Document:

Exhibit 10.36

Exhibit 10.36

CONFIDENTIAL SEPARATION AGREEMENT

AND GENERAL RELEASE OF ALL CLAIMS

This Confidential Separation Agreement and General Release of All Claims (“Separation
Agreement”) is made by and between ADVENTRX Pharmaceuticals, Inc. (“ADVENTRX”) and Evan M. Levine
(“Mr. Levine”) with respect to the following facts:

A. Other than as a member of the Board of Directors of ADVENTRX, Mr. Levine resigned all of
Mr. Levine’s positions with ADVENTRX and its subsidiaries and affiliated companies, including as
Chief Executive Officer and President of the Company, effective October 17, 2008.

B. On December 22, 2008, Mr. Levine resigned as a member of the Board of Directors of ADVENTRX
and, since December 22, 2008, Mr. Levine has had no relationship with ADVENTRX, except as a
stockholder of ADVENTRX.

C. The parties desire to settle all claims and issues that have, or could have, been raised in
relation to Mr. Levine’s employment with ADVENTRX and arising out of or in any way related to the
acts, transactions or occurrences between Mr. Levine and ADVENTRX to date, including, but not
limited to, Mr. Levine’s employment with ADVENTRX and the termination of that employment, on the
terms set forth below.

THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is
agreed by and between the undersigned as follows:

1. Severance Package. In consideration of the promises and representations made by
Mr. Levine in this Separation Agreement, ADVENTRX agrees to provide Mr. Levine with the following
payments and benefits (“Severance Package”) to which Mr. Levine is not otherwise entitled. Mr.
Levine acknowledges and agrees that this Severance Package constitutes adequate legal consideration
for the promises and representations made by Mr. Levine in this Separation Agreement. For clarity,
Mr. Levine will have no right to the Severance Package unless and until this Separation Agreement
is timely signed and delivered and not revoked.

1.1 Severance Payment. ADVENTRX agrees to provide Mr. Levine with a severance payment
of $225,000, less all applicable taxes and withholdings (“Severance Payment”). The Severance
Payment will be made in a lump-sum as soon as reasonably practicable following the Effective Date;
provided, however, that the Severance Payment will not be made earlier than January 2, 2009 and not
later than the close of business on the day that is the earlier of (a) the 5th full
business day after the Effective Date and (b) March 15, 2009.

1.2 Health Benefit Allowance. ADVENTRX agrees to provide Mr. Levine with a health
benefit allowance of $19,870.20, which Mr. Levine may use, at Mr. Levine’s discretion, to pay the
premiums required to continue Mr. Levine’s group health care coverage under the applicable
provisions of the Consolidated Omnibus Budget Reconciliation act of 1985 (“COBRA”) or any other
health care-related expenses. This health benefit allowance will be paid in the same manner as the
Severance Payment and will be subject to all applicable taxes and withholdings.

 

 

 

1.3 Stock Issuance. Promptly following the Effective Date but subject to the
remainder of this Section 1.3, ADVENTRX agrees to issue to Mr. Levine one million (1,000,000)
shares of its common stock, par value $0.001 per share, which shares shall be fully-vested
upon issuance (the “Shares”); provided that (a) this Separation Agreement is signed and
delivered and not revoked and (b) ADVENTRX has received a written waiver under that certain Rights
Agreement, dated July 25, 2005 (the “Rights Agreement”), that allows ADVENTRX to issue the Shares
without complying with the participation rights (and any related rights, including rights to
notice) set forth in the Rights Agreement (as defined in the Rights Agreement); provided, further,
that, if Mr. Levine is not an “Employee,” a “Consultant” or a “Director” (as each such term is
defined in the ADVENTRX 2008 Omnibus Incentive Plan) on the Effective Date, (x) the Company’s Board
of Directors has approved the issuance of the Shares to Mr. Levine, (y) ADVENTRX has received from
the American Stock Exchange written notification approving an application for the listing of the
Shares on the American Stock Exchange and (z) Mr. Levine signs and delivers that certain Restricted
Stock Issuance Agreement in substantially the form of Exhibit A, attached hereto. The
conditions set forth in foregoing clauses (a), (b), (x) and (y) above are collectively referred to
herein as the “Conditions.” Any Shares issued pursuant to this Section 1.3 shall be evidenced by a
stock certificate, which certificate shall be registered in the name of Mr. Levine and shall bear,
as applicable, restrictive legends reflecting that the Shares have not been registered under the
Securities Act of 1933, as amended, and may not be resold or transferred unless the Shares are
first registered or exempt from registration under the federal and state securities laws and/or
reflecting Mr. Levine’s relationship, whether current or prior, as an affiliate of ADVENTRX. In
the event the Conditions have not been satisfied by January 30, 2009, in lieu of issuing the
Shares, the Company shall pay Mr. Levine an additional $100,000, less all applicable taxes and
withholdings (the “Additional Payment”). The Additional Payment will be made in a lump-sum as soon
as reasonably practicable following January 30, 2009; provided, however, that the Additional
Payment will not be made later than March 15, 2009. For clarity, (A) the Company shall be
obligated only to either issue the Shares or make the Additional Payment and, once the Company has
either issued the Shares or made the Additional Payment, it shall have no obligation with respect
to the other and (B) if the Conditions have been satisfied by January 30, 2009 but Mr. Levine has
not signed and delivered that certain Restricted Stock Issuance Agreement in substantially the form
of Exhibit A, attached hereto, the Company shall have no obligation to either issue the
Shares or make the Additional Payment.

2. General Release.

2.1 Mr. Levine unconditionally, irrevocably and absolutely releases and discharges ADVENTRX,
and any parent and subsidiary corporations, divisions and affiliated corporations, partnerships or
other affiliated entities of ADVENTRX, past and present, as well as ADVENTRX’s employees, officers,
directors, agents, successors and assigns (collectively, “Released Parties”), from all claims
related in any way to the transactions or occurrences between them to date, to the fullest extent
permitted by law, including, but not limited to, Mr. Levine’s employment with ADVENTRX, the
termination of Mr. Levine’s employment, and all other losses, liabilities, claims, charges, demands
and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly
out of or in any way connected with Mr. Levine’s employment with ADVENTRX. This release is
intended to have the broadest possible application and includes, but is not limited to, any tort,
contract, common law, constitutional or other statutory claims, including, but not limited to
alleged violations of the California Labor Code or the federal Fair Labor Standards Act, Title VII
of the Civil Rights Act of 1964 and the California Fair Employment and Housing Act, the Americans
with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended, and all claims
for attorneys’ fees, costs and expenses. Mr. Levine expressly waives Mr. Levine’s right to
recovery of any type, including damages or reinstatement, in any administrative or court action,
whether state or federal, and whether brought by Mr. Levine or on Mr. Levine’s behalf, related in
any way to the matters
released herein. However, this general release is not intended to bar any claims that, by
statute, may not be waived, such as claims for workers’ compensation benefits, unemployment
insurance benefits, statutory indemnity and any challenge to the validity of Mr. Levine’s release
of claims under the Age Discrimination in Employment Act of 1967, as amended, as set forth in this
Separation Agreement.

 

2

 

2.2 ADVENTRX, and any parent and subsidiary corporations, divisions and affiliated
corporations, partnerships or other affiliated entities of ADVENTRX, past and present, as well as
ADVENTRX’s officers, directors, managing agents, successors and assigns in any of their respective
capacities as a representative of ADVENTRX (the “ADVENTRX Releasors”) unconditionally, irrevocably
and absolutely release and discharge Mr. Levine from all claims related in any way to the
transactions or occurrences between the ADVENTRX Releasors and Mr. Levine to date, to the fullest
extent permitted by law, including, but not limited to, Mr. Levine’s employment with ADVENTRX, the
termination of Mr. Levine’s employment, and all other losses, liabilities, claims, charges, demands
and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly
out of or in any way connected with Mr. Levine’s employment with ADVENTRX. This release is
intended to have the broadest possible application and includes, but is not limited to, any tort,
contract, common law, constitutional or other statutory claims, and all claims for attorneys’ fees,
costs and expenses. The ADVENTRX Releasors expressly waive any right to recovery of any type,
including damages or reinstatement, in any administrative or court action, whether state or
federal, and whether brought by any ADVENTRX Releasor or on any ADVENTRX Releasor’s behalf, related
in any way to the matters released herein. However, this general release is not intended to bar
any claims that, by statute, may not be waived, such as statutory indemnity.

3. California Civil Code Section 1542 Waiver. Mr. Levine and the ADVENTRX Releasors
each expressly acknowledges and agrees that all rights under Section 1542 of the California Civil
Code are expressly waived. That section provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

4. Representation Concerning Filing of Legal Actions. Mr. Levine represents that, as
of the date of this Separation Agreement, Mr. Levine has not filed any lawsuits, charges,
complaints, petitions, claims or other accusatory pleadings against ADVENTRX or any of the other
Released Parties in any court or with any governmental agency. ADVENTRX represents that, as of the
date of this Separation Agreement, ADVENTRX has not filed any lawsuits, charges, complaints,
petitions, claims or other accusatory pleadings against Mr. Levine in any court or with any
governmental agency.

