to the Entry Date that he intends such election to take

effect. This requirement shall be waived on adoption of the Plan and each

Participant shall be given a reasonable time to elect Salary Reduction

Contributions. Such written notice shall contain an election of the percentage

of his Adjusted Compensation to be contributed and authorization for his

Employer to reduce his Adjusted Compensation by such amount. Salary Reduction

Contributions may be suspended at any time by giving prior written notice.

After suspension the Participant shall not be eligible for further Salary

Reduction Contributions until the beginning of the next Plan Year, unless the

Committee determines that an earlier resumption is administratively feasible. A

Participant may change the percentage of his Salary Reduction Contributions

during open enrollment on January 1 or July 1. A Participant shall be fully

vested at all times in the portion of his Account from Salary Reduction

Contributions.

 

(c)  For any Plan Year the Committee shall have

the right to limit or reduce the Salary Reduction Contributions of the Highly

Compensated Participants in order to insure that the Maximum Deferral

Percentage Limit under Code Section 401(k) is not exceeded. Furthermore in

accordance with Treasury Regulation 1.401(k)–1(f), the Employer may make additional

Employer Discretionary Basic Contributions and/or Qualified Employer

Discretionary Matching Contributions or may distribute excess contributions

made during the Plan Year, with allocable earnings, in order to provide that

the Maximum Deferral Percentage Limit under Code Section 401(k) is not

exceeded. The Maximum Deferral Percentage Limit under Code Section 401 (k) is

equal to the greater of Limit 1 or Limit 2:

 

Limit 1. The Actual Deferral

Percentage (ADP) of the Highly Compensated Participants for the current Plan

Year may not exceed one hundred twenty–five percent (125%) of the Actual

Deferral Percentage of all other Participants for the prior Plan Year; or

 

Limit 2. The Actual Deferral

Percentage of the Highly Compensated Participants for the current Plan Year may

not exceed the lesser of

(a)           The Actual Deferral Percentage of all other Participants

for 

the prior Plan Year plus two percent (2%), or

(b)           The Actual Deferral Percentage of all other Participants

for 

the prior Plan Year, multiplied by  two hundred percent (200%).

 

The Employer may elect to

use current Plan Year data for non-Highly Compensated Participants rather than

prior Plan Year data in performing the ADP test for the current Plan Year.

However, if such election is made for a post-2000 Plan Year, the election may

not be changed until the sixth (6th) following Plan Year unless permitted by

the Secretary of the Treasury.

 

Actual

Deferral Percentage with respect to any specific group of Participants for a

Plan Year shall mean the average of the ratios (calculated separately for each

Participant in such group) of (A) the amount of each eligible Employees Salary

Reduction Contributions (including Employer Discretionary Basic Contributions

and Qualified Employer Discretionary Matching Contributions that are treated as

elective contributions) paid into the Trust Fund on behalf of each Participant

for such Plan Year to (B) the Participant’s Compensation for the relevant Plan

Year. For this purpose an eligible Employee is any Employee who is directly or

indirectly eligible to make a cash or deferred election under the Plan for all

or a portion of a Plan Year and includes; an Employee who would be a Plan

Participant but for the failure to make required contributions; an Employee

whose eligibility to make Salary Reduction Contributions has been suspended

because of an election (other than certain one–time elections) not to

participate, a distribution or a loan; and an Employee who cannot defer because

of the Section 415 limits on annual additions. In the case of an eligible

Employee who makes no Salary Reduction Contributions the deferral ratio that is

to be included in determining the ADP is zero.

 

4.3

 

In

the case of a first Plan Year other than as a successor plan, the ADP of

non-Highly Compensated Participants for the prior Plan Year may be deemed to be

3% or the Employer may, at its option, use the ADP for the current Plan Year.

 

For

purposes of determining whether a Plan satisfies the actual deferral percentage

test of Section 401(k), all Salary Reduction Contributions that are made under

two or more Plans that are aggregated for purposes of Sections 401(a)(4) or

410(b) (other than Section 410(b)(2)(A)(ii)) are to be treated as made under a

single Plan. If two or more plans are permissively aggregated for purposes of

Section 401(k), the aggregated plans must also satisfy Sections 401(a)(4) and

410(b) as though they were a single plan.

 

Employer

Discretionary Basic Contributions may be treated as elective contributions for

purposes of the actual deferral percentage test of 401(k) only if such

contributions are nonforfeitable when made and subject to the same distribution

restrictions that apply to Salary Reduction Contributions. Employer Discretionary

Basic Contributions and Qualified Employer Discretionary Matching

Contributions  which may be treated as elective contributions must satisfy

these requirements without regard to whether they are actually taken into

account as elective contributions. Employer Discretionary Basic Contributions

and/or Qualified Employer Discretionary Matching Contributions  may be

treated as Salary Reduction Contributions only if the conditions described in

Section 1.401(k)–1(b)(5) of the Regulations are satisfied.

 

A

Salary Reduction Contribution will be taken into account under the actual

deferral percentage test of Section 401(k)(3)(A) of the Code for a Plan Year

only if it relates to compensation that either would have been received by the

Employee in the Plan Year (but for the deferral election) or is attributable to

services performed by the Employee in the Plan Year and would have been

received by the Employee within 2 1/2 months after the close of the Plan Year

(but for the deferral election).

 

A

Salary Reduction Contribution will be taken into account under the actual

deferral percentage test of Section 401(k)(3)(A) of the Code for a Plan Year

only if it is allocated to the Employee as of a date within that Plan Year. For

this purpose, a Salary Reduction Contribution is considered allocated as of a

date within a Plan Year if the allocation is not contingent on participation or

performance of services after such date and the Salary Reduction Contribution

is actually paid to the trust no later than 12 months after the Plan Year to

which the contribution relates.

 

In

calculating the actual deferral percentage for purposes of Section 401(k), the

actual deferral ratio of a Highly Compensated Participant will be determined by

treating all cash or deferred arrangements under which the Highly Compensated

Participant is eligible (other than those that may not be permissively

aggregated) as a single arrangement.

 

(d)  In the event the Maximum Deferral Percentage

Limit under Code Section 401(k) is exceeded, the amount of excess contributions

for a Highly Compensated Participant shall be distributed pursuant to Treasury

Regulation 1.401(k)–1(f)(2) and will be determined in the following manner. The

total excess contribution amount to be distributed for a Plan Year is the

excess of the amount of contributions taken into account for Highly Compensated

Participants for the Plan Year over the maximum amount permitted under Limit 1

or Limit 2 above, as applicable, determined by hypothetically reducing

contributions made by or on behalf of Highly Compensated Participants in order

of individual actual deferral percentages, beginning with the highest

percentage and continuing until the excess contribution amount is eliminated.

This process defines the excess contribution amount. The Actual Deferral

Percentage (ADP) of the Highly Compensated Participant with the highest

contribution amount will then be reduced to the extent necessary to eliminate

the excess amount or to cause such Participant’s contribution amount to equal

the contribution amount of the Highly Compensated Participant with the next

highest contribution amount. This process is repeated until the total excess

amount is eliminated by distributions. In the case of a Highly Compensated

Participant that has excess contributions distributed on account of the Maximum

Deferral Percentage Limit of IRC §401(k), said Highly Compensated Participant

will forfeit the applicable incremental Employer Discretionary Matching

Contribution required to prevent the Highly Compensated Participant from receiving

a higher level of match than the Non-Highly Compensated Participants. Following

the distributions described in this paragraph, the ADP test is deemed to have

been satisfied, even if that test would not be satisfied on a recalculated

basis.

 

4.4

 

The

amount of a Participant’s excess contributions distributed pursuant to Treasury

Regulation 1.401(k)-1(f) shall be reduced by any excess deferrals previously

distributed during such Plan Year. The distribution of excess contributions

will include any income attributable thereto. The income allocable to excess

contributions is equal to the sum of the allocable gain or loss for the Plan

Year. The distribution of any excess contribution is to be made prior to the

two and one–half month period following the end of the Plan Year in which such

excess contributions were made.

 

(e)  In the event a Participant’s Salary

Reduction Contribution or Employer Contribution:

 

(1)           is made under a mistake of fact;

 

(2)           is conditioned upon initial qualification of the Plan

under Code Section 401(a) and the Plan does not so qualify,

 

the contribution may be

returned to the Employer within one (1) year after the payment of the

contribution, the disallowance  of the deduction to the extent disallowed,

or the date of denial of the qualification of the Plan, whichever is

applicable.  Except as provided 

under this paragraph, the

assets of the Plan will be used for the exclusive purpose of providing benefits

to Participants under the Plan and their Beneficiaries and for defraying

reasonable administrative expenses of the Plan.

 

(f)  Amounts attributable to Salary Reduction

Contributions, Employer Discretionary Basic Contributions and Qualified

Employer Discretionary Matching Contributions  may not be distributed

earlier than upon one of the following events:  (1)  The Employee’s

retirement, death, disability, or (A) separation from service in the case of

distributions before 2002, or (B) severance from employment not involving a

transfer of any Plan assets to a plan maintained or created by the new employer

(other than a rollover or elective transfer) in the case of distributions after

2001, regardless of when the severance from employment occurred; 

(2)  The termination of the Plan without establishment or maintenance of

another defined contribution plan (other than an ESOP or SEP);  (3) In the

case of a profit sharing or stock bonus plan, the Employee’s attainment of age

59 1⁄2 or the Employee’s hardship;  (4)  The sale or other disposition

by a corporation to an unrelated corporation prior to 2002 of substantially all

of the assets used in the trade or business, but only with respect to Employees

who continue employment with the acquiring corporation and the acquiring

corporation does not maintain the Plan after the disposition; (5)  The

sale or other disposition by a corporation prior to 2002 of its interest in the

subsidiary to an unrelated entity, but only with respect to Employees who

continue employment with the subsidiary and the acquiring entity does not

maintain the Plan after the disposition; and (6) such other circumstances as

may be permitted in accordance with Treasury Regulations under Code Section

401(k) from time to time.  Items 2, 4, and 5 above, apply only if the

distributions are in the form of a lump sum.  Items 4 & 5 above, apply

only to transactions which occur prior to 2002 and only if the transferor

corporation continues to maintain the Plan.

 

3.             Limitations on

Matching Contributions.

(d)  For any Plan Year, the Committee shall have

the right to limit or reduce the Employer Discretionary Matching Contributions

attributable to the Highly Compensated Participants in order to insure that the

Maximum Contribution Percentage Limit under Code Section 401(m) is not

exceeded.  The Maximum Contribution Percentage Limit under Code Section

401(m) is equal to the greater of Limit 1 or Limit 2:

 

Limit 1. The Actual

Contribution Percentage (ACP) of the Highly Compensated Participants for the

current Plan Year may not exceed one hundred twenty-five percent (125%) of the

Actual Contribution Percentage of all other Participants for the prior Plan

Year; or

 

Limit 2. The Actual

Contribution Percentage of the Highly Compensated Participants for the current

Plan Year may not exceed the lesser of:

 

1.             the Actual Contribution Percentage of all other

Participants for the prior Plan Year, plus two percent (2%), or

 

4.5

 

2.                                       the Actual Contribution Percentage of all

other Participants for the prior Plan Year, multiplied by two hundred percent

(200%).

 

The

Employer may elect to use current Plan Year data for non-Highly Compensated

Participants rather than prior Plan Year data in performing the ADP test for

the current Plan Year. However, if such election is made for a post-2000 Plan

Year, the election may not be changed until the sixth (6th) following Plan Year

unless permitted by the Secretary of the Treasury.