5. Nondisparagement. Mr. Levine agrees that Mr. Levine will not make any voluntary
statements, written or oral, or cause or encourage others to make any such statements that defame,
disparage or in any way criticize the personal and/or business reputations, practices or conduct of
ADVENTRX or any of the other Released Parties. ADVENTRX agrees that its officers, directors and
managing agents will not make any voluntary statements, written or oral, or cause or encourage
others to make any such statements that defame, disparage or in any way criticize the personal
and/or business reputations, practices or
conduct of Mr. Levine. The foregoing notwithstanding, the parties may respond accurately and
fully to any questions, inquiry or request for information when required to do so by legal process.

 

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6. Confidentiality and Return of ADVENTRX Property; Surviving Obligations. Mr. Levine
understands and agrees that as a condition of receiving the Severance Package described in
paragraph 1, all ADVENTRX property must be returned to ADVENTRX. By signing this Separation
Agreement, Mr. Levine represents and warrants that Mr. Levine has returned to ADVENTRX all ADVENTRX
property, data and information belonging to ADVENTRX and agrees that Mr. Levine will not use or
disclose to others any confidential or proprietary information of ADVENTRX or any of the other
Released Parties. Mr. Levine further agrees to comply with the continuing obligations set forth in
the surviving provisions of ADVENTRX’s Confidential Information, Non-Solicitation and Invention
Assignment Agreement for Employees, the Code of Business Conduct and Ethics, the Policies and
Procedure Manual, as updated from time to time, and the Insider Trading and Disclosure Policy, each
as previously executed by Mr. Levine (collectively, “Employment Documents”). In addition, Mr.
Levine agrees to keep the terms of this Separation Agreement confidential between Mr. Levine and
ADVENTRX, except that Mr. Levine may tell, in confidence, Mr. Levine’s immediate family and
attorney or accountant, if any, as needed, but in no event should Mr. Levine discuss this
Separation Agreement or its terms with any current or prospective employee of ADVENTRX.

7. Section 16 Reporting. Mr. Levine understands that ADVENTRX is required to disclose
in its annual proxy statement information regarding Section 16 reporting delinquencies by its
directors and officers that occurred during the prior fiscal year. To assist ADVENTRX in meeting
such disclosure requirements, Mr. Levine hereby (a) certifies that all reportable transactions in
ADVENTRX securities through the date of this Separation Agreement have been reported on a Form 4,
and (b) agrees to execute and deliver to ADVENTRX promptly after December 31, 2008, but no later
than January 30, 2009, the “no filing due” certification in the form attached hereto as
Appendix A.

8. No Admissions. By entering into this Separation Agreement, Mr. Levine and the
Released Parties make no admission that they have engaged, or are now engaging, in any unlawful
conduct. The parties understand and acknowledge that this Separation Agreement is not an admission
of liability and shall not be used or construed as such in any legal or administrative proceeding.

9. Older Workers’ Benefit Protection Act. This Separation Agreement is intended to
satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f). Mr.
Levine is advised to consult with an attorney before executing this Separation Agreement.

9.1 Acknowledgments/Time to Consider. Mr. Levine acknowledges and agrees that (a) Mr.
Levine has read and understands the terms of this Separation Agreement; (b) Mr. Levine has been
advised in writing to consult with an attorney before executing this Separation Agreement; (c) Mr.
Levine has obtained and considered such legal counsel as Mr. Levine deems necessary; (d) Mr. Levine
has been given twenty-one (21) days to consider whether or not to enter into this Separation
Agreement (although Mr. Levine may elect not to use the full 21-day period at Mr. Levine’s option);
and (e) by signing this Separation Agreement, Mr. Levine acknowledges that Mr. Levine does so
freely, knowingly, and voluntarily. If the signed Agreement is not received by the Company’s
corporate secretary by 5:00 p.m. Pacific Time on January 14, 2009, ADVENTRX will assume Mr. Levine
is not interested in the Severance Package, and the offer will be automatically withdrawn.

 

4

 

9.2 Revocation/Effective Date. This Separation Agreement shall not become effective
or enforceable until the eighth day after Mr. Levine signs and delivers to ADVENTRX this Separation
Agreement. In other words, Mr. Levine may revoke Mr. Levine’s acceptance of this Separation
Agreement within seven (7) days after the date Mr. Levine signs and delivers it to ADVENTRX. Mr.
Levine’s revocation must be in writing and received by the Company’s corporate secretary by
5:00 p.m. Pacific Time on the seventh day in order to be effective. If Mr. Levine does not revoke
acceptance within the seven (7) day period, Mr. Levine’s acceptance of this Separation Agreement
shall become binding and enforceable on the eighth day (“Effective Date”). The Severance Package
will become due and payable in accordance with paragraph 1 above and its subparts after the
Effective Date, provided Mr. Levine does not revoke.

9.3 Preserved Rights of Mr. Levine. This Separation Agreement does not waive or
release any rights or claims that Mr. Levine may have under the Age Discrimination in Employment
Act of 1967, as amended, that arise after the execution of this Separation Agreement. In addition,
this Agreement does not prohibit Mr. Levine from challenging the validity of this Separation
Agreement’s waiver and release of claims under the Age Discrimination in Employment Act of 1967, as
amended.

10. Severability. In the event any provision of this Separation Agreement shall be
found unenforceable, the unenforceable provision shall be deemed deleted and the validity and
enforceability of the remaining provisions shall not be affected thereby.

11. Full Defense. This Separation Agreement may be pled as a full and complete
defense to, and may be used as a basis for an injunction against, any action, suit or other
proceeding that may be prosecuted, instituted or attempted by Mr. Levine or the ADVENTRX Releasors
in breach hereof.

12. Applicable Law. The validity, interpretation and performance of this Separation
Agreement shall be construed and interpreted according to the laws of the United States of America
and the State of California.

13. Entire Agreement; Modification. This Separation Agreement, including the
surviving provisions of the Employment Documents, all of which are herein incorporated by
reference, is intended to be the entire agreement between the parties and supersedes and cancels
any and all other and prior agreements, written or oral, between the parties regarding this subject
matter. For clarity, that certain Confidential Separation Agreement and General Release of All
Claims dated October 17, 2008 and presented to Mr. Levine on or about October 19, 2008 is hereby
withdrawn and shall be of no further force or effect. This Separation Agreement may be amended
only by a written instrument executed by all parties hereto.

 

5

 

THE PARTIES TO THIS SEPARATION AGREEMENT HAVE READ THE FOREGOING SEPARATION AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS
SEPARATION AGREEMENT ON THE DATES SHOWN BELOW.

	 	 	 	 	 
	Dated: December 23, 2008 	By:  	/s/ Evan M. Levine
 	 
	 	 	Evan M. Levine 	 

	 	 	 	 	 
	 	Adventrx Pharmaceuticals, Inc.

 	 
	Dated: December 23, 2008 	By:  	/s/ Patrick L. Keran
 	 
	 	 	Patrick L. Keran 	 
	 	 	Vice President and General Counsel 	 

 

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Appendix A

CERTIFICATE

I am aware that, as a “Section 16 officer” of ADVENTRX Pharmaceuticals, Inc. during the fiscal
year ended December 31, 2008, I must file a Form 5 with the Securities and Exchange Commission
within 45 days after the end of the fiscal year, unless I have previously reported all transactions
and holdings otherwise reportable on such Form 5.

After reviewing my records, I hereby certify to ADVENTRX that I am not required to file a
Form 5 for the fiscal year ended December 31, 2008.

	 	 	 	 	 
	 	 	 
	Date:                	By:  	 	 
	 	 	Name:  	Evan M. Levine  	 

 

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Exhibit A

RESTRICTED STOCK ISSUANCE AGREEMENT

 

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RESTRICTED STOCK ISSUANCE AGREEMENT

This Restricted Stock Issuance Agreement (this “Agreement”) is effective as of
[                    ] by and between ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the
“Corporation”), and Evan M. Levine, an individual and resident of the State of California (“Mr.
Levine”).

1. ISSUANCE OF SHARES

1.1 Issuance. Mr. Levine is hereby issued One Million (1,000,000) shares of the
Corporation’s common stock, par value $0.001 per share (the “Shares”), pursuant to terms of that
certain Confidential Separation Agreement and General Release of All Claims effective as of
[                    ] between the Corporation and Mr. Levine (the “Separation Agreement”).

1.2 Stockholder Rights. Mr. Levine shall have all the rights of a stockholder
(including voting and dividend rights) with respect to the Shares, subject, however, to the
transfer restrictions set forth herein.

2. INVESTMENT REPRESENTATIONS

2.1 Organization; Authority. Mr. Levine confirms he has all requisite power and
authority to enter into this Agreement and to consummate the transactions contemplated hereby, and
this Agreement constitutes a legal, valid and binding obligation of Mr. Levine, enforceable in
accordance with its terms.

2.2 Acquire Entirely for Own Account. This Agreement is made with Mr. Levine in
reliance upon Mr. Levine’s representation to the Corporation, which by Mr. Levine’s execution of
this Agreement Mr. Levine hereby confirms, that the Shares are being acquired for investment for
Mr. Levine’s own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof and that Mr. Levine has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this Agreement, Mr. Levine
further represents that Mr. Levine does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Shares.