 

Actual

Contribution Percentage with respect to any specific group of Participants for

a Plan Year shall mean the average of the ratios (calculated separately for

each Participant in such group) of (A) the sum of the Employer Discretionary

Matching Contributions that have been paid into the Trust Fund on behalf of

each Participant for such Plan Year plus any Qualified Employer Discretionary

Matching Contributions taken into account for such purpose, to (B) the

Participant’s Compensation for such Plan Year. The Employer Discretionary

Matching Contributions are to be taken into account if they are paid to the

Trust during the Plan Year or are paid to an agent of the Plan and are

transmitted to the Trust within a reasonable period after the end of the Plan

Year. Excess deferred contributions which are recharacterized under Section

4(2) of the Plan will be included in determining the actual contribution

percentage. An excess contribution to a cash or deferred arrangement that is

recharacterized is to be taken into account in the Plan Year in which the

contribution would have been received in cash by the Employee had the Employee

not elected to defer the amounts. The Plan will take into account the actual

contribution ratios of all eligible Employees for purposes of the actual

contribution percentage (ACP) test in Section 401(m). For this purpose an

eligible Employee is any Employee who is directly or indirectly eligible to

receive an allocation of Employer Discretionary Matching Contributions or to

make Employee contributions and includes: an Employee who would be a Plan

Participant but for the failure to make required contributions; an Employee

whose right to make Employee contributions or receive Employer Discretionary

Matching Contributions has been suspended because of an election (other than

certain one-time elections) not to participate; an Employee who cannot make an

Employee contribution or receive an Employer Discretionary Matching

Contributions because Section 415(c)(1) or Section 415(e) prevents the Employee

from receiving additional annual additions. In the case of an eligible Employee

who makes no Employee contributions and who receives no Employer Discretionary

Matching Contributions the contribution ratio that is to be included in

determining the ACP is zero.

 

In

the case of the first Plan Year other than as a successor plan, the ACP of the

non-Highly Compensated Participants for the prior Plan Year may be deemed to be

3%, or the Employer may, at its option, use the ACP for the current Plan Year.

 

An

Employer Discretionary Matching Contributions and/or Qualified Employer

Discretionary Matching Contribution is taken into account for a Plan Year only

if it is (1) made on account of the Employee’s Salary Reduction Contributions

for the Plan Year, (2) allocated to the Employee’s account as of a date within

that year, and (3) paid to the Trust by the end of the twelfth month following

the close of that year. Qualified Employer Discretionary Matching Contributions

which are used to meet the requirements of Section 401(k)(3)(A) are not to be

taken into account for purposes of the ACP test of Section 401(m). Employer

Discretionary Basic Contributions and/or Qualified Employer Discretionary

Matching Contributions may be treated as Salary Reduction Contributions only if

the conditions described in Section 1.401(k)-1(b)(5) of the Regulations are

satisfied.

 

The

determination of income for excess aggregate contributions will be determined

under the method in Section 6(i). For purposes of determining whether a Plan

satisfies the actual contribution percentage test of Section 401(m), all

Employee and Employer Discretionary Matching Contributions that are made under

two or more plans that are aggregated for purposes of Sections 401(a)(4) and

410(b) (other than Section 410(b)(2)(A)(ii)) are to be treated as made under a

single Plan. If two or more plans are permissively aggregated for purposes of

Section 401(m) the aggregated plans must also satisfy Sections 401(a)(4) and

410(b) as though they were a single plan. The actual contribution ratio of a

Highly Compensated Participant will be determined by treating all plans subject

to Section 401(m) under which the Highly Compensated Participant is eligible

(other than those that may not be permissively aggregated) as a single plan.

 

(b)  In the event the Maximum Contribution

Percentage Limit under Code Section 401(m) is exceeded the amount of excess

aggregate contributions for a Highly Compensated Participant will be

distributed or forfeited pursuant to Treasury Regulation §1.401(m)-1(e) and

determined in the following manner. The total excess aggregate

 

4.6

 

amount to be distributed for

a Plan Year is the excess of the amount of contributions taken into account for

Highly Compensated Participants for the Plan Year over the maximum amount

permitted under Limit 1 or Limit 2 above, as applicable, determined by

hypothetically reducing contributions made by or on behalf of Highly

Compensated Participants in the order of individual contribution percentages,

beginning with the highest of such percentages and continuing until the ACP test

would have been satisfied. This process defines the total excess aggregate

contribution amount. Contributions on behalf of the Highly Compensated

Participant with the highest contribution amount will be reduced by

distributions to the extent necessary to eliminate the excess aggregate

contribution amount or to cause such Participant’s contribution amount to equal

the contribution amount for the Highly Compensated Participant with the next

highest contribution amount. This process is repeated until the entire excess

aggregate contribution amount is eliminated. The Participant to whom an excess

is attributed will receive the excess as a distribution from the Plan.

Following such distributions the ACP test is deemed to have been satisfied,

even if the test would not then be satisfied on a recomputed basis.

 

The

amount of a Participants excess aggregate contributions distributed shall be

reduced by any excess aggregate contributions previously distributed during

such Plan Year. The distribution of excess aggregate contributions will include

any income attributable thereto. The income allocable to the excess aggregate

contributions includes income for the Plan Year for which the excess aggregate

contributions  were made. The distribution of any excess aggregate contribution

is to be made prior to the two and one-half month period following the end of

the Plan Year in which such excess aggregate contributions were made.

 

Failure

to correct excess aggregate contributions by the close of the Plan Year

following the Plan Year for which they were made will cause the Plan to fail to

satisfy the requirements of Section 401(a)(4) of the Plan Year for which the

excess aggregate contributions were made and for all subsequent years they

remain uncorrected.

 

(c)  For any Plan Year beginning before 2002, the

application of the Maximum Deferral Percentage Limitation and Maximum

Contribution Percentage Limitation pursuant to Sections 4(2)(c) and 4(3)(a) of

the Plan shall be made in accordance with the multiple use limitations under

Regulation §1.401(m)-2. If multiple use of the alternative limitation occurs,

it must be corrected by reducing the actual deferral percentage of all Highly

Compensated Participants regardless of whether they are eligible under both the

arrangement subject to Section 401(k) and a plan subject to Section 401(m).

 

(d)  To the extent Qualified Employer

Discretionary Matching Contributions are used, pursuant to Plan Section

4(2)(c), to compute the Maximum Deferral Percentage Limit under Code Section

401(k), they will not be used to compute the Maximum Contribution Percentage

Limit under Code Section 401(m). Furthermore, at the election of the Employer,

Employer Discretionary Basic Contributions (to the extent not utilized to

compute the Maximum Deferral Percentage Limit under Code Section 401(k)) may be

used in the computation of the Maximum Contribution Percentage Limit under Code

Section 401(m). Employer Discretionary Basic Contributions may be treated as

Qualified Employer Discretionary Matching Contributions for purposes of the

actual contribution percentage test of Section 401(m) only if such

contributions are nonforfeitable and made distributable only under the

following circumstances: (1) “The Employees retirement, death, disability, or

separation from service; (2) The termination of the Plan without establishment

or maintenance of another defined contribution plan (other than an ESOP or

SEP); (3) In the case of a profit sharing or stock bonus plan, the Employee’s

attainment of age 59 1/2 or the Employees hardships (4) The sale or other

disposition by a corporation to an unrelated corporation of substantially all

of the assets used in the trade or business, but only with respect to Employees

who continue employment with the acquiring corporation and the acquiring

corporation does not maintain the Plan after the disposition; (5) The sale or

other disposition by a corporation of its interest in the subsidiary to an

unrelated entity, but only with respect to Employees who continue employment

with the subsidiary and the acquiring entity does not maintain the Plan after

the disposition, and (6)  such other circumstances as may permit a

distribution of contributions as are subject to the restrictions  of Code

Section 401(k). Items 2, 4, and 5 above, apply only if the distributions are in

the form of a lump sum, Items 4 and 5 above apply only if the transferor

corporation continues to maintain the Plan. Employer Discretionary Basic

Contributions which may be treated as Qualified Employer Discretionary Matching

Contributions roust satisfy these requirements without regard to whether they

are actually taken into account as Qualified Employer Discretionary Matching

Contributions. Salary Reduction Contributions and/or Employer Discretionary

Basic Contributions may be treated as Qualified Employer Discretionary Matching

Contributions only if the conditions described in Section 1.401(m)-1(b)(5) of

the Regulations are satisfied.

 

4.7

 

4.             Employee Rollover

Contribution

(a)           With the Employer’s consent, a

Rollover Contribution may be made by or for an Employee if either of the

following conditions are met

 

(1)  The Contribution is a Rollover Contribution

which the Code permits to be transferred to a plan that meets the requirements of

Section 401(a) of the Code; and

(2)  The Contribution is made within 60 days

after the Employee receives or would be entitled to receive the distribution;

and

(3)  The Employee furnishes evidence satisfactory

to the Committee that proposed transfer is in fact a Rollover Contribution

which meets conditions (1) and (2) above.

-OR-

(4)  The Contribution is made pursuant to Plan

Section 23 diversification requirements.

 

The

Rollover Contribution may be made by the Employee or may be made with his

consent by the named fiduciary of another plan. The Contribution will be made

according to procedures set up by the Committee.

 

(b)           If the Employee is not a Participant

at the time the Rollover Contribution is made he will be deemed to be a

Participant only for the purposes of investment and distribution of the

Rollover Contribution. No Employer Contribution will be made for him and he may

not make Participant Contributions until the time he meets all of the

requirements to become a Participant.

 

(c)           Any Rollover Contribution made by or

for an Employee is credited to his Account when made and is at all times fully

vested and nonforfeitable.

 

4.8

 

SECTION 5. INVESTMENT OF

TRUST ASSETS

(a)  Subject to the exceptions contained in

Section 5(c), Trust Assts under the Plan will be invested by the Trustee

primarily in Company Stock in accordance with the Trust Agreement. Employer

Contributions (and other Trust Assets) may be used to acquire shares of Company

Stock from Company shareholders or from the Company. The Trustee may also

invest Trust Assets in such other prudent investments as the Trustee deems to

be desirable for the Trust or Trust Assets may be held temporarily in cash. All

purchases of Company Stock by the Trustee shall be made at prices which do not

exceed the fair market value of Company Stock as determined in good faith by

the Trustee in accordance with the provisions of Section 18. The Trustee may

invest and hold up to one hundred percent (100%) of the Trust Assets in Company

Stock.

 

(b)  Except for the put option described in Code

Section 409(h), no security acquired with the proceeds of an exempt loan may be

subject to a put, call or other option buy-sell or other arrangement while held

by and when distributed from the Plan whether or not the Plan has continued to

operate as an Employee Stock Ownership Plan. Assets transferred in satisfaction

of a loan must not exceed the amount of default. For a disqualified person the

assets transferred to satisfy default can not exceed the payment schedule of

the loan. The Trustee may incur Acquisition Loans exempt under Code Section

4975(e)(7) from time to time to finance the acquisition of Company Stock

(Financed Shares) for the Plan or to repay a prior Acquisition Loan. An Acquisition

Loan shall be for a specific term shall be used within a reasonable period of

time shall bear a reasonable rate of interest and shall not be payable on

demand except in the event of default. An Acquisition Loan may be secured by a

pledge of the Financed Shares so acquired (or acquired with the proceeds of a

prior Acquisition Loan which is being refinanced). No other Trust Assets may be

pledged as collateral for an Acquisition Loan and no lender shall have recourse

against Trust Assets other than any Financed Shares remaining subject to

pledge. If the lender is a party in interest (as defined in ERISA), Financed

Shares may be transferred to the lender only upon and to the extent of the

failure of the Plan to meet the payment schedule of the loan. Any pledge of

Financed Shares must provide for the release of the shares so pledged as

payments on the Acquisition Loan are made by the Trustee and such Financed

Shares are allocated to Participant Company Stock Accounts under Section 6.

Except for the put option described in Code Section 409(h), no security

acquired with the proceeds of an exempt loan may be subject to a put call or

other options buy-sell or other arrangement while held by and when distributed

from the Plan, whether or not the Plan has continued to operate as an Employee

Stock Ownership Plan. Assets transferred in satisfaction of a loan must not

exceed the amount of default. For a disqualified person the assets transferred

to satisfy default can not exceed the payment schedule of the loan. Payments of

principal and interest on any Acquisition Loan shall be made by the Trustee

only from Employer Contributions to enable the Trust to repay such Acquisition

Loan, and to the extent permitted under applicable law from earnings

attributable to such Employer Contributions and from any dividends received by

the Trust on such Financed Shares.

 

(c)  A Participant’s Salary Reduction

Contributions or Rollover Contributions may be, at the Participant’s election,

invested in Company Stock. A Participant may, with the consent of the Trustee

direct the investment of his existing  Salary Reduction Contributions and

Rollover Contributions in the following Investment Funds:

 

(1)           An Equity Fund shall be a fund, the principal investment

goal of which shall be capital appreciation primarily through investment in

Company Stock. The Trustee may apply Employer Contributions and the Profit

Sharing Accounts which are Participant-directed pursuant to this Section, to

payments of principal and interest on an Acquisition Loan.

 

(2)           A Mutual Fund.

 

(3)           A Money Market Fund.

 

(4)           Any other Fund which the Trustees may establish from time

to time.

 

5.1

 

(d)  As of each Anniversary Date, the Trustee

shall determine the fair market value of each Investment Fund, where

applicable, in accordance with Section 18 of this document. With respect to

each such Investment Fund, the Trustee shall determine the net gain or loss

resulting from expenses paid, and realized and unrealized gains and losses.

After each Anniversary Date, the net gain or loss of each Investment Fund shall

be allocated by the Committee, or its agent, to the Accounts of Participants

participating in such Investment Fund.

 

The

reasonable and equitable decision of the Trustee as to the value of each

Investment Fund and of any Account as of each Anniversary Date shall be

conclusive and binding upon all Participants having any interest, direct or

indirect, in the Investment Funds or in any Account.

 

5.2

 

SECTION 6.   ALLOCATIONS TO PARTICIPANT’S ACCOUNT

 

Separate

Accounts shall be established to reflect each Participant’s interest in the

Plan. Within each of the Accounts described in Sections (a), (b), and (c)

herein, a separate Company Stock Account and Other Investments Account will be

determined and maintained in accordance with the procedures contained in

Subsection (e).

 

(a)  Matching Contribution Accounts.

1.                                       Employer

Discretionary Matching Contribution Account.  The Employer Discretionary Matching

Contribution Account maintained for each Participant will be credited annually

with the amount of the Employer Discretionary Matching Contribution allocable

to such Participant, as determined pursuant to Section (4)(1)(a)(2), and with

his share of the net income (or loss) of the Trust.

 

2.                                       Qualified

Employer Discretionary Matching Contribution Account. The Qualified Employer Discretionary

Matching Contribution Account maintained for a Participant will be credited

with the amount of any Qualified Employer Discretionary Matching Contribution

allocable to the Participant in accordance with Section 4(1)(a)(2), and 

with its share of the income (or loss) of the Trust.  Qualified Employer

Discretionary Matching Contributions will be allocated only among the accounts

of non-Highly Compensated Participants.

 

(b)  Employer Discretionary Basic Contribution Account.

The Employer Discretionary Basic Contribution Account maintained for each

Participant will be credited annually with his allocable share of Employer

Discretionary Basic Contributions and with his share of the net income (or

loss) of the Trust. Employer Discretionary Basic Contributions will be made

only to satisfy the actual contribution percentage test and actual deferral

percentage test in Sections 4(2) and 4(3) of the Plan as of the Anniversary

Date among the Accounts of all non-highly Compensated Participants so entitled

under Section 3(b), based on the percentage of such non-Highly Compensated

Participant’s Adjusted Compensation to the total Adjusted Compensation of all

non-Highly Compensated Participants.

 

(c)  Employee Salary Reduction Account. The

Employee Salary Reduction Contribution Account maintained for each Participant

will be credited (or debited) at least annually (or more frequently at the

Board’s discretion) with his share of the net income (or loss) of the Trust his

Salary Reduction Contributions if any, made during that Valuation Period and

with any financed shares released from the Loan Suspense Account on account of his

Salary Reduction Contributions. If securities acquired with the proceeds of an

exempt loan available for distribution consist of more than one class a

Distributee must receive substantially the same proportion of each such class.

 

(d)  Employee Rollover Contribution Account.  The

Rollover Contribution Account maintained for each Participant will be credited

(or debited) at least annually (or more frequently at the Board’s discretion)

with his share of net income (or loss) of the Trust and with his Rollover

Contributions, if any, made during that Valuation Period.

 

(e)  Profit Sharing  Account.  The

Profit Sharing Account maintained for each Participant will be credited (or

debited) at least annually (or more frequently at the Board’s discretion) with

his share of net income (or loss) of the Trust.

 

(f)  Employer Discretionary Optional Contribution Account. 

The Employer Discretionary Optional Contribution Account of a Participant will

be allocated, as of the Anniversary Date, its share of any Employer Discretionary

Optional Contribution under Section 3(b), in the ratio which the Adjusted

Compensation of each such 

 

6.1

 

Participant bears to the

Adjusted Compensation of all such Participants for that Plan Year. A separate

Company Stock Account and Other Investments Account shall be established to

reflect each Participant’s interest under the Employer Discretionary Optional

Contribution portion of the Plan. The Company Stock Account maintained for each

Participant will be credited annually with his allocable share of Company Stock

(including fractional shares) purchased and paid for by the Trust or

contributed in kind to the Trust including any Forfeitures of Company Stock.

Any stock dividends on Company Stock will be allocated to a Participant’s

Company Stock Account on an annual basis (or more frequently at the Board’s

discretion). Financed Shares shall initially be credited to a Loan Suspense

Account and shall be allocated to the Company Stock Accounts of Participants

only as payments on the Acquisition Loan are made by the Trustee. The number of

Financed Shares to be released from the Loan Suspense Account for allocation to

Participants’ Company Stock Accounts for each Plan Year shall be determined by

the Committee as described under (e)(1) and (e)(2) below.

 

(1)           General Rule. The

number of Financed Shares held in the Loan Suspense Account immediately before

the release for the current Plan Year shall be multiplied by a fraction. The

numerator of the fraction shall be the amount of principal or principal and

interest paid on the Acquisition Loan for that Plan Year. The denominator of

the fraction shall be the sum of the numerator plus the total payments of

principal or principal and interest on the Acquisition Loan projected to be

paid for all future Plan Years. For this purpose the interest to be paid in

future years is to be computed by using the interest rate in effect as of the

Anniversary Date of the Plan Year.

 

(2)           Special Rule. The

Committee may elect (at the time an Acquisition Loan is incurred) or the

provisions of the Acquisition Loan may provide for the release of shares from

the Loan Suspense Account based solely upon the ratio that the payments of

principal for each Plan Year bear to the total principal amount of the

Acquisition Loan. This method may be used only if (A) the Acquisition Loan

provides for annual payments of principal and interest at a cumulative rate

that is not less rapid at any time than level annual payments of such amounts

for ten (10) years; (B) interest included in any payment on the Acquisition

Loan is disregarded only to the extent that it would be determined to be

interest under standard loan amortization tables and (C) the entire duration of

the Acquisition Loan repayment period does not exceed ten (10) years, even in

the event of a renewal, extension or refinancing of the Acquisition Loan.

 

(3)           Other Investments Accounts.

The Other Investments Account maintained for each Participant will be credited

(or debited) at least annually (or more frequently at the Board’s discretion)

with his share of the net income (or loss) of the Trust with any cash dividends

on Company Stock allocated to his Company Stock Account (other than currently

distributed dividends) and with his allocable share of Employer Contributions

in cash. Any Forfeitures from the Other Investments Accounts will be allocated

on an annual basis. Such Account will be debited for the Participant’s share of

any cash payments made for the acquisition of Company Stock or for the

repayment of any principal and interest on an Acquisition Loan.

 

The

allocations to Participants’ Accounts for each Plan Year will be made as

follows under the remaining subsections of this Section.

 

(g)  Employer Contributions and Forfeitures.

Employer Discretionary Optional Contributions and Forfeitures under Section

12(b) and (c) for each Plan Year will be allocated as of the Anniversary Date

among the Accounts of Participants so entitled under Sections 3(b) and 6(b) in

the ratio which the Adjusted Compensation of each such Participant bears to the

total Adjusted Compensation of all such Participants for that Plan Year.

Employer Discretionary Basic Contributions under Section 4 for each Plan Year

will be allocated as of the Anniversary Date among the Accounts of all

non-Highly Compensated Participants so entitled in the ratio which the Adjusted

Compensation of each such Participant bears to the total Adjusted Compensation

of all such non-Highly Compensated Participants for that Plan Year. Employer Discretionary

Matching Contributions and Qualified Employer Discretionary Matching

Contributions will be allocated  as a percentage of the Salary Reduction

Contributions of all eligible Participants in the case on Employer

Discretionary Matching Contributions, and non-Highly Compensated Participants

in the case of Qualified Employer Discretionary Matching Contributions. See

generally Sections 3(b) and 4 (1)(a)(2).  If securities acquired with the

proceeds of an exempt loan available for distribution consist of more than one

class a Distributee must receive substantially the same proportion of each such

class.

 

6.2

 

(h)  Allocation Limitations. The “limitation

year” for  purposes of applying the limits of Code Section 415 is the Plan

Year. For each Plan Year the Annual Additions with respect to any Participant

may not exceed the lesser of:

 

(2)           twenty-five percent (25%) of his Compensation for

limitation years beginning before 2002, or one hundred percent (100%) of his

Compensation for limitation years beginning after 2001; or

 

(3)           the Defined Contribution Dollar Limitation.

 

For this purpose, “Annual

Additions” shall be the total amount of any Employer Contributions, Salary

Reduction Contributions, voluntary contributions and Forfeitures (including any

income attributable to Forfeitures and amounts described in Code Sections

415(1)(1) and 419A(d)(2)) allocated to the Participant in this Plan and any

other Employer defined contribution plan. For purposes of applying these

limitations only, for Plan Years beginning after 1997 the Plan uses the safe

harbor definition of Compensation pursuant to Section 1.415-2(d)(10) of the

Treasury Regulations, as defined in Section 2 of the Plan, adjusted to include

deferrals described in Code Section 415(c)(3)(D). In computing Annual Additions

Forfeitures of Company Stock and Employer Contributions of Company Stock shall

be based on the fair market value of Company Stock as of the Anniversary Date.

 

Prior

to the allocation of the Employer Contributions for any Plan Year, the

Committee shall determine whether the amount to be allocated would cause the

limitation described herein to be exceeded as to any Participant. In the event

that the limitation is exceeded for any Participant due to the allocation of a

forfeiture or a reasonable error in the estimation of a Participant’s

Compensation the excess shall be maintained in a separate suspense account and

shall be allocated in the next subsequent Plan Year as if such amounts were an

additional contribution to the appropriate Account. No contributions which

would be included in the next limitation year’s Annual Addition may be made

before the total suspense account has been reallocated.

 

Any

excess amount shall be reallocated among the Accounts of the other Participants

according to the ratio which the Adjusted Compensation of each such Participant

bears to the total Adjusted Compensation of all such Participants for the Plan

Year, to the extent possible without exceeding the limitations with respect to

any other Participant for that Plan Year.

 

In

addition, for any Participant who was covered under a defined benefit plan

Annual Additions may not be allocated to his Accounts (under this Plan) in

amounts which cause the sum of the defined benefit plan fraction and the

defined contribution plan fraction to exceed 1.0 for any Plan Year, For this

purpose, the “defined benefit plan fraction” shall have as its numerator the

projected annual benefit of the Participant under the defined benefit plan as

of the Anniversary Date and shall have as its denominator the lesser of (i) the

product of 1.25 multiplied by the dollar limitation in effect under Section

415(b)(1)(A) of the Code for such Plan Year; or (ii) the product of 1.4

multiplied by the amount which may be taken into account under Section

415(b)(1)(B) of the Code with respect to the Participant for such Plan Year.

The “defined contribution plan fraction” shall have as its numerator the total

of the Annul Additions of the Participant (under this Plan and any other

Employer defined contribution plan) for all Plan Years and shall have as its

denominator the sum of the lesser of the following amounts determined for such

Plan Years and for each prior year of Service with an Employer: (i) the product

of 1.25 multiplied by the dollar limitation taken into account under Section

415(c)(1)(A) of the Code for the yearn or (ii) the product of 1.4 multiplied by

the amount which may be taken into account under Section 415(c)(1)(B) of the

Code with respect to such Participant for such year. Provided, however, that

the provisions of this paragraph shall not apply in Plan Years beginning after

1999.

 

Notwithstanding

the above, elective deferrals (within the meaning of Section 402(g)(3)) may be

distributed or Employee contributions (whether voluntary or mandatory) may be

returned to the extent that the distribution or return would reduce the excess

amounts in the Participant’s Account. These amounts are disregarded for

purposes of 

 

6.3

 

Section 402(g), the actual

deferral percentage test of Section 401(k)(3) and the actual contribution

percentage test of Section 401(m)(2).