2.3 Exemption from Registration. Mr. Levine understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly,
are being issued to him in reliance on specific exemptions from the registration requirements of
U.S. federal and state securities laws and that the Corporation is relying in part upon the truth
and accuracy of the representations and warranties of Mr. Levine set forth herein in order to
determine the availability of such exemptions and the eligibility of Mr. Levine to acquire the
Shares.

2.4 Disclosure of Information. Mr. Levine believes he has received all information
necessary or appropriate for deciding whether to acquire the Shares for the consideration set forth
herein, including the periodic reports and other filings of the Corporation made with the U.S.
Securities and Exchange Commission and available at www.sec.gov. Mr. Levine further
represents that he has had the opportunity to ask questions and receive answers from the
Corporation regarding investment in the Shares.

 

 

 

2.5 Investment Experience. Mr. Levine acknowledges that he is able to fend for
himself, can bear the economic risk of this investment and has such knowledge and experience in
financial or business matters (including experience in evaluating and investing in securities of
companies in the same or similar industry and stage of life as the Corporation), and is capable of
evaluating the merits and risks of the investment in the Shares.

2.6 Accredited Investor. Mr. Levine is an “accredited investor” within the meaning of
Rule 501 of Regulation D of the Securities Act, as presently in effect.

2.7 Restricted Securities. Mr. Levine understands that the Shares are restricted
securities under applicable U.S. federal and state securities laws and may not be resold or
transferred unless the Shares are first registered under the Securities Act and qualified by state
authorities or unless an exemption from such registration/qualification is available (which
exemption may be available under Rule 144 promulgated under the Securities Act, subject to the
remainder of this Section 2.7 and the conditions and requirements of Rule 144). Accordingly, Mr.
Levine hereby acknowledges that Mr. Levine is prepared to hold the Shares for an indefinite period
and that Mr. Levine is aware that Rule 144 promulgated under the Securities Act is not presently
available to exempt the sale of the Shares from the registration requirements of the Securities
Act. Mr. Levine further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not limited to, the time
and manner of sale, the holding period for the Shares, and requirements relating to the Corporation
which are outside of Mr. Levine’s control and which the Corporation has no obligation and may not
be able to satisfy. Mr. Levine understands that there is no assurance that the Corporation will
satisfy the criteria for continued listing of its common stock on the American Stock Exchange. Mr.
Levine also acknowledges that the Corporation has no obligation to register or qualify the Shares
for resale.

2.8 Restrictive Legends. In order to reflect the restrictions on disposition of the
Shares, Mr. Levine understands that the stock certificates, if any representing the Shares will
bear restrictive legends, including one or more of the following or other legends:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH
ACT OR (B) ASSURANCES SATISFACTORY TO THE CORPORATION THAT REGISTRATION UNDER SUCH
ACT IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER.”

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET STAND-OFF
PROVISION AND ACCORDINGLY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN
ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF THE RESTRICTED STOCK
ISSUANCE AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER OF SUCH SHARES (OR THE PREDECESSOR IN INTEREST
TO SUCH SHARES). THE CORPORATION WILL, UPON WRITTEN REQUEST, FURNISH A COPY OF SUCH
AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

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2.9 Legal, Tax, Economic Considerations. Mr. Levine has reviewed with his own
advisors the legal, tax, economic and related considerations of the transactions contemplated by
this Agreement, and it is relying solely on such advisors and not on any statements or
representations of the Corporation or any of the Corporation’s employees or agents. Mr. Levine
understands that he (and not the Corporation) shall be responsible for his own tax liability that
may arise as a result of the transactions contemplated by this Agreement.

2.10 No Obligation to Register. Mr. Levine acknowledges and understands that the
Corporation is under no obligation to register the Shares.

3. MARKET STAND-OFF PROVISION

In the event the number of shares of the Corporation’s common stock then beneficially owned by
Mr. Levine and his Affiliates exceeds 4.99% of the total number of shares of the Corporation’s
common stock then issued and outstanding, in connection with a public offering of the Corporation’s
securities and upon request of the underwriters, placement agents or similar entity managing such
offering (which request may be delivered by the Corporation if the Corporation is so requested by
such underwriters, agents or entities), Mr. Levine agrees not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of the Shares (except to the
extent they are included in the registration) without the prior written consent of such
underwriters, agents or entities for such period of time from the effective date of such
registration as may be requested by such underwriters, agents or entities and to execute an
agreement reasonably reflecting the foregoing as may be requested by such underwriters, agents or
entities at the time of the Corporation’s public offering; provided, however, that in no
event shall such period exceed ninety (90) days. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation’s outstanding common stock, then any
new, substituted or additional securities distributed with respect to the Shares shall be
immediately subject to this section. In order to enforce the limitations of this section, the
Corporation may impose stop-transfer instructions with respect to the Shares until the end of the
applicable stand-off period. Mr. Levine acknowledges and agrees that notice of a public offering of
the Corporation’s securities (including a request not to take the actions described above in this
Section 3) is the Company’s confidential information and Mr. Levine shall not disclose such
confidential information to anyone or use such confidential information for any purpose.

4. GENERAL PROVISIONS

4.1 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be notified,
(ii) when sent by confirmed facsimile if sent during the normal business hours of the recipient (if
not sent during the normal business hours of the recipient, then on the next business day);
(iii) five days after having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier,
specifying next day
delivery, with written verification of receipt. All written communications shall be addressed
to the party to be notified at the address or facsimile number applicable to such party appearing
on the signature page to this Agreement, or such other address or facsimile number that such party
provides in writing to the other party.

 

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4.2 Agreement is Entire Contract. This Agreement, together with the Separation
Agreement, constitute the entire contract between the parties hereto with regard to the subject
matter hereof.

4.3 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California, as applied to contracts among California residents
entered into and to be performed entirely within California.

4.4 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall constitute one and the
same instrument.

4.5 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the parties’ respective successors and assigns. Notwithstanding
the foregoing, Mr. Levine shall not assign his rights or obligations hereunder without prior
written consent of the Corporation. Any assignee of Mr. Levine shall have become a party to this
Agreement or shall have agreed in writing to be bound by the terms and conditions hereof.

[Signature page follows]

 

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IN WITNESS WHEREOF, each party hereto has executed this Restricted Stock Issuance Agreement as
of the date first set forth above.

	 	 	 	 	 
	 	ADVENTRX PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Address:    6725 Mesa Ridge Road

                  Suite 100

                  San Diego, CA 92121

Facsimile:  (858) 552-0876

	 	 	 	 	 
	 	
 	 
	 	Evan M. Levine 	 

	 	 	 	 	 	 
	 

	 	Address:	 	 	 
	 

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	 	 	 	 

[COUNTERPART SIGNATURE PAGE TO

RESTRICTED STOCK ISSUANCE AGREEMENT]

 

 

 

November 7, 2008

Evan M. Levine

5173 Seagrove Place

San Diego, CA 92130

Dear Evan,

As you know, there has been substantial discussion regarding the terms of the Confidential
Separation Agreement and General Release of All Claims that was presented to you on October 19,
2008 (the “Separation Agreement”). In light of this, you and the Company mutually agree that it is
in the best interests of Adventrx Pharmaceuticals, Inc. (the “Company”) and its stockholders that
these discussions continue. In furtherance of the foregoing, this letter agreement (this “Letter
Agreement”) memorializes our mutual agreements regarding the amendment of the Separation Agreement
as stated herein. Your agreement to the terms of this Letter Agreement does not alter the
Separation Agreement, except as otherwise specifically provided herein, and does not obligate you
to further negotiate the terms of the Separation Agreement.

In consideration of and exchange for your agreement to the terms of this Letter Agreement, the
Company agrees to pay you $40,000, less standard deductions and withholdings, to be paid to you in
4 equal installments of $10,000, less standard deductions and withholdings (the “Payment”) on the
following dates: November 11, 2008, November 17, 2008, November 24, 2008, and December 1, 2008.

In exchange for the Payment, you agree that you will not sign the Separation Agreement, as amended
by this Letter Agreement, before December 9, 2008 and you agree to the following amendments to the
Separation Agreement:

	 	1)	 	The last sentence of Section 1.1 of the Separation Agreement is amended and restated
to read in its entirety as follows:

“The Severance Payment will be made in 39 substantially equal installments payable to
Employee over a period of 18 months in accordance with the Company’s standard payroll
practices, beginning on the first payday following December 30, 2008 (the “Severance
Period”).”

	 	2)	 	The last sentence of Section 9.1 of the Separation Agreement is amended and restated
to read in its entirety as follows:

“If the signed Agreement is not received by Pamela Lopez, Human Resources, by 5:00
p.m. Pacific Time by December 30, 2008, ADVENTRX will assume Employee is not
interested in the Severance Package, and the offer will be automatically
withdrawn.”

 

 

 

The Company agrees that the terms of the Separation Agreement will not be altered, except as
provided herein, and explicitly agreed to in writing by you. Nothing provided herein obligates you
to further negotiate the terms of the Separation Agreement. Subject to your compliance with your
obligations under the Employment Documents (as defined in the Separation Agreement), the Company
agrees that the offers provided in and the terms of the Separation Agreement, including, but not
limited to, Sections 1.1 and 1.2 herein, will remain in effect through December 30, 2008, unless
otherwise agreed to in writing by you and the Company.