 

(h)           Special Limitation Provision.

Any Employer Contributions which are applied by the Trust (not later than the

due date, including extensions for filing the Company’s Federal income tax

return for that Plan Year) to pay interest on an Acquisition Loan, and any

Financed Shares which are allocated as Forfeitures shall not be included as

Annual Additions under Section 6(g); provided, however, that the provisions of

this Section 6(h) shall be applicable only for Plan Years for which not more

than one-third (1/3) of the Employer Contributions applied to pay principal or

interest or both on an Acquisition Loan are allocated to Participants who are

Highly Compensated Participants within the meaning of Code Section 414(q).

 

(i)            Net Income (or Loss) of the Trust.

The net income (or loss) of the Trust for each Valuation Period will be

determined as of the Valuation Date. Each Participant’s share of the net income

(or loss) will be allocated to his Accounts in the ratio which the balance of

such Accounts on the preceding Valuation Date plus fifty percent (50%) of such

Participant’s Salary Reduction Contribution and Employer Contribution for the

then current Valuation Period (reduced by the amount of any distribution of

Capital Accumulation from such Account during the Valuation Period) bear to the

sum of such Account balances and contributions for all Participants in the

current Valuation Period. The net income (or loss) of the Trust includes the

increase (or decrease) in the fair market value of Trust Assets (other than

Company Stock), interest income, dividends and other income and gains (or loss)

attributable to Trust Assets (other than any dividends on Company Stock

allocated to Company Stock Accounts) since the preceding Valuation Date,

reduced by any expenses charged to the Trust Assets for that Valuation Period.

The computation of the net income (or loss) of the Trust shall not take into

account any interest paid by the Trust under an Acquisition Loan.

 

(j)            Dividends on Company Stock. 

Cash dividends received on shares of Company Stock allocated to Participants’

Accounts will be allocated to the respective Other Investments Account portion

of the account to which such Company Stock was allocated. Cash dividends

received on unallocated shares of Company Stock shall be included in the

computation of net income (or loss) of the Trust. Stock dividends received on Company

Stock shall be credited to the Accounts to which such Company Stock was

allocated. Any cash dividends which are currently distributed to Participants,

used to repay a loan to the ESOP under Sections 17(b) or (c), or used to pay

administrative expenses of the Plan shall not be credited to Participants’

Accounts. Employer securities with a fair market value of not less than the

amount of a dividend used to make payments on a loan in which the proceeds are

used to acquire the Employer securities (whether or not allocated to

Participants with respect to which the dividend is paid are allocated to such

Participant for the year which (but for Code Section 404(k)(2)(A)) such

dividend would have been allocated to such Participant.

 

(k)           Accounting for  Allocations.

The Committee shall establish accounting procedures for the purpose of making

the allocations to Participants’ Accounts provided for in this Section. The

Committee shall maintain adequate records of the aggregate cost basis of

Company Stock allocated to each Participant’s Company Stock Account. The

Committee shall also keep separate records of Financed Shares and of Employer

Contributions (and any earnings thereon) made for the purpose of enabling the

Trust to repay any Acquisition Loans. From time to time, the Committee may

modify the accounting procedures for the purposes of achieving equitable and

nondiscriminatory allocations among the Accounts of Participants in accordance

with the general concepts of the Plan, the provisions of this Section and the

requirements of the Code and ERISA.

 

(l)            Limitation on Allocation to Certain

Shareholders. To the extent that a Company shareholder sells

qualifying Company securities to the Plan Trust and elects (with the consent of

the Company) nonrecognition of gain under Section 1042 of the Code, no portion

of the assets of the Plan attributable to (or allocable in lieu of) Employer

securities acquired by the Plan in a sale to which Section 1042 applies nay

accrue (or be allocated directly or indirectly under any plan of the Employer

meeting the requirements of Section 401(a)); (a) during the nonallocation

period for the benefit of (i) any taxpayer who

make an election under Section 1042(a) with respect to Employer securities (ii)

any individual who is related to

the taxpayer or the decedent (within the meaning of Section 267(b)), or (b) for

the benefit of any other person who owns (after application of Section 318(a))

more than twenty-five percent (25%) of (i) any class of outstanding stock of

the corporation which issued such Employer securities or of any corporation

which is member of the same control group or corporation (within the meaning of

 

6.4

 

Code Section 409(1)(4)) of

such corporation or (ii) the total value of any class of outstanding stock of

any such corporation. For the purposes of (b) above Code Section 318(a) shall

be applied without regard to the employee trust exception in Section

318(a)(2)(B)(i). Nonallocation period means the period beginning on the date of

sale of the qualified securities and ending on the later of: (i) the date which

is 10 years after the date of sale or (ii) the date of the Plan allocation

attributable to the final payment of acquisition indebtedness incurred in

connection with such sale. The nonallocation period is the period beginning on

the date of the sale of the qualified securities and ending on the later of (i)

the date which is 10 years after the date of sale or (ii) the date of the Plan

allocation attributable to the final payment of acquisition indebtedness

incurred in connection with such sale.

 

(m)          Limit on Allocations In Certain S

Corporation Years. Notwithstanding any other provision of

the Plan to the contrary, for any year in which the Plan holds securities in a

corporation organized as an S corporation for federal income tax purposes, no

portion of the Plan attributable to the assets of the Plan attributable to such

securities or allocable in lieu thereof shall, during a nonallocation year

within the contemplation of Code §409(p), accrue or be allocated directly or

indirectly under any plan of the Employer or any Affiliate to a disqualified

person within the contemplation of such Code Section in a manner which would be

prohibited by that Code Section. The provisions of this subsection are

effective generally for Plan Years beginning after 2004; provided, however,

that for ESOPs established after March 14, 2001, or which convert to S

corporation status after that date, this subsection is effective for Plan Years

ending after that date.

 

6.5

 

SECTION 7.  EXPENSES OF THE PLAN AND TRUST

 

All

expenses of administering the Plan and Trust shall be charged to and paid out

of the Trust Assets. The Company may pay all or any portion of such expenses,

and payment of expenses by the Company shall not be deemed to be Employer

Contributions.

 

7.1

 

SECTION 8.   VOTING

COMPANY STOCK

 

All

Company Stock in the Trust shall normally be voted by the Trustee in such

manner as it shall determine in its sole discretion. However, with respect to

any corporate matter which involves the voting of Company Stock as to the

approval or disapproval of any corporate merger or consolidation,

recapitalization, reclassification, liquidation, dissolution, sale of

substantially all assets of a trade or business, or such similar transactions

as may be prescribed in Code regulations, each Participant will be entitled to

direct the Trustee as to the exercise of any voting rights attributable to

shares of Company Stock then allocated to his Company Stock Account but only to

the extent required by Sections 401(a)(22) 409(e)(2) and 409(e)(3) of the Code

and the regulations thereunder. In that event, any allocated Company Stock with

respect to which voting instructions are not received from Participants shall

not be voted, and all Company Stock which is not then allocated to

Participants’ Company Stock Accounts shall be voted in the manner determined by

the Trustee.

 

8.1

 

SECTION 9.  DISCLOSURE TO PARTICIPANTS

 

(a)                                  Summary

Plan Description.

Each Participant shall be furnished with the summary plan description required

by Sections 102(a)(1) and 104(b)(1) of ERISA. Such summary plan description

shall be updated from time to time as required under ERISA and Department of

Labor regulations thereunder.

 

(b)                                 Summary

Annual Report.

Within the time required after each Anniversary Date, each Participant shall be

furnished with the summary annual report of the Plan required by Section

104(b)(3) of ERISA, in the form required by regulations of the Department of

Labor.

 

(c)                                  Statements. Each Participant shall be furnished with an

annual statement (or more frequently at the Board’s discretion) reflecting the

following information:

 

(1)           The balance (if any) in his Accounts as of the beginning

of the last statement.

 

(2)           The amounts of Employer Contributions, Salary Reduction

Contributions, and Forfeitures allocated to his Accounts for the Valuation

Period.

 

(3)           The adjustments to his Accounts to reflect his share of

dividends (if any) on Company Stock and the net income (or loss) of the Trust

for the Valuation Period.

 

(4)           The new balance in his Accounts, including the number of

shares of Company Stock allocated to his Company Stock Account and the fair

market value of Company Stock as of the Valuation Date.

 

(5)           His vested percentage in his Account balances (under

Sections 12 and 13) as of the Valuation Date.

 

(d)                                 Additional

Disclosure. The

Committee shall make available for examination by any Participant copies of the

Plan, the Trust Agreement and the latest annual report of the Plan filed (on

Form 5500) with the Internal Revenue Service. Upon written request of any

Participant, the Committee shall furnish copies of such documents and may make

a reasonable charge to cover the cost of furnishing such copies, as provided in

regulations of the Department of Labor.

 

9.1

 

SECTION 10.  CAPITAL ACCUMULATION

 

A

Participant’s vested (nonforfeitable) interest under the Plan is called his

Capital Accumulation. His Capital Accumulation shall be determined in

accordance with the provisions of Sections 11 and 12. Each Participant’s

Capital Accumulation will be distributed as provided in Sections 14 and 15.

 

10.1

 

SECTION 11. 

RETIREMENT, DISABILITY, OR DEATH

 

Upon

a Participant’s retirement, disability or death, his Capital Accumulation will

be the total of his Account balances (100% vested). The Participant will share

in the allocation of Employer Contributions and Forfeitures for the Plan Year

in which his Service terminates by retirement, disability, or death.

 

A

Participant will be treated as having retired under the Plan if his Service

ends by any of the following:

 

(a)           Normal Retirement

A Participant’s right to his

or her normal retirement benefit will be nonforfeitable on attainment of normal

retirement age as an Employee; that is, the earlier of Normal Retirement Age

under the Plan; or the later of age 65 or the fifth anniversary of the time the

Participant commenced participation in the Plan.

 

(b)           Early Retirement Date

A Participant may elect

early retirement under the Plan at any time after he has attained age

fifty-five (55) and completed at least five (5) years of Service with the

Employer.

 

(c)           Deferred Retirement

In the event a Participant’s

Service continues beyond his Normal Retirement Age, he shall continue to

participate in the Plan.

 

(d)           Disability Retirement

If the Committee determines

that a Participant has suffered a disability (while employed by the Company or

an Affiliated Company) of a type that entitles him to receive total disability

benefits under Social Security, he will be granted disability retirement under

the Plan without regard to his age or period of Service.

 

11.1

 

SECTION 12. 

OTHER TERMINATION OF SERVICE, BREAK IN SERVICE, VESTING  AND

FORFEITURES

 

(a)                                  If a Participant’s Service terminates for any

reason other than his retirement, disability or death, his Capital Accumulation

attributable to his Employer Discretionary Optional Contribution Account,

Profit Sharing Account and Employer Discretionary Matching Contributions will

be determined on the basis of his nonforfeitable interest, in accordance with

the following vesting schedule:

 

	

  Credited

  Service 

  Under Section 13

  	

   

  	

  Nonforfeitable

  

  Percentage

  	

   

  
	

   

  	

   

  
	

  Less

  than One Year

  	

   

  	

  0

  	

  %

  
	

  One

  Year

  	

   

  	

  20

  	

  %

  
	

  Two

  Years

  	

   

  	

  40

  	

  %

  
	

  Three

  Years

  	

   

  	

  60

  	

  %

  
	

  Four

  Years

  	

   

  	

  80

  	

  %

  
	

  Five

  Years

  	

   

  	

  100

  	

  %

  

 

A Participant is 100% vested

at all times in his Account due to Employer Discretionary Basic Contributions,

Qualified Employer Discretionary Matching Contributions, Employee Salary

Reduction Contributions and Rollover Contributions.

 

(b)                                 Forfeitures. Any portion of the final balances in a

Participant’s Accounts which is not vested (and does not become part of his

Capital Accumulation) will become a Forfeiture as of the Anniversary Date in

the Plan Year in which the Participant has received or is deemed to have

received a distribution of his nonforfeitable interest in his Account balances.