THE PARTIES TO THIS LETTER AGREEMENT, WHICH AMENDS THE SEPARATION AGREEMENT, AS PROVIDED HEREIN,
HAVE READ THE FOREGOING AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE,
THE PARTIES HAVE EXECUTED THIS LETTER AGREEMENT ON THE DATES SHOWN BELOW.

	 	 	 	 	 
	Dated:  November 7, 2008 	By:  	/s/
Evan M. Levine
 	 
	 	 	Evan Levine 	 

	 	 	 	 	 
	Dated:  November 7, 2008 	By:  	/s/
 Mark N.K. Bagnall
 	 
	 	 	Mark N.K. Bagnall 	 
	 	 	Executive Vice PresidentExhibit 10.07

Exhibit 10.07

PENTEGRA DEFINED CONTRIBUTION PLAN

FOR FINANCIAL INSTITUTIONS

16th Revision, Amended and Restated, Effective January 1, 2008

108 Corporate Park Drive
White Plains, N.Y. 10604

 

 

 

A tax-exempt, trusteed savings plan

established July 1, 1970

in order that eligible employees

of financial institutions and other organizations serving them

may save and invest on a regular, long term basis.

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	PURPOSE
	 	 	i	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	ARTICLE II PARTICIPATION AND MEMBERSHIP
	 	 	8	 
	Section 1. Employer Participation
	 	 	8	 
	Section 2. Employee Membership
	 	 	8	 
	ARTICLE III CONTRIBUTIONS
	 	 	12	 
	Section 1. Contributions by Members.
	 	 	12	 
	Section 2. Regular Contributions by Employer
	 	 	12	 
	Section 3. Supplemental Contributions by Employer
	 	 	14	 
	Section 4. 401(k) Features
	 	 	15	 
	Section 5. Remittance of Contributions
	 	 	22	 
	Section 6. Transfer of Funds and Rollover Contributions
	 	 	22	 
	Section 7. Limitations on Member Contributions and Matching
Employer
Contributions
	 	 	27	 
	Section 8. Profit Sharing Feature
	 	 	30	 
	Section 9. Catch-up Contributions
	 	 	33	 
	Section 10. Automatic Enrollment
	 	 	33	 
	ARTICLE IV INVESTMENT OF CONTRIBUTIONS
	 	 	37	 
	Section 1. General
	 	 	37	 
	Section 2. Qualified Default Investment Alternative
	 	 	38	 
	ARTICLE V
MEMBERS’ ACCOUNTS, UNITS AND VALUATION
	 	 	40	 
	ARTICLE VI
VESTING OF UNITS
	 	 	41	 
	Section 1. Vesting
	 	 	41	 
	Section 2. Forfeitures
	 	 	44	 
	ARTICLE VII WITHDRAWAL PAYMENTS
	 	 	46	 
	Section 1. General
	 	 	46	 
	Section 2. Account Withdrawal While Employed
	 	 	47	 
	Section 3. Account Withdrawal Upon Termination of Employment or
Employer Participation
	 	 	47	 
	Section 4. Account Withdrawal Upon Member’s Disability
	 	 	52	 
	Section 5. Member’s Death
	 	 	53	 
	Section 6. Minimum Distribution Requirements
	 	 	54	 

 

 - i - 

 

	 	 	 	 	 
	 	 	Page
	ARTICLE VIII LOAN PROGRAM
	 	 	60	 
	Section 1. General
	 	 	60	 
	Section 2. Loan Application
	 	 	60	 
	Section 3. Permitted Loan Amount
	 	 	61	 
	Section 4. Source of Funds for Loan
	 	 	61	 
	Section 5. Conditions of Loan
	 	 	61	 
	Section 6. Crediting of Repayment
	 	 	62	 
	Section 7. Cessation of Payments on Loan
	 	 	63	 
	Section 8. Loans to Former Members and Beneficiaries
	 	 	63	 
	ARTICLE IX ADMINISTRATION OF PLAN
	 	 	64	 
	Section 1. Board of Directors
	 	 	64	 
	Section 2. Trust Agreement
	 	 	65	 
	ARTICLE X MISCELLANEOUS PROVISIONS
	 	 	67	 
	Section 1. General Limitations
	 	 	67	 
	Section 2. Top Heavy Provisions
	 	 	69	 
	Section 3. Information and Communications
	 	 	72	 
	Section 4. Small Account Balances
	 	 	72	 
	Section 5. Amounts Payable to Incompetents, Minors or Estates
	 	 	72	 
	Section 6. Non-alienation of Amounts Payable
	 	 	72	 
	Section 7. Unclaimed Amounts Payable
	 	 	73	 
	Section 8. Leaves of Absence
	 	 	73	 
	Section 9. Return of Contributions to Employer
	 	 	74	 
	Section 10. Controlling Law
	 	 	74	 
	ARTICLE XI TERMINATION OF EMPLOYER PARTICIPATION
	 	 	75	 
	Section 1. Termination by Employer
	 	 	75	 
	Section 2. Termination by Board
	 	 	75	 
	Section 3. Termination Distribution
	 	 	75	 
	ARTICLE XII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
	 	 	76	 
	TRUSTS ESTABLISHED UNDER THE PLAN
	 	 	77	 

 

- ii - 

 

PURPOSE

The purpose of the Pentegra Defined Contribution Plan for Financial Institutions (the “Plan”
or “Pentegra DC Plan”) is to provide Members of participating Employers with a convenient way to
save on a regular and long term basis and, in addition to, or in lieu of such benefit, a benefit
under a Profit Sharing Feature, all as elected by the Employer, and as set forth herein and in the
Trust Agreement adopted as a part of this Plan. This Plan, as hereby amended and restated, and the
Trust established hereunder, are intended to qualify as a plan and trust which meet the
requirements of Sections 401(a), 401(k), and 501(a), respectively, of the Internal Revenue Code of
1986, as now in effect or hereafter amended, or any other applicable provisions of law including,
without limitation, the Employee Retirement Income Security Act of 1974, as amended. The Plan is
applicable to Members who earn one Hour of Employment on or after the Plan’s Effective Date unless
specifically provided otherwise herein or otherwise required by applicable law. If a Member has not
earned an Hour of Employment on or after the Plan’s Effective Date, the Member’s benefits shall be
based on the Plan’s predecessor plan document. The Effective Date of this Plan, as herein amended
and restated, is generally as of January 1, 2008, unless otherwise provided herein or under
applicable law.

 

- i - 

 

ARTICLE I DEFINITIONS

The following words and phrases as used in this Plan shall have the following meanings:

	1.	 	“Account” means the Plan account established and maintained in respect of each Member
pursuant to Article V, including the Member’s 401(k) Account, Roth 401(k) Account, Regular
Account, Rollover Account (including Profit Sharing Rollover Amounts), Safe Harbor CODA
Account, and Profit Sharing Account.
	 
	2.	 	“Actual Deferral Percentage Test Safe Harbor” means the method described in Section 4(J) of
Article III for satisfying the actual deferral percentage test of Section 401(k) (3) of the
Code.
	 
	3.	 	“Actual Deferral Percentage Test Safe Harbor Contributions” means Employer matching
contributions and non-elective contributions described in Section 4(J) of Article III.
	 
	4.	 	“Basic Amounts” means, with respect to a Member, the contributions made on behalf of the
Member by the Employer pursuant to Article III, Section 2(B) and earnings thereon.
	 
	5.	 	“Beneficiary” means the person or persons designated to receive any amount payable under the
Plan upon the death of a Member. Such designation may be made or changed only by the Member on
a form provided by, and filed with, the Board prior to his death. If the Member is not
survived by a Spouse and if no Beneficiary is designated, or if the designated Beneficiary
predeceases the Member, then any such amount payable shall be paid to such Member’s estate
upon his death.
	 
	6.	 	“Board” means the Board of Directors provided for in Article IX, Section 1.
	 
	7.	 	“Break in Service” means a Plan Year during which an individual has not completed more than
500 Hours of Employment, as determined by the Board in accordance with the IRS Regulations.
Solely for purposes of determining whether a Break in Service has occurred, an individual
shall be credited with the Hours of Employment which such individual would have completed but
for a maternity or paternity absence, as determined by the Board in accordance with this
Article I, Paragraph (7), the Code and the applicable regulations issued by the DOL and the
IRS; provided, however, that the total Hours of Employment so credited shall not exceed 501
and the individual timely provides the Board with such information as it may require. Hours of
Employment credited for a maternity or paternity absence shall be credited entirely (i) in the
Plan Year in which the absence began if such hours of Employment are necessary to prevent a
Break in Service in such year, or (ii) in the following Plan Year. For purposes of this
Article I, Paragraph (7),
maternity or paternity absence shall mean an absence from work by reason of the individual’s
pregnancy, the birth of the individual’s child or the placement of a child with the
individual in connection with the adoption of the child by such individual, or for purposes
of caring for a child for the period immediately following such birth or placement.
	 
	8.	 	“Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All
citations to sections of the Code are to such sections as they may from time to time be
amended or renumbered.