For periods prior to the date of execution hereof, no Forfeiture will occur

prior to the date the individual incurs a Break in Service. If the Participant

has not received a distribution of his vested Account balances, then the

portion of his Account balance which is not vested shall be forfeited only upon

the occurrence of a five consecutive year Break in Service. Forfeitures shall

first be charged against a Participant’s Other Investments Account with any

balance charged against his Company Stock Account at the then fair market value

of Company Stock. Financed Shares shall be forfeited only after other shares of

Company Stock have been forfeited. Forfeitures will be reallocated among the

Participants, as provided in Section 6(f), as of the Anniversary Date of the

Plan Year in which a Forfeiture occurs. A Break in Service will  occur

only in a Plan Year for which a Participant is not credited with more than 500

hours of Service. If more than one class of qualifying Employer securities

subject to exempt loan provisions have been allocated to a Participant’s

Account the Plan must forfeit the same proportion of each such class.

 

12.1

 

(c)                                  Restoration

of Forfeited Accounts  If a Participant who has incurred a

forfeiture is reemployed prior to the occurrence of a five-consecutive-year

Break in Service, the portion of his Accounts (attributable to the prior period

of Service) that was forfeited shall be restored as if there had been no

Forfeiture, provided the Participant does not thereafter incur a fifth

consecutive Break in Service and repays any amounts previously distributed

within five (5) years of the date of re-employment. Such restoration shall be

made out of Forfeitures in the Plan Year of reemployment (prior to allocations

under Section 6(f)). To the extent such Forfeitures are not sufficient, the

Company shall make a special contribution to the Participant’s restored

Accounts. Any amount so restored to a Participant shall not constitute an

Annual Addition under Section 6(g). If more than one class of qualifying

Employer Securities subject to exempt loan provisions have been allocated to a

Participant’s Account, the Plan must forfeit the same proportion of each such

class. The loan for Employer Securities must primarily be for the benefit of

the Plan Participants and Beneficiaries of the Plan.

 

(d)                                 Subsequent

Vesting. If a

Participant receives a distribution of his Capital Accumulation and is

re-employed prior to the occurrence of five consecutive one year Breaks in

Service, his Capital Accumulation (“X”) shall be determined prior to the date

he becomes fully vested in accordance with the following formula:

 

X= P(AB+D) -D

 

For purposes of applying

this formula, P is the vested  percentage at the time of  the later

determination, AB is the total account balance at that time, and D is the

amount previously distributed as a Capital Accumulation.

 

(e)                                  Change of

Control.  Upon

a Change in Control a Participant will be 100% vested in his Company Stock

Account and Other Investments Account.

 

12.2

 

SECTION 13.  CREDITED SERVICE

 

(a)                                  General

Rule. For purposes

of vesting, an Employee’s Credited Service includes the total number of Plan

Years after 1979 in which he is credited with at least 1,000 Hours of Service

with the Employer as determined pursuant to Section 3. Credited Service shall

include such Service with the Company or any Affiliated Company. For purposes

of vesting, service with an Employer includes service with Employers who are

members of a controlled group of corporations within the meaning of Code

Section 1563(a)a without regard to Subsections (a)(4) and (e)(3)(C), and

regardless of whether such members are adopting Employers of the Plan. In any

case in which the Employer maintains a plan of a predecessor employer, service

for such predecessor shall be treated as service for the Employer. In any case

in which the Employer maintains a plan which is not the plan maintained by a

predecessor employer, service for such predecessor shall, to the extent

provided in regulations prescribed by the Secretary, be treated as service for

the Employer. Service of any Employee who is a Leased Employee to any Employer

aggregated under Section 414(b), (c), or (m) must be credited for vesting

purposes whether or not such individual is eligible to participate in the Plan.

 

(b)                                 Reemployment. If a former Participant is reemployed after

the occurrence of a Break in Service, the following special rules shall apply

in determining his Credited Service:

 

(1)           New Accounts will be established to reflect his interest

in the Plan attributable to his Service after the Break in Service.

 

(2)           If he is reemployed after the occurrence of a five

consecutive year Break in Service, or if  Credited Service after the Break

in Service will not increase his vested interest in his Accounts attributable

to Service prior to the Break in Service.

 

(3)           After he completes one (1) Plan Year of Credited Service

following his reemployment, subject to the foregoing his Credited Service with

respect to his new Accounts will include his Credited Service accumulated prior

to the Break in Service.

 

(4)           In the case of a Participant who is reemployed who has not

attained a vested interest under this Plan, Service prior to the Break in

Service shall not be included in determining his Credited Service provided the

number of consecutive one-year Breaks in Service equals or exceeds the greater

of five (5), or the aggregate number of years of Credited Service before such

consecutive Breaks in Service.

 

13.1

 

SECTION 14   WHEN CAPITAL ACCUMULATION WILL BE DISTRIBUTED

(a)

In General.

A Participant’s Capital Accumulation will be computed following the termination

of his Service, and will be available for distribution as soon as is

administratively practicable thereafter. In no event however, shall distribution

in such case be delayed later than one year after the close of the Plan Year in

which the Participant retires, is disabled or dies without the consent of the

Participant. Under certain circumstances described in Section 14(d), the

Committee may delay the timing of a distribution to the Participant because the

Plan lacks sufficient cash liquidity to convert a Participant’s Stock Account

to cash. However, in no event shall distribution of the Other Investments

Account of a Participant terminating for reasons other than retirements

disability, or death be delayed later than the Anniversary Date of the Plan

Year following the year of termination.

 

In

no event however (with the exception of Financed Shares described in the

succeeding sentence), shall distribution be deferred more than one year after

the close of the fifth Plan Year following the Participant’s termination of

Service (unless the Participant has been reemployed by the Company at the end

of the fifth Plan Year following the termination of Service or the Participant

has chosen to delay the distribution of his Capital Accumulation beyond this

date). In the event any portion of the Participant’s Account consists of

Company Stock attributable to a loan made to the Plan (pursuant to Section 5 of

the Plan) which has not been fully repaid if the Plan lacks sufficient cash

liquidity as described in Section 14(d), the above timing as to distributions

may be delayed until the earlier of the Plan Year in which sufficient cash

liquidity is available or the Plan Year following the year in which the loan is

fully repaid. Once entitled to distribution, the Participant will receive a

distribution: of the Participant’s Capital Accumulation in a single sum

distribution. Provided, however, that for distributions made prior to April 1,

2002, a Participant may also elect to receive (1) Distribution of the

Participant’s Capital Accumulation in substantially equal annual installments

over a period not exceeding five (5) years (provided that such period does not

exceed the life expectancy of the Participant); or  (2) Any combination of

a single sum distribution and installment payments described in (1).

 

A

Participant’s consent is required for distributions under Code Section

411(a)(11) while such distributions are immediately distributable, The failure

to consent to a distribution by a Participant constitutes an election to defer.

The restrictions described therein are applicable to any distribution including

one under Code Section 409(o).

 

Notwithstanding

any provision of the Plan to the contrary that would otherwise limit a

Distributee’s election under Code Section 401(a)(31), a Distributee may elect

at the time and in the manner prescribed by the Plan Administrator, to have any

portion of an Eligible Rollover Distribution paid directly to an Eligible

Retirement Plan specified by the Distributee in a Direct Rollover.

Notwithstanding any provision of the Plan to the contrary that would otherwise

limit a Distributee’s election under Code Section 401(a)(31), a Distributee may

elect at the time and in the manner prescribed by the Plan administrator, to

have any portion of an Eligible Rollover Distribution paid directly to an

Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

 

Further

provided, that on and after the effective date of the automatic direct rollover

provisions of Code Section 401(a)(31)(B), distributions of  $1,000 or more

shall comply with those provisions.

 

Notwithstanding

the foregoing, if the fair market value of a Participants Account attributable

to Company Stock is in excess of $500,000 as of the date distribution is to

begin, the five–year maximum distribution period shall be extended by one

additional year (up to an additional five years) for each $100,000 increment,

or fraction of such increment by which the value of the Participants’ Account

exceeds $500,000. The $500,000 and $100,000 dollar amount shall be subject to

adjustment in accordance with Section 409(o)(2) of the Code.

 

(b)  Required Distributions. Unless the

Participant otherwise elects, distribution of a Participant’s Capital

Accumulation shall commence not later than sixty (60) days after the

Anniversary Date coinciding with or next following his Normal Retirement Age

(or his termination of Service, if later). The distribution of the Capital

Accumulation of any Participant who is not a 5–percent owner of the Company

must commence not later than April 1 of the calendar year following the later

of the calendar year in which he attains age 70 1 /2 or has terminated service, 

regardless of any consent requirements pursuant to Section 15(c) of the Plan. A

non-5% owner may elect by such April 1 to delay distribution until a later

termination of service, but in the absence of an election to the contrary

distributions will begin by such April 1 If the Participant owns, directly or

indirectly, more than 5–percent 

 

14.1

 

of the outstanding stock of

the Company or stock possessing more than 5-percent of the total combined

voting power of all stock of the Company, the distribution of the Capital

Accumulation of such Participant with respect to the calendar year in which he

attains age 70 1/2 must commence not later than April 1 of the next calendar

year (even if he has not terminated Service and regardless of any consent

requirements pursuant to Section 15(c) of the Plan). Distributions from the

Plan will be made in accordance with the requirements of the Regulations under

Section 401(a)(9), including the minimum distribution incidental benefit

requirements of Section 1.401(a)(9)-2 of the proposed Regulations. With respect

to distributions under the Plan made in calendar years beginning on or after

January 1, 2001, the Plan will apply the minimum distribution requirements of

section 401(a)(9) of the Internal Revenue Code in accordance with regulations

under section 401(a)(9) that were proposed in January, 2001, notwithstanding

any provision of the Plan to the contrary.  This amendment shall continue

in effect until the end of the last calendar year beginning before the

effective date of final regulations under section 401(a)(9) or such other date

specified in guidance published by the Internal Revenue Service.

 

(c)  Post-Separation Accounts. If any part of

a Participant’s Capital Accumulation is retained in the Trust after his Service

or participation ends, his Accounts will continue to be treated as provided in

Section 6. However, such Accounts will not be credited with any additional

Employer Contributions or Forfeitures.

 

(d)  Necessary Delays. In accordance with

Section 15 of the Plan, if Company Stock is not readily tradable on an

established market, the Participant must be given the right to demand

distribution of his Capital Accumulation entirely in cash, Company Stock, or

some combination of the two. In such case, the Trustees will strive to create

sufficient cash reserves in the Plan to permit a terminating Participant to

convert the portion of his Capital Accumulation consisting of Company Stock to

cash. However, should Plan cash reserves not permit conversion of Company Stock

to cash, the Committee may delay distribution of a Participant’s Capital

Accumulation, within the limits described in Section 14(a), until the date such

Plan cash reserves can be reasonably generated through either additional

Employer contributions to the Plan or a restructuring of existing Plan assets.

 

(e)  Unclaimed Accounts. The Plan does not

require either the Trustee or the Plan Administrator to search for, or

ascertain the whereabouts of, any Participant or Beneficiary.  At the time

the Participant’s or Beneficiary’s benefit becomes distributable, the Plan

Administrator, by certified or registered mail addressed to his last known

address of record with the Plan Administrator or the Employer, must notify any Participant,

or Beneficiary, that he is entitled to a distribution under this Plan.  If

the Participant, or Beneficiary, fails to claim his distributive share or make

his whereabouts known in writing to the Plan Administrator within 6 months from

the date of mailing of the notice, the Plan Administrator will treat the

Participant’s or Beneficiary’s unclaimed payable Account as forfeited and will

reallocate the unclaimed payable Account in accordance with the Plan’s

forfeiture provisions.  Where the benefit is distributable to the

Participant, the forfeiture under this paragraph occurs as of the last day of

the notice period, if the Participant’s nonforfeitable Account does not exceed

$5,000 (excluding the value of any rollover contributions and earnings thereon

for distributions made after 2001) ($3,500 prior to 1998), or as of the first

day the benefit is distributable without the Participant’s consent, if the

present value of the participant’s nonforfeitable Account exceeds $5,000

(excluding the value of any rollover contributions and earnings thereon for

distributions made after 2001) ($3,500 prior to 1998).  Where the benefit

is distributable to a Beneficiary, the forfeiture occurs on the date the notice

period ends except, if the Beneficiary is the Participant’s spouse and the

Nonforfeitable Account payable to the spouse exceeds $5,000 (excluding the

value of any rollover contributions and earnings thereon for distributions made

after 2001) ($3,500 prior to 1998), the forfeiture occurs as of the first day the

benefit is distributable without the spouse’s consent.  Pending

forfeiture, the Plan Administrator, following the expiration of the notice

period, may direct the Trustee to segregate the nonforfeitable Account in a

segregated Account and to invest that segregated Account in Federally insured

interest bearing savings accounts or time deposits (or in a combination of

both), or in other fixed income investments. If a Participant or Beneficiary

who has incurred such a forfeiture of his Account under the provisions of this

paragraph makes a claim, at any time, for his forfeited Account, the Plan

Administrator must restore the Participant’s or Beneficiary’s forfeited Account

to the same dollar amount as the dollar amount of the Account forfeited,

unadjusted for any gains or losses occurring subsequent to the date of the

forfeiture.  The Plan Administrator will make the restoration during the

Plan Year in which the Participant or Beneficiary makes the claim, first from

the amount, if any, of Participant forfeitures the Plan Administrator otherwise

would allocate for the Plan Year, then from the amount, if any, of the Trust

Fund net income or gain for the Plan Year and then from the amount, or

additional amount, the Employer contributes to 

 

14.2

 

enable the Plan

Administrator to make the required restoration.  The Plan Administrator will direct the Trustee to distribute the

Participant’s or Beneficiary’s restored Account to him not later than 60 days

after the close of the Plan Year in which the Plan Administrator restores the

forfeited Account.  The forfeiture provisions of this Section apply solely

to the Participant’s or to the Beneficiary’s Account derived from Employer

contributions.