 

1

 

	9.	 	“Commencement Date” means the date on which an Employer begins to participate in the Plan.
	 
	10.	 	“Contribution Determination Period” means the Plan Year, fiscal year, or calendar or fiscal
quarter, as elected by an Employer, upon which eligibility for and the maximum permissible amount
of any contribution to the Profit Sharing Feature, as defined in Article III, Section 8, is
determined. Notwithstanding the foregoing, for purposes of Article VI, Section 2(B), Contribution
Determination Period means the Plan Year.
	 
	11.	 	“Disability” means a Member’s disability as defined in Article VII, Section 4.
	 
	12.	 	“DOL” means the United States Department of Labor.
	 
	13.	 	“Employee” means any person in the Employment of, and who receives a salary from, an Employer,
and any leased employee within the meaning of Section 414(n)(2) of the Code, unless the Employer
elects to exclude leased employees from participation of the Plan under Article II, Section 2(H).
Notwithstanding the foregoing, if such leased employees constitute less than twenty percent (20%)
of the Employer’s Non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii)
of the Code, such leased employees are not Employees if they are covered by a plan meeting the
requirements of Section 414(n)(5)(B) of the Code. A director of the Employer is not eligible to
participate in the Plan unless he is also an Employee.
	 
	14.	 	“Employer” means any entity which has adopted the Plan in accordance with Article II, Section
1.
	 
	15.	 	“Employment” means all periods of service with an Employer commencing with the Employee’s first
day of employment or reemployment and ending on the date a break in service begins. The first day
of employment or reemployment is the first day the
Employee performs an hour of service. An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods of a year will be expressed
in terms of days.
	 
	 	 	Hour of service shall mean each hour for which an Employee is paid or entitled to payment
for the performance of duties for an Employer.
	 
	 	 	For purposes of this Section 15, break in service is a period of severance of at least 12
consecutive months.
	 
	 	 	Period of severance is a continuous period of time during which the Employee is not employed
by an Employer. Such period begins on the date the Employee retires, quits or is discharged
or, if earlier, the 12 month anniversary of the date on which the Employee was otherwise
first absent from service.
	 
	 	 	If an Employer is a member 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 Section 414(c) of the Code), or any other entity required to be
aggregated with the Employer pursuant to section 414(o) of the Code, service will be
credited for any employment for any period of time for any other member of such group.
Service will also be credited for any individual required under section 414(n) or section 414(o) to be considered an employee of any Employer aggregated under section 414(b), (c), or
(m).

 

2

 

	 	 	In the case of an Employee who is absent from work for maternity or paternity reasons, the
12-consecutive month period beginning on the first anniversary of the first date of such
absence shall not constitute a break in service. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy
of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the
placement of a child with the Employee in connection with the adoption of such child by such
Employee, or (4) for purposes of caring for such child for a period beginning immediately
following such birth or placement.
	 
	 	 	Solely for purposes of determining vesting, “Employment” shall include service performed by
an individual for an Employer or members of an affiliated service group (under Code Section
414(m)), a controlled group of corporations (under Code Section 414(b)), or a group of
trades or businesses under common control (under Code Section 414(c)), of which the Employer
is a member, during the period such individual is not a member of a class of Employees
otherwise eligible to participate in the Plan.
	 
	16.	 	“Enrollment Date” means the date on which an Employee becomes a Member as provided under
Article II, Section 2.
	 
	17.	 	“ERISA” means the Employee Retirement Income Security Act of 1974, as now in effect or as
hereafter amended.
	 
	18.	 	“401(k) Account” means the Plan account established and maintained in respect of a Member
pursuant to Article III, Section 4 and Article V, and shall include all amounts
(and earnings thereon) credited thereto on behalf of the Member pursuant to the provisions of
Article III. Unless specified otherwise, the term “401(k) Account” shall also include a Member’s
Roth 401(k) Account.
	 
	19.	 	“401(k) Elective Deferral” means a Member’s pre-tax elective Salary deferrals pursuant to
Article III, Section 4 and a Member’s Roth Elective Deferrals pursuant to Article III, Section
4(D).
	 
	20.	 	“Highly Compensated Employee” or “Highly Compensated Member” means an Employee or a Member (i)
who is a 5 percent owner at any time during the look-back year or determination year, or (ii) (a)
who is employed during the determination year and who during the look-back year received
compensation from the Employer in excess of $105,000 (in 2008) (as adjusted pursuant to the Code
and Regulations for changes in the cost of living), and (b) if elected by the Employer was in the
top-paid group of Employees for such look-back year.
	 
	 	 	For this purpose, the determination year shall be the Plan Year. The look-back year shall be
the 12-month period immediately preceding the determination year.

The top-paid group shall consist of the top 20 percent of the Employees when ranked on the
basis of compensation paid by the Employer.
	 
	 	 	The determination of who is a Highly Compensated Employee will be made in accordance with
Section 414(q) of the Code and the IRS Regulations thereunder.

 

3

 

	21.	 	“Hour of Employment” means

(A) Each hour for which an Employee is paid, or entitled to payment, for the
performance of duties for an Employer. These hours will be credited to the Employee for the
computation period in which the duties are performed; and

(B) Each hour for which an Employee is paid, or entitled to payment, by an Employer on
account of a period of time 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. No more than
501 Hours of Employment will be credited under this Subsection (B) for any single continuous
period (whether or not such period occurs in a single computation period). Hours under this
Subsection (B) will be calculated and credited pursuant to Section 2530.200b-2 of the DOL
Regulations which is incorporated herein by this reference; and

(C) Each hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by an Employer. The same Hours of Employment will not be credited both
under Subsection (A) or (B), as the case may be, and under this Subsection (C). These hours
will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.

Hours of Employment will be credited for employment with other members of an affiliated
service group (under Code Section 414(m)), a controlled group of corporations (under Code
Section 414(b)), or a group of trades or businesses under common control (under Code Section
414(c)), of which the Employer is a member, and any other entity required to be aggregated
with such Employer pursuant to Code Section 414(o).

Hours of Employment will also be credited for any individual considered an Employee for
purposes of the Plan under Code Section 414(n) or Section 414(o).

Solely for purposes of determining eligibility to participate, “Hour of Employment”
shall include service performed by an individual for an Employer or members of an affiliated
service group (under Code Section 414(m)), a controlled group of corporations (under Code
Section 414(b)), or a group of trades or businesses under common control (under Code Section
414(c)), of which the Employer is a member, during the period such individual is not a
member of a class of Employees otherwise eligible to participate in the Plan.

	22.	 	“IRS” means the United States Internal Revenue Service.
	 
	23.	 	“Leave of Absence” means an absence authorized by an Employee’s Employer on a uniform basis, in
accordance with Article X, Section 8.

 

4

 

	24.	 	“Matching Amounts” means, with respect to a Member, the contributions made on behalf of the
Member by the Employer pursuant to Article III, Section 2(A) and earnings thereon.
	 
	25.	 	“Member” means an Employee enrolled in the membership of the Plan under Article II, Section 2.
Notwithstanding the foregoing, Member shall include a former Member, except for purposes of Article
III (other than Section 6 thereof) of the Plan.
	 
	26.	 	“Month” means any calendar month.
	 
	27.	 	“Non-highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.
	 
	28.	 	“Normal Retirement Age” means the Member’s sixty-fifth (65th) birthday.
	 
	29.	 	“Plan” or “Pentegra DC Plan” means the Pentegra Defined Contribution Plan for Financial
Institutions established herein and as from time to time amended.
	 
	30.	 	“Plan Year” means a 12 month period ending December 31.
	 
	31.	 	“Profit Sharing Account” means the Plan account established in respect of each Member pursuant
to Article III, Section 8(B)(2) and Article V which shall be maintained separate from any other
Account established in respect of such Member under the Plan.
Except as otherwise indicated under the Plan, a Member’s Profit Sharing Account shall not
include his Profit Sharing Rollover Amounts.
	 
	32.	 	“Profit Sharing Rollover Amounts” means, with respect to an Employee or Member whose Employer
participates in the Plan solely under Article III, Section 8 (Profit Sharing Feature), any amounts
(and earnings thereon) transferred or contributed on behalf of such Employee or Member pursuant to
Article III, Section 6(C).
	 
	33.	 	“Qualified Default Investment Alternative” or “QDIA” means an investment alternative under
Article IV, Section 2 that satisfies the requirements of Section 404(c)(5) of ERISA and U.S.
Department of Labor Regulations Section 2550.404c-5(e), and any guidance issued thereunder, and
which has been approved by the Board.
	 
	34.	 	“Regular Account” means the Plan account established and maintained in respect of a Member
pursuant to Article III, Section 2(C) and Article V, and shall include all amounts (and earnings
thereon) credited thereto on behalf of the Member pursuant to the provisions of Article III.
	 
	35.	 	“Regulations” means the applicable regulations issued under the Code, ERISA or other applicable
law, by the IRS, the DOL or any other governmental authority and any proposed or temporary
regulations or rules promulgated by such authorities pending the issuance of such regulations.
	 
	36.	 	“Rollover Account” means the Plan account established in respect of each Member pursuant to
Article III, Section 6(C) and Article V which shall be maintained separate from any other Account
established in respect of such Member under the Plan. For purposes of Article III, Section 4(H),
Article VII, Sections 1 and 2, and Article VIII, a
Member’s Rollover Account shall not include his Profit Sharing Rollover Amounts unless
otherwise indicated therein.

 

5

 

	37.	 	“Roth Elective Deferral” means an elective deferral that is: (a) designated irrevocably by the
Member at the time of the cash or deferred election as a Roth contribution that is being made in
lieu of all or a portion of the pre-tax elective deferrals the Member is otherwise eligible to make
under the Plan; and (b) treated by the Employer as includible in the Member’s income at the time
the Member would have received that amount in cash if the Member had not made a cash or deferred
election.
	 
	38.	 	“Roth 401(k) Account” means the Plan account established and maintained in respect of a Member
pursuant to Article III, Section 4(D) and Article V, and shall include all amounts (and earnings
thereon) credited thereto on behalf of the Member pursuant to
the provisions of Article III, Section 4(D) and including Roth Elective Deferrals made pursuant to
an Employer’s automatic enrollment program under Article III, Section 10, where such automatic
401(k) Elective Deferrals are Roth Elective Deferrals.
	 
	39.	 	“Safe Harbor CODA Account” means the Plan account established in respect of each Member
pursuant to Article III, Section 4(J) and Article V which shall be maintained separate from any
other Account established in respect of such Member under the Plan.
	 
	40.	 	“Salary” means regular basic monthly (or other periodic) salary or wages, exclusive of special
payments such as overtime, bonuses, fees, deferred compensation (other than amounts deferred
pursuant to a Member’s election under Article III, Section 4), severance payments, and
contributions by the Employer under this or any other plan (other than before tax contributions
made on behalf of a Member under a Code Section 125 cafeteria plan or contributions made under Code
Section 132(f), unless the Employer specifically elects to exclude such contributions). Commissions
shall be included at the Employer’s option within such limits, if any, as may be set by the
Employer and applied uniformly to all its commission Employees. In addition, Salary may also
include, at the Employer’s option, special payments such as (i) overtime or (ii) overtime plus
bonuses. If an
Employer elects to generally include bonuses in the definition of Salary, the Employer may
nevertheless elect to exclude a particular type of bonus (e.g, long term incentive
compensation payments), provided such exclusion is applied uniformly to all its Employees.
	 
	 	 	If an Employer elects to include the special payments enumerated in (i) or (ii) above in the
definition of Salary or, if the Employer elects to include commissions in the definition of
Salary, such Salary shall be determined based on the amounts received by the Member during
the relevant determination period. Otherwise, unless an Employer specifically requests to
include Salary changes received by a Member during the relevant determination period and is
granted permission by the Board, a Member’s monthly Salary rate is one twelfth of his annual
Salary rate as of each January 1. If commissions are included in Salary, unless an Employer
specifically requests to include commissions received by a Member during the relevant
determination period and is granted permission by the Board, they shall be calculated on a
uniform basis based on the commissions received by the Member during the 12 month period
prior to the determination period. As an alternative to the foregoing definition, at the
Employer’s option, Salary may be defined to include total taxable compensation reported on
the Member’s IRS Form W-2,
plus deferrals, if any, pursuant to Section 401(k) of the Code, Section 125 of the Code, and
Section 132(f) of the Code (unless the Employer specifically elects to exclude such Section
125 and Section 132(f) deferrals), but excluding the payment of compensation deferred from
previous years. In no event, may a Member’s Salary for any Plan Year exceed for purposes of
the Plan $200,000 or, effective
January 1, 1994, $150,000 (adjusted for cost of living to the extent permitted by the Code
and the IRS Regulations).

 

6

 

	 	 	For Plan Years beginning after December 31, 1996, the family member aggregation rules of
Code Section 414(q)(6) (as in effect prior to the Small Business Job Protection Act of 1996)
are eliminated.
	 
	 	 	The annual Salary of each Member taken into account in determining allocations, shall not
exceed $230,000 (in 2008) as adjusted for cost-of-living increases in accordance with
section 401(a)(17)(B) of the Code.
	 
	41.	 	“Spouse” or “Surviving Spouse” means the individual to whom a Member or former Member was
married on the date such Member withdraws his Account, or if such Member has not withdrawn his
Account, the individual to whom the Member or former Member was married on the date of his death.
	 
	42.	 	“Supplemental Amounts” means, with respect to a Member, the contributions made on behalf of the
Member by the Employer pursuant to Article III, Section 3 and earnings thereon.
	 
	43.	 	“Trustee” means the Trustee or Trustees provided for in Article IX, Section 2.
	 
	44.	 	“Trust Fund” means the Trust Fund or Funds established by the Trust Agreement or Agreements
provided for in Article IX, Section 2.
	 
	45.	 	“Unit” means the unit of measure described in Article V of a Member’s proportionate interest in
the Plan’s Investment Funds.
	 
	46.	 	“Valuation Date” means any business day of any month for the Trustee, except that in the event
the underlying portfolios of any Investment Fund cannot be valued on such date, the Valuation Date
for such Investment Fund shall be the next subsequent date on which the underlying portfolio(s) can
be valued. Valuations shall be made as of the close of business on such valuation date(s).
	 
	47.	 	“Year of Employment” means a 12-month period of Employment.
	 
	48.	 	“Year of Service” means any Plan Year during which an individual completed at least 1,000 Hours
of Employment, or satisfied any alternative requirement, as determined by the Board in accordance
with any applicable regulations issued by the DOL and the IRS.
	 
	49.	 	The masculine pronoun wherever used shall include the feminine pronoun.

 

7

 

ARTICLE II PARTICIPATION AND MEMBERSHIP

Section 1. Employer Participation

Any financial institution, or other organization serving it, may apply to the Board for
participation in the Plan if: (A) as of its Commencement Date and in accordance with
Section 410(b) of the Code and the IRS Regulations (i) the percentage of Non-highly Compensated
Employees who will benefit under the Plan is at least 70% of the percentage of Highly Compensated
Employees who will benefit under the Plan (excluding such employees as are permitted to be excluded
under IRS Regulations), or (ii) the average benefit percentage test (as defined in Section
410(b)(2) of the Code and the IRS Regulations) will be satisfied with respect to the Employer. The
applicant shall submit the formal application and all required information, and the Board, in its
discretion, shall decide upon admittance and determine the Commencement Date. The Board may, in its
discretion and at such times as it may determine, require an affirmative showing by an Employer of
its continued compliance with the requirements of Section 410(b) of the Code and IRS Regulations.
Initial and continued participation shall be subject to the determination of the IRS that the Plan
and the Trust Fund are tax qualified and tax exempt under Sections 401(a) and 501(a) of the Code,
respectively. In addition, any Employee who participated in the Plan but who has been transferred
to a governmental or quasi-governmental agency serving the financial industry shall,
notwithstanding anything to the contrary in this Section, be permitted to continue to participate
in the Plan; provided that, in such case, such Employee’s employing agency has adopted the Plan.

An Employer may, at its option, subject to the provisions of the Plan, adopt different Plan
features and provisions (basis of participation) for different definable groups of employees,
including for employees acquired pursuant to a merger or acquisition. The Employer will be required
to demonstrate that this Section 1 and all other applicable Code and IRS Regulations continue to be
satisfied following the adoption of different bases of participation for separate and definable
groups of employees.

Section 2. Employee Membership

	(A)	 	Employer contributions on behalf of any Member shall be conditioned upon the Member making
contributions under Article III, Section 1, except in the case of the basic contribution feature
described in Article III, Section 2; the supplemental contribution feature (Formula (2)) described
in Article III, Section 3; the 401(k) Feature described in Article III, Section 4(B); the Safe
Harbor CODA non-elective contribution feature described in Article III, Section 4(J); or the Profit
Sharing Feature described in Article III, Section 8.
	 
	(B)	 	Every Employee (other than Employees who, at the election of the Employer, are excluded from
participation under this Section 2) shall be eligible for membership in the Plan on the later of:

	 	(1)	 	His Employer’s Commencement Date, or
	 
	 	(2)	 	The first day of the month, or, at the election of the Employer, the first day of the
calendar quarter, coincident with or next following his satisfaction of one or more of the
eligibility requirements described hereunder, as designated by his Employer: (i) the
Employee’s first day of Employment; (ii) the completion of any
number of months not to exceed 12 consecutive months or (iii) the completion of one Year of
Service or two Years of Service, and/or (iv) if the Employer so elects, it may adopt a
minimum age requirement from age 18 to age 21. An Employer, at its election and in a
uniform and nondiscriminatory manner, may waive the eligibility requirement(s) for
participation specified under this paragraph (B) for (1) all Employees, or (2) all those
Employees employed on or up to 12 months after the Employer’s Commencement Date under the
Plan.