 

(f)  Small Capital Accumulations.  Notwithstanding the other distribution

provisions of the Plan, if the Capital Accumulation of a terminated

Participant’s Account does not exceed $5,000 (excluding the value of any

rollover contributions and earnings thereon for distributions made after 2001)

($3,500 prior to 1998), the Capital Accumulation will be distributed in a

single sum as soon as is administratively practicable after a termination of

employment. In the case of a terminated Participant who has no Capital

Accumulation, his Capital Accumulation will be deemed to have been distributed

upon termination of employment.

 

(g)  Unless otherwise elected by the Participant,

distribution of a Participant’s Capital Accumulation shall commence not later

than sixty (60) days after the Anniversary Date coinciding with or next

following his Normal Retirement Age (or his termination of Service, if later).

The distribution of the Capital Accumulation of any Participant who is not a

5-percent owner of the Company must commence not later than April 1 of the next

Plan Year following the later of the Plan Year in which he attains age 70 1 /2

and has terminated service, regardless of any consent requirements pursuant to

Section 15(c) of the Plan. If the Participant owns, directly or indirectly,

more than 5 percent of the outstanding stock of the Company or stock possessing

more than 5 percent of the total combined voting power of all stock of the

Company, the distribution of the Capital Accumulation of such Participant with

respect to the Plan Year in which he attains age 70 1/2 must commence not later

than April 1 of the next Plan Year (even if he has not terminated Service and

regardless of any consent requirements pursuant to Section 15(c) of the Plan.

Distributions from the Plan will be made in accordance with the requirements of

the Regulations under Section 401(a)(9), including the minimum distribution

incidental benefit requirements of Section 1.401(a)(9)-2 of the proposed

Regulations. With respect to distributions under the Plan made in calendar years

beginning on or after January 1, 2001, the Plan will apply the minimum

distribution requirements of section 401(a)(9) of the Internal Revenue Code in

accordance with regulations under section 401(a)(9) that were proposed in

January, 2001, notwithstanding any provision of the Plan to the contrary. 

This amendment shall continue in effect until the end of the last calendar year

beginning before the effective date of final regulations under section

401(a)(9) or such other date specified in guidance published by the Internal

Revenue Service.

 

(h)  If any part of a Participant’s Capital

Accumulation is retained in the Trust after his Service or participation ends,

his Accounts will continue to be treated as provided in Section 6. However,

such Accounts will not be credited with any additional Employer Contributions

or Forfeitures.

 

(i)  In accordance with Section 15 of the Plan,

if Company Stock is not readily tradable on an established market, the

Participant must be given the right to demand distribution of his Capital

Accumulation entirely in cash, Company Stock, or some combination of the two.

In such case, the Trustees will strive to create sufficient cash reserves in

the Plan to permit a terminating Participant to convert the portion of his

Capital Accumulation consisting of Company Stock to cash. However, should Plan

cash reserves not permit conversion of Company Stock to cash, the Committee may

delay distribution of a Participant’s Capital Accumulation, within the limits

described in Section 14(a), until the date such Plan cash reserves can be

reasonably generated through either additional Employer contributions to the

Plan or a restructuring of existing Plan assets.

 

14.3

 

SECTION 15.   HOW CAPITAL ACCUMULATION WILL BE DISTRIBUTED

 

(a)                             Except as noted in paragraph (d) of this

section, distribution of a Participant’s Capital Accumulation will be made in

whole shares of Company Stock, cash or a combination of both, as determined by

the Committee; provided, however, that the Committee shall notify the

Participant of his right to demand distribution of his Capital Accumulation

entirely in cash or entirely in whole shares of Company Stock (with the value

of any fractional share paid in cash); provided, however, that the

Participant’s request shall not be granted if the distribution of Stock would

result in the number of shareholders in excess of the number that a corporation

may then have and continue to qualify as an “S corporation” under Code Section

1361. If Company Stock is readily tradable on an established market, a

Participant need not be given the right to demand distribution in cash. In the

event a distribution is to be made in shares of Company Stock, any balance in a

Participant’s Other Investments Account will be applied to provide whole shares

of Company Stock for distribution, at the then fair market value. If securities

acquired with the proceeds of an exempt loan are available for distribution and

consist of more than one class of Company Stock, a Participant must receive

substantially the same proportion of each such class of Company Stock.

 

(b)                            The Trustee will make distributions from the

Trust only upon the direction of the Committee. Distribution will be made to

the Participant if living, and if not, to his Beneficiary. Upon the death of a

Participant, the Participant’s Beneficiary shall be his surviving spouse, or if

none, his estate. A Participant (with the consent of his spouse, if any) may

designate a different Beneficiary (and contingent Beneficiaries) and alternate

form of distribution of his Capital Accumulation from time to time (and may

change such designation of Beneficiary or form of distribution at any time)

with the consent of his spouse (unless the original consent permits subsequent choice

of Beneficiary or form of distribution without further spousal consent) by

filing a written designation with the Committee. The consent for a designation

of a Beneficiary (or change in designation of Beneficiary and form of

distribution) must be in writing, must acknowledge the effect of such election,

and must be witnessed by a Plan representative or a notary public. A deceased

Participant’s entire Capital Accumulation shall be distributed to his

Beneficiary within five (5) years after his death, except to the extent that

distribution has previously commenced by the end of the year following the year

of death, in accordance with Section 14(a).

 

(c)                             The Company shall furnish the recipient of a

distribution with the tax consequences explanation required by Section 402(f)

of the Code and shall comply with the applicable withholding requirements of

Section 3405 of the Code with respect to distributions from the Trust (other

than any dividend distributions under Section 17(b)). If a Participant’s

Accumulation has at the time of any distribution or any prior distribution

exceeded $5,000 (excluding the value of any rollover contributions and earnings

thereon for distributions made after 2001) ($3,500 prior to 1998), no portion

of this Accumulation shall be distributed to him without his consent, or if the

Participant has died, the consent of the surviving Participant’s Beneficiary

prior to the later of age 62 or normal retirement age. Regardless of the value

of a Participant’s Capital Accumulation, no distribution may be made under the

preceding sentence after the Annuity Starting Date unless the Participant and

the spouse of the Participant (or where the Participant has died, the surviving

spouse) consents in writing to such distribution in accordance with Section 417

of the Code and the Regulations thereunder.

 

(d)                            For any Plan Year after December 31, 1997, in

which the Company has in effect an election under code Section 1362(a) to be

treated as a Subchapter S small business corporation, distribution of a Participant’s

Capital Accumulation will be made in whole shares of Company Stock, cash or a

combination of both, as determined by the Committee; provided, however, that

the Committee may elect to distribute the entire Participant’s Capital

Accumulation in cash pursuant to Code Section 409(h)(2), as amended, and the

Participant shall not have the right to demand distribution of his Capital

Accumulation in whole shares of Company Stock.

 

15.1

 

SECTION 16.   RIGHTS,

OPTIONS AND RESTRICTIONS ON BANK STOCK

 

(a)                             Shares of Company Stock distributed by the

Trust shall be subject to a “right of first refusal” if the Company Stock is

not publicly traded at the time the right may be exercised. The right of first

refusal shall not be applicable if Company Stock is publicly traded at the time

the right may otherwise be exercised. For this purpose, “publicly traded”

refers to shares of Company Stock which are listed on a national securities

exchange or which are quoted on a system sponsored by a national securities

association. If the Company Stock is subject to a right of first refusal, the

right shall provide that, prior to any subsequent transfer of such shares, the

shares must first be offered for purchase in writing to the Company, and then

to the Trust, at the greater of their then fair market value or a bona fide

third party offer. A bona fide written offer from an independent prospective

buyer shall be deemed to be the fair market value of such Company Stock for

this purpose. The Company and the Trustee shall have a total of fourteen (14)

days to exercise the right of first refusal on the same terms offered by a

prospective buyer. The Company or the Trustee may require that a Participant

entitled to a distribution of Company Stock execute an appropriate stock

transfer agreement (evidencing the right of first refusal) prior to receiving a

distribution of Company Stock.

 

(b)                            In accordance with Section 409(h) of the Code

and the regulations thereunder, the Company shall not be required to issue a

“put option” to any Participant who receives a distribution of Company Stock if

the Company Stock is readily tradable on any established market or if the

Company is not allowed by law to purchase its own stock. If the Company is permitted

by law to purchase its own stock and the Company’s stock is not readily

tradable on an established market, the Company shall issue a “put option” to

any Participant who receives a distribution of Company Stock. The put option

shall permit the Participant to sell such Company Stock to the Company at any

time during two option periods, at the fair market value of such shares. The

first put option period shall be for at least sixty (60) days beginning on the

date of distribution. The second put option period shall be for at least sixty

(60) days beginning after the new determination of the fair market value of

Company Stock by the Trustee (and notice to the Participant) in the following

Plan Year. The Company may allow the Trustee to purchase shares of Company

Stock tendered to the Company under a put option. In the event neither the

Trustee nor the Company wishes to purchase such shares, then the Participant

has the right to demand distribution in cash. If the distribution to the

Participant constituted a total distribution within the meaning of Code Section

409(h)(5), payment of the fair market value of a Participants’ Account

consisting of Company Stock may be made in five substantially equal annual

payments. The first installment shall be paid not later than 30 days after the

Participant exercises the put option. The Plan will pay a reasonable rate of

interest (as determined by the Company or the Trustees) and will provide

adequate security on amounts not paid after 30 days. If the distribution to the

Participant did not constitute a total distribution within the meaning of Code

Section 409(h)(5), the Participant shall be paid an amount equal to the fair

market value of the Company Stock repurchased no later than 30 days after the

Participant exercises the put option.

 

(c)                             The Company or the Trustee may at any time

offer to purchase any shares of Company Stock (including, if a put option is

issued, those shares not sold under the put option described in Section 16(b))

which are held by former Participants (or Beneficiaries), at the then fair

market value. The terms of payment for any such purchase of Company Stock may

be either in a lump sum or in installments over a period not exceeding ten (10)

years, with interest payable at a reasonable rate on any unpaid installment

balance (as determined by the Trustee).

 

(d)                            Shares of Company Stock held or distributed

by the Trustee may include such legend restrictions on transferability as the

Company may reasonably require in order to assure compliance with applicable

federal and state securities and banking laws. Except as otherwise provided in

this 

 

16.1

 

Section 16, no shares of

Company Stock held or distributed by the Trustee may be subject to a put, call

or other option, or buy-sell or similar arrangement. Furthermore, except as

otherwise provided in this Section 16, the Trustee may not obligate the Plan or

Trust to acquire securities from a particular security holder at an indefinite

time determined upon the happening of an event. The provisions of this Section

16 shall continue to be applicable to Company Stock even if the Plan ceases to

be an employee stock ownership plan under Section 4975(e)(7) of the Code. The

rights and protections required under Reg. Section 54.4975-(b)(4), relating to

put, call or other options and to buy-sell or similar arrangements and Reg.

Section 54.4975-(b)(10), (11) & (12), relating to put options are

nonterminable, even if the loan is repaid or the Plan ceases to be a KSOP.

 

(e)                                  Shares of Company Stock distributed to a

Participant from the Plan shall be subject to the terms of the shareholders

agreement attached hereto as Appendix A.

 

16.2

 

SECTION 17.       NO ASSIGNMENT OF BENEFITS, DIVIDENDS, HARDSHIP AND

OPTIONAL DISTRIBUTIONS

 

(a)                                  Nonalienation. 

Prior to a Participant receiving distribution of his Capital

Accumulation, such Participant’s Capital Accumulation may not be anticipated,

assigned (either at law or in equity), alienated or subject to attachment,

garnishment, levy, execution or other legal or equitable process, except in

accordance with a “qualified domestic relations order” (as defined in Section

414(p) of the Code) or a federal tax lien, to the extent required by applicable

law.

 

(b)                                 Dividends on Allocated Stock. Any cash dividends on Company Stock

allocated to the Accounts of Participants may be paid currently (or within

ninety (90) days after the end of the Plan Year in which the dividends are paid

to the Trust) in cash to such Participants on a nondiscriminatory basis, as

determined by the Committee. Such distribution (if any) of cash dividends to

Participants may be limited to dividends on shares of Company Stock which are

then vested or may be applicable to dividends on all shares allocated to

Company Stock Accounts.

 

(c)                                  Dividends Used to Repay Loan

to Plan. To the extent

permitted by applicable law, any cash dividends on allocated and/or unallocated

Company Stock (and any distributions by a Subchapter S corporation based on its

stock) may be used to repay a loan to the Plan which meets the requirements of

Code Section 4975 and the Regulations thereunder.

 

(d)                                 Trustee Discretion as to

Dividends. The decision

as to whether cash dividends on Company Stock will be distributed to

Participants, used to repay a loan to the ESOP, or held in the Trust shall be

made in the sole discretion of the Trustee, and the Trustee may request the

Company to pay such dividends directly to Participants.

 

(e)                                  Hardship Distributions. Upon prior written notice but not more than

once in any two-year period, a Participant under age 59 1⁄2 may be permitted to

make a withdrawal from his Other Investment Account or Salary Reduction Account

in accordance with the rules listed below:

 

(1)           An application for approval shall be made in writing on a

form provided for such purposes by the Committee, and

 

(2)           Withdrawals shall be subject to the following conditions:

 

(i)                                                             Withdrawals shall be approved only on account

of an immediate and heavy financial hardship and shall be approved only up to

the amount that is necessary to satisfy such financial hardship. The

determination of the existence of an immediate and heavy financial hardship and

of the amount necessary to meet such need is to be made in a nondiscriminatory

and objective manner on the basis of all relevant facts and circumstances. The

determination of the Committee as to justification of the withdrawal and the

amount thereof shall be final.

 

(ii)                                                          A distribution will generally be treated as

necessary to satisfy a financial hardship if the Committee reasonably relies

upon the Participants’ representation that the need cannot be relieved:

 

17.1

 

(A)  through reimbursement or compensation by

insurance or otherwise, or

(B)  by reasonable liquidation of the

Participant’s assets (or those of his spouse), to the extent such liquidation

would not itself cause an immediate and heavy financial hardship, or

(C)  by cessation of Salary Reduction

Contributions under the Plan, or

(D)  by other distributions or nontaxable (at the

time of the loan) loans from any tax-qualified employee benefit plans

maintained by the Employer or any other employer of the Participant, or by

borrowing from commercial sources on reasonable commercial terms.

 

(iii)                                                             For the purpose of this Section, the term

“financial hardship” shall mean the financial inability to the Participant to

provide the necessary funds:

 

(A)  to meet the extraordinary medical expenses

(described in Code Section 213(d)) incurred by the Participant, the

Participant’s spouse, or any dependents of the Participant (as defined in Code

Section 152), or

 

(B)  to provide payment of tuition and related

educational fees for the next twelve (12) months of post-secondary education

for the Participant, his or her spouse, children or dependents, or

 

(C)  to provide funds for the purchase (excluding

mortgage payments) of a principal residence for the Participant or to provide

funds to prevent the eviction of the Participant from his principal residence

or foreclosure on the mortgage of the Participant’s principal residence.

 

(vi)                                                      Withdrawals shall be in an amount of not less

than five hundred dollars ($500) and shall not exceed one hundred percent

(100%) of the portion of the Participant’s Salary Reduction Contribution which

is not invested in Company Stock.

 

(v)                                                         Withdrawals shall be made in cash.

 

(vi)                                                      Withdrawals are limited to the portion of the

Salary Reduction Account which reflects Salary Deferrals thereto. Investment

experience credited to the Account is not eligible for withdrawal under this

paragraph.

 

However,

(i) in the case of a hardship withdrawal made before 2002, a Participant shall

cease Salary Deferrals for a one year period after receipt of a hardship

distribution, and (ii) in the case of a hardship withdrawal made after 2001, a

Participant shall cease Salary Deferrals for a six (6) month period after

receipt of a hardship distribution..

 

(f)                                    In-Service

Distributions After 59 1⁄2. A Participant may elect to receive a distribution of all or any portion

of his vested Account upon attainment of age fifty-nine and one-half (59 1/2)

by providing written notification to the Administrative Committee.

 

17.2

 

SECTION 18.  ADMINISTRATION

 

The

Plan will be administered by a Board of Trustees (the “Trustee”) and

Administrative Committee (the “Committee”), each composed of individuals

appointed by the Board of Directors to serve at its pleasure. The Trustee shall

be the named fiduciary with authority and responsibility for the management and

investment of the Trust Assets. The Committee members shall be the named

fiduciaries with authority to control and manage all other aspects of the

administration of the Plan. Any Committee member may also serve as a Trustee of

the Plan if so designated by the Board of Directors.

 

Committee

action will be by vote of a majority of the members at a meeting or in writing

without a meeting. Minutes of each meeting of the Committee shall be kept. The

Committee shall make such rules, regulations, computations interpretations, and

decisions and shall maintain such records and accounts as may be necessary to

administer the Plan in a nondiscriminatory manner for the exclusive benefit of

the Participants and their Beneficiaries, as required under the Code and ERISA.

The Committee shall establish procedures to determine the qualified status of

domestic relations orders and to administer distributions under such qualified

orders (in accordance with Section 414(p) of the Code).

 

The

Committee will give instructions to the Trustee with respect to matters which

require instructions, as provided in this Plan and the Trust Agreement. The

Committee members may allocate their fiduciary responsibilities among

themselves and may designate other persons (including the Trustee) to carry out

its fiduciary responsibilities under the Plan. In the event that the Committee

specifically designates the Trustee to perform any of the Committees fiduciary

responsibilities or if the Trustee is composed of the same individuals as the

Committee then any specific instructions otherwise required by the Plan or

Trust Agreement from the Committee to the Trustee with respect to such

designated fiduciary responsibilities shall not be required.

 

The

Trustee shall be responsible for investing the Trust Assets under the Plan. The

Trustee shall establish a funding policy and method for acquiring Company Stock

for the Trust in a manner that is consistent with the objectives of the Plan

and the requirements of ERISA. If Company Stock is readily tradable on an

established securities market, the fair market value of Company Stock shall be

based upon the offering price established by current bid and asked prices

quoted by persons independent of the Company, pursuant to Section 3(18)(A)(ii)

of ERISA. In the absence of Company Stock trading on an established securities

market, all valuations of Company Stock pursuant to activities carried on by

the Plan shall be made by an independent appraiser meeting requirements similar

to those contained in Treasury Regulations under Section 170(a)(1) of the Code.

In the case of a transaction between the Plan and a disqualified person value

must be determined as of the date of the transaction. For all other purposes

value must be determined as of the most recent valuation date under the Plan.

An independent appraisal will not in itself be a good faith determination of

value in the case of a transaction between the Plan and a disqualified person.

However, in other cases a determination of fair market value based on at least

an annual appraisal independently arrived at by a person who customarily makes

such appraisals and who is independent of any party to a transaction under

Sections 54.4975-7(b)(9) and (12) will be deemed to be a good faith

determination of value.

 

The

Trustee and the Committee are empowered, on behalf of the Plan to employ

investment advisers accountants legal counsel and other agents to assist them

in the performance of their duties under the Plan. The Company shall secure

fidelity bonding for the fiduciaries of the Plan as required by Section 412 of

ERISA. All reasonable expenses of the Trustee and the Committee shall be paid

as provided in Section 7. The Company shall indemnify each member of the Board

of Trustees and the Committee against any personal liability or expense, except

such liability or expense as may result from his own willful misconduct.

 

The

Committee shall be the Plan Administrator under Section 414(g) of the Code and

under Section 3(16)(A) of ERISA, except to the extent, if any, that the Company

elects to vest that authority in itself or another person(s). The Committee

shall be the designated agent of the Plan for the service of legal process. The

Plan Administrator shall have the sole and final power and authority to

construe and interpret the Plan, including without limitation the power to

construe any ambiguity and interpret any provision of the Plan, supply any

omission and reconcile any inconsistency in such manner as it deems

appropriate, to determine all questions relating to eligibility 

 

18.1

 

for the Plan and benefits

thereunder, to establish rules and procedures regarding the administration of

the Plan, to adopt such reasonable accounting procedures  as it deems

necessary or desirable, to receive and review reports, and to issue such

statements and disclosures as may be required or appropriate. All decisions by

the Plan Administrator shall be final, binding and conclusive.

 

18.2

 

SECTION 19.  CLAIMS PROCEDURE

 

A

Participant (or Beneficiary) who does not receive a distribution to which he

believes he is entitled may present a claim to the Committee for any unpaid

benefits. All questions and claims regarding benefits under the Plan shall be

acted upon by the Committee.

 

Each

Participant (or Beneficiary) who wishes to file a claim for benefits with the

Committee shall do so in writing, addressed to the Committee or to the Company.

If the claim for benefits is wholly or partially denied, the Committee shall

notify the Participant (or Beneficiary) in writing of such denial of benefits

within ninety (90) days after the Committee initially received the benefit

claim.

 

Any

notice of a denial of benefits shall advise the Participant (or Beneficiary)

of:

 

(a)           the specific reason or reasons for

the denial;

 

(b)           the specific provisions of the Plan

on which the denial is based;

 

(c)                                  any additional material or information

necessary for the Participant (or Beneficiary) to perfect his claim and an

explanation of why such material or information is necessary; and

 

(d)           the steps which the Participant (or

Beneficiary) must take to have his claim for benefits reviewed.

 

Each

Participant (or Beneficiary) whose claim for benefits is denied shall have the

opportunity to file a written request for a full and fair review of his claim

by the Committee, to review all documents pertinent to his claim and to submit

a written statement regarding issues relative to his claim. Such written

request for review of his claim must be filed by the Participant (or

Beneficiary) within sixty (60) days after receipt of written notification of

the denial of his claim.

 

The

decision of the Committee will be made within sixty (60) days after receipt of

a request for review and shall be communicated in writing to the claimant. Such

written notice shall set forth the specific reasons and specific Plan

provisions on which the Committee based its decision.  If there are

special circumstances (such as the need to hold a hearing) which require an

extension of time for completing the review, the Committee’s decision shall be

rendered not more than one hundred twenty (120) days after receipt of a request

for review.

 

All

notices by the Committee denying a claim for benefits, and all decisions on

request for a review of the denial of a claim for benefits, shall be written in

a manner calculated to be understood by the Participant (or Beneficiary) filing

the claim or requesting the review.

 

19.1

 

SECTION 20.  GUARANTIES

 

All

Capital Accumulations will be paid only from the Trust Assets.  An

Employer, the Trustee or the Committee shall not have any duty or liability to

furnish the Trust with any funds, securities, or other assets, except as

expressly provided in the Plan.

 

The

adoption and maintenance of the Plan shall not be deemed to constitute a

contract of employment or otherwise between an Employer and any Employee, or to

be a consideration for, or an inducement or condition of, any employment. 