 

8

 

	 	 	 	The eligibility requirement(s) designated by the Employer shall apply uniformly to all Plan
Features elected by the Employer. Notwithstanding the foregoing, the Employer may elect to
establish as an eligibility requirement (as a minimum service requirement, minimum age
requirement, or both) for Employer matching contributions, Employer basic contributions,
Employer supplemental contributions, Employer Safe Harbor CODA contributions, and/or
Employer Profit Sharing contributions (i) the completion of any number of months not to
exceed 12 consecutive months, or (ii) the completion of one 12-consecutive-month period,
and/or (iii) if the Employer so elects, it may adopt a minimum age requirement from age 18
to age 21. If, pursuant to Section 410(b)(4)(B), the Employer applies Code Section 410(b)
separately to the portion of the Plan (within the meaning of Code Section 414(l)) that
benefits only Employees who satisfy the eligibility requirements of this Section 2 that are
lower than age twenty-one (21) and completion of a Year of Service, the Plan is treated as
two separate plans for purposes of Code Section 401(k). Accordingly, if the Employer elects
to make a Safe Harbor CODA contribution, then such contribution shall not be made on behalf
of Employees who have not attained age twenty-one (21) and completed a Year of Service.
However, in such a case, Section 401(k) Elective Deferrals and the matching contribution
made pursuant to Article III, Section 2(A) on behalf of those Employees must satisfy
Article III, Sections 4(E), (F) and (G) and Article III, Section 7.
	 
	 	 	 	Subject to the requirements of the Code, where an Employee who participated as a Member
under the Plan terminates employment with an Employer and thereafter is reemployed by the
same (or a different) Employer, such Employee, subject to any applicable break in service
rules, shall participate immediately upon returning to employment with respect to the
Profit Sharing Feature and the Basic and Supplemental Employer Contribution and shall
participate on the next applicable payroll date with respect to Member Contributions,
Matching Employer Contributions, Safe Harbor Employer Contributions and the 401(k) Feature,
as and to the extent any such contribution feature is then maintained by such Employee’s
Employer and the Member has satisfied the eligibility requirements for receiving such
Employer contributions. In the case of an Employer that adopts a 401(k) Feature under
Article III, Section 4, the eligibility requirement(s) under such Feature, and any other
Plan Feature adopted by the Employer in addition to the 401(k) Feature, shall not exceed
the period described in clause (i) above, and, at
the election of the Employer, attainment of an age as elected by the Employer from age 18
to age 21 as described in clause (iii) above. In the event a Member is no longer part of an
eligible class of Employees and thus becomes ineligible to participate in the Plan, such
Employee, subject to any applicable break in service rules, shall participate immediately
upon returning to an eligible
class of Employees with respect to the Profit Sharing Feature and the Basic and
Supplemental Employer Contribution and shall participate on the next applicable
payroll date with respect to Member Contributions, Matching Employer Contributions,
Safe Harbor CODA contributions, and the 401(k) Feature, as and to the extent any
such contribution feature is then maintained by such Employee’s Employer and the
Member has satisfied the eligibility requirements for receiving such Employer
contributions.

 

9

 

	(C)	 	Where an Employer designates a one Year of Service or two Years of Service eligibility
requirement, an Employee must complete at least 1,000 Hours of Employment during each
12-consecutive-month eligibility computation period (measured from his date of Employment and then
from each January 1, thereafter). Where an Employer designates an eligibility waiting period of
less than 12 months, an Employee must, for purposes of eligibility, complete a required number of
hours (measured from his date of Employment and each anniversary thereafter) which is arrived at by
multiplying the number of months of the eligibility waiting period requirement by 83 ; provided,
however, if the Employee completes at least 1,000 Hours of Employment during the
12-consecutive-month eligibility computation period (measured from his date of Employment and then
from each January 1 thereafter) the Employee shall be deemed to satisfy the eligibility waiting
period designated by the Employer.

	(D)	(1)		The Employer shall notify each Employee of his membership in the Plan and shall furnish him
with an enrollment application in order that he may elect to make or receive contributions on his
behalf under Article III at the earliest possible date consonant with this Article.
	 
	 	(2)	 	All Employees whose Employment commences after the expiration date of the Employer’s
waiver of the eligibility requirement(s) shall be enrolled in the Plan in accordance with
the eligibility requirement(s) designated in Paragraph (B) above.
	 
	 	(3)	 	If it is determined that an Employee who is eligible to be enrolled has, for any
reason, not been so notified, such Employee shall be furnished an application by his
Employer and be retroactively enrolled, in accordance with the Plan and applicable law, as
of the date he first became eligible, upon receipt by the Board of the application properly
executed. In accordance with the Plan and applicable law, the Employer may be required to
make certain contributions, and the Employee may, at his election, make any contributions
he could have made, had the Employee been enrolled on such earlier date. The Account of an
Employee
who is retroactively enrolled shall, upon such enrollment, consist solely of the number of
Units which, as of the Valuation Date coincident with or next following such enrollment,
may be credited to him pursuant to Article V based upon the amount of contributions
received by the Board.

	(E)	 	An Employee shall become a Member on his Enrollment Date which shall be the date on which he
becomes eligible. However, no person shall under any circumstances become a
Member unless and until his enrollment application is filed with, and accepted by, the
Plan. If an Employee fails to complete the enrollment form furnished to him, the Employer
shall do so on his behalf.

 

10

 

	(F)	 	At the option of the Employer, an Employee who is employed on or prior
to his Employer’s Commencement Date may make a one time election to
waive participation in the Plan on the Employer’s Commencement Date.
	 
	(G)	 	Membership under all provisions of the Plan shall terminate upon the
earlier of (a) a Member’s termination of Employment and payment to him
of his entire vested interest, or (b) his death.
	 
	(H)	 	The following Employees, at the Employer’s election, may be excluded
from participation in the Plan:

	 	(i)	 	Employees who are included in a unit of Employees covered by a
collective bargaining agreement between the Employee representatives and
one or more Employers if there is evidence that retirement benefits were
the subject of good faith bargaining between such Employee
representatives and such Employer(s). For this purpose, the term
“Employee representative” does not include any organization where more
than one-half of the membership is comprised of owners, officers and
executives of the Employer;
	 
	 	(ii)	 	Employees who are non-resident aliens and who receive no earned income
from the Employer which constitutes income from sources within the
United States;
	 
	 	(iii)	 	Employees who are employed on an hourly basis. Notwithstanding, if the
Employee is employed on an hourly basis following the adoption date of
the Plan
by the Employer, but prior to the adoption of an hourly exclusion by his
Employer, such employee shall will continue to receive benefits on the
same basis as a regular salaried Member, despite classification as an
hourly employee unless the employee is otherwise excluded from
participation in the Plan at the election of the Employer under this
Section 2(H). In the event an individual who was not part of an eligible
class of Employees becomes part of an eligible class, such individual
will be eligible to participate in the Plan in accordance with the
provisions of this Article II;
	 
	 	(iv)	 	Employees who are not regular full-time or part-time Employees (Flex Staff
Employees);
	 
	 	(v)	 	Leased Employees within the meaning of Section 414(n)(2) of the Code; and
	 
	 	(vi)	 	Employees hired under a written agreement which precludes membership and
provides for a specific period of employment not in excess of one year.

 

11

 

ARTICLE III CONTRIBUTIONS

Section 1. Contributions by Members

A Member of an Employer may elect to make contributions under the Plan (in 1% increments) up to a
maximum percentage specified by the Employer not to exceed 100% of his Salary. Each Employer shall
elect whether: (A) its Members’ contributions must be based on a percentage of Salary (in 1%
increments); (B) its Members’ contributions must be based on a flat dollar amount of Salary; or (C)
to permit its Members to make contributions based on either a percentage or flat dollar amount of
Salary. A Member may change his contribution rate or suspend his contributions at any time, but
reduced or suspended contributions may not subsequently be made up.

Section 2. Regular Contributions by Employer

	(A)	 	Matching Employer Contributions
	 
	 	 	Under this Section, an Employer shall contribute to the Plan on behalf of each of its
Members (subject to any possible suspension under Article VII) an amount equal to a
percentage (as specified by the Employer) of the Member’s contributions (determined, if
elected by the Employer, on the basis of the Plan Year) not in excess of a maximum of
50% (as specified by the Employer) of his Salary. Such contributions, unless otherwise
elected by the Employer, shall be made on a payroll period basis. Notwithstanding, the
Employer may elect to determine Employer matching contributions based upon the entire
Plan Year. A Member’s Salary and any limitation on matching contributions shall be
applied based upon the applicable payroll period, unless the Employer elects to determine
matching contributions based upon the Plan Year. In such instance, a Member’s Salary
and the applicable limits for the entire Plan Year shall be used to determine Employer
matching contributions.
	 
	 	 	The percentage chosen by the Employer shall be in accordance with the schedule of
contribution formulas listed below. Such contribution formula must be uniformly
applicable to all its Members on a payroll period basis (or on the basis of such other
period as elected by the Employer), except where the Employer has elected to provide a
separate basis of participation for different definable groups of employees under the Plan.

	 	 	 	 	 	 	 	 	 
	 

	 	Formula 0
	 	-
	 	 	 	0% of the Member’s contributions.
	 
	 	 	 	 	 	 	 	 
	 

	 	Formula 25
	 	-
	 	 	 	25% of the Member’s contributions.
	 
	 	 	 	 	 	 	 	 
	 

	 	Formula 50
	 	-
	 	 	 	50% of the Member’s contributions.
	 