Nothing contained in this Plan shall be deemed to give an Employee the right to

be retained in the Service of an Employer or to interfere with the right of an

Employer to discharge, with or without cause, any Employee at any time.

 

20.1

 

SECTION 21.  FUTURE OF THE PLAN

 

As

future conditions cannot be foreseen, the Company reserves the right to amend

or terminate the Plan (in whole or in part) and the Trust Agreement at any

time, by action of its Board of Directors. Neither amendment nor termination

shall retroactively reduce the vested rights of Participants or permit any part

of the Trust Assets to be diverted to or used for any purpose other than for

the exclusive benefit of the Participants (and their Beneficiaries).

 

The

Company specifically reserves the right to amend the Plan and the Trust

Agreement retroactively in order to satisfy any applicable requirements of the

Code and ERISA. The Plan may only be amended to eliminate or reduce benefits of

a Participant within the contemplation of Code Section 411(d)(6) if the

amendment constitutes timely compliance with a change in law affecting plan

qualification the IRS gives Code Section 7805(b) relief, and the elimination or

reduction is made only to the extent necessary to comply with the plan

qualification rules.

 

The

Company further reserves the right to terminate the Plan in the event of a

determination by the Internal Revenue Service (after a timely Application for

Determination is filed by the Company) that the Plan initially fails to satisfy

the requirements of Section 401 (a) and 4975(e)(7) of the Code. In that event

all Trust Assets shall (upon written direction of the Company) be returned to

the Company, and the Plan and the Trust shall terminate.

 

If

the Plan is terminated (or partially terminated) by the Company, participation

of all Participants affected by the termination will end. The Accounts of all

affected employees within the contemplation of Code Section 411(d)(3) upon the

termination or partial termination will become nonforfeitable as of the date of

termination. A complete discontinuance of Employer contributions shall be

deemed to be a termination of the Plan for this purpose. After termination of

the Plan, the Trust will be maintained until the Capital Accumulation of all

Participants have been distributed. Capital Accumulations will be distributed

following termination of the Plan in accordance with Section 14 of the Plan.

 

In

the event of the merger or consolidation of this Plan with another Plan, or the

transfer of Trust Assets (or liabilities) to another Plan, the Account balances

of each Participant immediately after such merger, consolidation or transfer

must be at least as great as immediately before such merger, consolidation or

transfer (as if the Plan had then terminated).

 

21.1

 

SECTION 22.  “TOP HEAVY” CONTINGENCY PROVISIONS

 

(a)                                  The provisions of this Section 22 are

included in the Plan pursuant to Section 401(a)(10)(B)(ii) of the Code and

shall become applicable only if the Plan becomes a “top-heavy plan” under

Section 416(g) of the Code for any Plan Year.

 

(b)                                 The determination as to whether the Plan

becomes “top-heavy” for any Plan Year shall be made as of the Anniversary Date

of the immediately preceding Plan Year by considering the Account balances of

Participants in (1) the Plan, (2) any other plan (such as a defined

contribution or defined benefit plan) of the Employer in which a Key Employee

participates (in the Plan Year containing the determination date or any of the

preceding four Plan Years, even if the plan was terminated), and (3) each other

plan which enables any plan in which a Key Employee participates during the

period tested to meet the requirements of Code Section 401(a)(4) or 410(b). All

employers aggregated under Code Section 414(b), (c), (m) or (o) are considered

a single employer. The Plan (and any other defined contribution plan or any

defined benefit plan) shall be “top-heavy” only if the total of the Account

balances under the Plan and any other defined contribution plan and the value

of accrued benefits under any defined benefit plan for Key Employees as of the

determination date for that Plan Year exceeds sixty percent (60%) of the total

of the Account balances for all Participants. For such purpose, Account

balances (including Participants’ Account balances under any other defined

contribution plan) and accrued benefit values shall be computed and adjusted

pursuant to Section 416(g) of the Code. In determining Key Employees under this

Section 22(b), the term “annual compensation” in Section 416(i)(1)(A) of the

Code shall mean Compensation (as defined in Section 2).

 

Employer

Discretionary Matching Contributions allocated to Key Employees are treated as

Employer Contributions for purposes of determining the minimum contribution or

benefit under section 416. However, if the Plan uses contributions allocated to

Employees other than Key Employees on the basis of Employee Contributions or

Salary Reduction Contributions to satisfy the minimum contribution requirement,

these contributions are not treated as Employer Discretionary Matching

Contributions for purposes of applying the requirements of sections 401(k) and

401(m) for Plan Years beginning after December 31, 1988. Notwithstanding the

foregoing or any other provision of the Plan, for Plan Year beginning after

2001, to the maximum extent permitted under Code Section 416 the Plan may take

into account any matching contributions in satisfying any top-heavy minimum

contribution requirements.

 

(c)                                  (c) 

For any Plan Year in which the Plan is “top-heavy,” each Participant who

is an Employee on the Anniversary Date and is not a participant in a defined

benefit plan and who is a Non-Key Employee shall receive, regardless of his

Hours of Service for that Plan Year, a minimum allocation of Employer

Contributions and Forfeitures which is equal to the lesser of:

 

(1)           Three percent (3%) of his Compensation; or

 

(2)           The same percentage of his Compensation as the allocation

to the Key Employee for whom the Percentage is the highest for that Plan Year.

For purposes of this calculation, any salary reduction or other similar

arrangement of a Key Employee shall be included in determining the percentage

allocation to a Key Employee.

 

(d)                                 If such Employee is also a Participant in any

other defined contribution plan, he shall receive only the minimum allocation

in this Plan and shall not receive the minimum allocation provided in the other

defined contribution plan.

 

22.1

 

(e)                                  For any Plan Year in which the Plan is

“top-heavy,” each Participant who is an Employee on the Anniversary Date and is

also a participant in a defined benefit plan and who is a Non-Key Employee

shall receive only the defined benefit minimum provided in the defined benefit

plan and shall not receive the minimum allocation provided in Section 22(c) of

this Plan (or the minimum allocation in any other defined contribution plan).

 

(f)                                    For any Plan Year before 2000 in which the

Plan is “top-heavy,” with respect to any Participant who is covered under a

defined benefit plan, the “defined benefit plan fraction” and the “defined

contribution plan fraction” referred to in Section 6(g) shall be computed by

substituting “1.0” in lieu of “1.25” in both denominators.

 

(g)                                 The Capital Accumulation of an Employee who

has not performed any Service for the Employer at any time during the five-year

period ending on the determination date is excluded from the calculation to

determine top-heaviness.

 

22.2

 

SECTION 23.  DIVERSIFICATION

 

(a)                                  In General. Within 90 days after the last day of each

Plan Year during the Participants’ Qualified Election Period, any Plan

Participant who has attained age fifty-five (55) and has completed ten (10)

years of Credited Service while a Participant (i.e., a “Qualified Participant”)

shall have the right to make an election to direct the Plan as to the

investment of twenty-five percent (25%) of the total number of shares of

employer securities acquired by or that have been contributed to the Plan that

have ever been allocated to a qualified Participant’s account on or before the

most recent plan allocation date; less the number of shares of employer

securities previously distributed, transferred or diversified pursuant to a

diversification election. Within 90 days after the close of the last Plan Year

in the Participant’s Qualified Election Period a Qualified Participant may

direct the Plan as to the investment of fifty percent (50%) of the value of

such Account. The term Qualified Election Period shall mean the six (6) Plan

Year period beginning with the Plan Year in which a Plan Participant first

becomes a Qualified Participant.

 

(b)                                 Method of

Directing Investment.

The Participant’s election to diversify his Account shall be provided to the

Plan Administrator in writing within ninety (90) days after the close of a Plan

Year within the Qualified Election Period, and shall be effective no later than

1 80 days after the close of the Plan Year to which the election applies.

 

(c)                                  Distribution

of  Account.

Upon a Qualified Participant’s election to direct the investment of a portion

of the Participant’s Account, the Plan may distribute the portion of the

Account that is covered by the election within 90 days after the last day of

the period during which the election can be made. Such distribution shall be

subject to such requirements of the Plan concerning put options (Section 16)

and such provisions under Section 15 as require the consent of the Participant

and the Participant’s spouse (if any) to a distribution with a value in excess

of $5,000 (excluding the value of any rollover contributions and earnings

thereon for distributions made after 2001).

 

23.1

 

SECTION 24.  QUALIFIED MILITARY SERVICE

 

Notwithstanding

any other provision of the Plan to the contrary, effective December 12, 1994,

the following provisions with respect to an Employee’s rights resulting from

qualified military service shall control where applicable.

 

(a)           Contributions

 

Supplemental Employee

Contributions shall be allocated to the Accounts of each Employee on account of

his or her qualified military service in accordance with Chapter 43, Title 38

of the Code. If any contribution is made to the Plan by the Company or an

Employee with respect to such Employee which is required on account of such

Employee’s qualified military service, then:

 

(1)           Such contribution shall not be subject to any otherwise

applicable limitation contained in Code Sections 402(g), 404(a), or 415, and

shall not be taken into account in applying any such limitations to other

contributions or benefits under the Plan with respect to the year in which such

contribution is made. Rather, such contribution shall be subject to said

limitations with respect to the year to which such contribution relates (in

accordance with rules prescribed by the Secretary).

 

(2)           The Plan shall not be treated as failing to meet the

requirements of Code Sections 401(a)(4), 401(a)(26), 401(k)(3 ), 401(k)(11),

401(k)(12), 401(m), 410(b), or 416, by reason of the making of (or the right to

make) such contribution.

 

(b)           Limitation on Applicability

 

The provisions of this

section shall not require:

(1)                                  Any crediting of earnings to an Employee with

respect to any contribution before such contribution is actually made; or

(2)                                  Any allocation of any forfeiture with respect

to the period of such Employee’s qualified military service

 

(c)           Definitions

 

The following terms shall

have the meanings set out below for purposes of the application of this

section:

 

(1)           “Qualified Military Service” means any service in the

uniformed services (as defined in Chapter 43 of Title 38, United States Code)

by any individual if such individual is entitled to reemployment rights under

said chapter with respect to such service.

 

(2)           “Compensation.” For purposes of Code Section 415(c)(3), an

Employee who is in qualified military service shall be treated as receiving

compensation from the Employer during such period of service equal to

 

(i)                                                     the compensation such Employee would have

received during such period if he were not in qualified military service,

determined based on the rate of pay he would have received from the Employer

but for his absence during such period, or

 

24.1

 

(ii)                                                  if the compensation he would have received

from the Employer during such period is uncertain, his average compensation

from the Employer during the 12-month period (or, if shorter, the period of

employment) immediately preceding the period of qualified military service.

 

(d)           Special Provisions Regarding Elective Deferrals

 

An Employee entitled to

benefits under Chapter 43 of Title 38, United States Code, with respect to the

Plan may make additional elective deferrals hereunder in the amount provided

below (or such amount as the Employee elects) during the period which begins on

his date of reemployment and continues until the date which is the lesser of

 

(i)                                                     the product of 3 and the period of qualified

military service which resulted in such rights, and

 

(ii)                                                  5 years.

 

In addition, the Employer

shall make a matching contribution with respect to any additional elective deferral

made as described above which would have been required had such deferral

actually been made during the period of such qualified military service.

 

The maximum amount of

elective deferrals that such Employee would have been permitted to make

hereunder in accordance with the limitations set out in the preceding paragraph

during the period of qualified military service if he had continued to be

employed by the Employer during such period and received compensation (as

determined above). Such amount may be adjusted for any elective deferrals

actually made during the period of qualified military service.

For purposes of this

section, the term “elective deferral” has the meaning given by Code Section

402(g)(3).

 

24.2

 

SECTION 25.  GOVERNING LAW

 

The

provisions of the Plan and the Trust Agreement shall be construed,

administered, and enforced in accordance with the laws of the State of

Washingtona, to the extent such laws are not superseded by ERISA.

 

25.1

 

SECTION 26.  EXECUTION

 

To

record the adoption of this Plan, the Company has caused this document to be

executed this 20th day of November, 2001.

 

	

   

  	

  FIRST

  COMMUNITY FINANCIAL GROUP, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   /s/

  Ken F. Parsons, Sr.

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

   Chairman/CEO/President

  	

   

  
	

   

  	

   

  

 

 

26.1

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