	 	 	 	 	 	 	 	 
	 

	 	Formula 75
	 	-
	 	 	 	75% of the Member’s contributions.
	 
	 	 	 	 	 	 	 	 
	 

	 	Formula 100
	 	-
	 	 	 	100% of the Member’s contributions.

 

12

 

	 	 	 	 	 	 	 	 	 
	 

	 	Formula Step (1)
	 	-
	 	(i)
	 	50% of the Member’s contributions through the
third year of Employment.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(ii)
	 	75% of the Member’s contributions during the
fourth and fifth years of Employment.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(iii)
	 	100% of the Member’s contributions upon
completion of 5 or more years of Employment.
	 
	 	 	 	 	 	 	 	 
	 

	 	Formula Step (2)
	 	-
	 	(i)
	 	100% of the Member’s contributions through the
third year of Employment.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(ii)
	 	150% of the Member’s contributions during the
fourth and fifth years of Employment.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(iii)
	 	200% of the Member’s contributions upon
completion of 5 or more years of Employment.
	 
	 	 	 	 	 	 	 	 
	 	 	Formula Step (3)	 	-	 	A percentage of the Member’s contributions chosen by the
Employer through the Member’s third year of Employment
with an increased percentage of the Member’s contributions
as elected by the Employer to apply during the fourth and
fifth years of Employment and a further increased percentage
of the Member’s contributions to apply upon completion of 5
or more years of Employment.
	 
	 	 	 	 	 	 	 	 
	 	 	Formula 150	 	-	 	150% of the Member’s contributions.
	 
	 	 	 	 	 	 	 	 
	 	 	Formula 200	 	-	 	200% of the Member’s contributions.

Notwithstanding the matching formulas provided above, an Employer may at its option, specify the
percentage of the Member’s contributions which will be matched by the Employer.

	(B)	 	Basic Employer Contributions
	 
	 	 	An Employer may, at its option, make a basic contribution equal to a uniform percentage
(as specified by the Employer) of each of its Members’ Salaries for each month or payroll
period, as applicable, provided that in no event shall such percentage exceed 15%. The
percentage so specified may be elected or changed by the Employer by filing a properly
completed form with the Pentegra DC Plan Office. No more than one such change may
be made by an Employer during any year. An employer may restrict the allocation of
such basic contribution to those Members who were employed with the Employer on the
last working day of the month or payroll period for which the basic contribution is made.
	 
	 	 	At the election of the Employer, any basic contribution shall be credited to its Members’
401(k) Accounts or Regular Accounts on a uniform basis.
	 
	(C)	 	Regular Accounts
	 
	 	 	A Regular Account shall be established and maintained for each Member on whose
behalf contributions are made to the Plan pursuant to Section 1 or 2 of this Article.

 

13

 

Section 3. Supplemental Contributions by Employer

An Employer may, at its option, make a supplemental contribution under Formula (1) or (2) below:

Formula (1) - A uniform percentage (as specified by the Employer) of each Member’s contributions
not in excess of a maximum percentage (if the Employer elects to impose such a maximum) of the
Member’s Salary which were received by the Plan during the preceding Plan Year. Such supplemental
contribution may be made on or before the last day of February in any year on behalf of all those
Members who were in its employ on the last working day of the preceding Plan Year. For purposes of
this Section, Members on a Type 1 non-military Leave of Absence (as defined under Article I,
Paragraph (23) and Article X, Section 8(B)(1)), or a Type 4 military Leave of Absence (as defined
under Article I, Paragraph (23) and Article X, Section 8(B)(4)), shall be deemed employed on the
last working day of such preceding Plan Year.

Formula (2) - A uniform dollar amount per Member or a uniform percentage limited to a specific
dollar amount, if elected by the Employer, of each Member’s Salary (i) for the preceding Plan Year
or fiscal year, regardless of whether the Member was eligible to participate in the Plan during the
entire Plan Year (or fiscal year), or (ii) if an Employer so elects with respect to all of its
Members, for the portion of the preceding Plan Year (or fiscal year) during which the Member was
eligible to participate in the Plan. Such supplemental contribution may be made within the time
prescribed by law, including extensions of time, for filing of the Employer’s federal income tax
return on behalf of all those Members who were in its employ on the last working day of the
preceding Plan Year (or, at the Employer’s option, the Employer’s fiscal year). Notwithstanding
anything herein to the contrary, Employer contributions under Article III, Sections 2(A) and 2(B)
and Formula 2 of this Article III, Section 3 shall not exceed, in the aggregate, 25% of the
Member’s Salary for such Plan Year. The Employer may, at its option, elect to make a contribution
under this paragraph to only those Members whose Salary is less than an amount to be specified by
the Employer to the extent that such Salary limit is less than the dollar amount under Section
414(q) of the Code for such year.

For purposes of this Section, Members on a Type 1 non-military Leave of Absence (as defined under
Article I, Paragraph (23) and Article X, Section 8(B)(1)), or a Type 4 military Leave of Absence
(as defined under Article I, Paragraph (23) and Article X, Section 8(B)(4)), shall be deemed
employed on the last working day of such preceding Plan Year (or fiscal year). The percentage
contributed under this Formula (2) shall be
limited in accordance with the Employer’s matching formula and basic contribution rate under
Section 2 of this Article such that the sum of the Employer’s Formula (2) supplemental contribution
plus the Employer basic contribution and the maximum Employer matching contribution under Section 2
of this Article shall not exceed 15% of Salary for such year.

At the election of the Employer, any supplemental contribution shall be credited either to its
Members’ 401(k) Accounts (but not to the Member’s Roth 401(k) Account) or Regular Accounts on a
uniform and nondiscriminatory basis.

 

14

 

Section 4. 401(k) Features

	(A)	 	An Employer may, at its option, adopt either the 401(k) Feature under Paragraph (B) of
this Section or one of the 401(k) Features
described in Paragraph (C) of this
Section. In
addition, an Employer may elect, in conjunction with electing a Paragraph (B) or
Paragraph (C) 401(k) Feature, a Roth Elective Deferral feature under Paragraph (D).
Under any 401(k) Feature, there shall be established for each of its Members a “401(k)
Account.” A Member’s 401(k) Account shall be invested pursuant to his overall
directions under Article IV but maintained separately from his Regular Account
(consisting of the value of contributions made under Sections 1 and 2 of this Article).
Based on the Employer’s election in accordance with Article III, Section 1, a Member
contributing under this 401(k) feature shall be permitted to make deferrals based upon a
uniform percentage (in whole percentages), or flat dollar amount of his Salary, as his
Employer shall elect, so that the Member reaches the Code Section 402(g) limit by the
end of the Plan Year. Should such Member not reach the 402(g) limit by the last
contribution reporting period, the Member will be permitted to make a final 401(k)
Elective Deferral which will enable a Member to precisely reach the limit under 402(g) of
the Code. Such final contribution may be made based on a percentage of the Member’s
compensation which is not a whole percentage. Notwithstanding anything in this Article
III, Section 4 to the contrary, and in accordance with IRS Regulation Section 1.401(k)-
1(a)(3)(iii), Member contributions may not be made prior to the Member’s performance
of services with respect to which the Member contributions are made or, if earlier, when
the compensation on which the Member contribution is based would be currently
available.
	 
	(B)	 	Option 1 - Under the 401(k) Feature provided in this Paragraph (B), each Member may
elect to defer 1% up to a maximum percentage specified by the Employer not to exceed
100% (in 1% increments) of his Salary or, subject to Article III, Section 3, a flat dollar
amount of his Salary, or, if permitted by the Employer, either a percentage of his Salary
or flat dollar amount, as the Member shall elect, and direct his Employer to contribute
such amount to his 401(k) Account. Such deferral to the 401(k) Account shall reduce the
Member’s contribution under Section 1 of this Article.
	 
	 	 	The Employer shall contribute to each Member’s 401(k) Account an amount equal to 2%
of his Salary not in excess of $3,750, subject to Article X, Section 1 of the Plan, unless
the Member has deferred amounts of his Salary pursuant to the preceding paragraph, in
which case the Employer’s 2% contribution will be allocated to the Member’s Regular
Account. The amount which the Employer would otherwise be required to contribute
with respect to each Member under Section 2 of this Article shall be reduced, but not
below zero, by the amount which it contributes with respect to the Member under this
Paragraph (B). Notwithstanding anything in this Paragraph to the contrary, should a
Member’s deferrals to the 401(k) Account reach the maximum specified under the
provisions of Paragraph (I) below in any Plan Year, the Employer’s 2% contribution will
be allocated to the Member’s Regular Account for the remainder of such Plan Year.

 

15

 

The Employer, at its option, may adopt either of the two additional 401(k) Features described
below:

	(C)	 	Option 2 - Under this Feature, each Member may elect to make deferrals to his 401(k)
Account and/or contributions to his Regular Account in an amount of 1% of, or subject to
Article III, Section 1, a flat amount of, Salary, or, if permitted by the Employer, either a
percentage of his Salary or flat dollar amount, up to a maximum percentage specified by
the Employer not to exceed 100% (in 1% increments) of his Salary, except that amounts
deferred to the 401(k) Account shall reduce the Member’s contribution under Section 1 of
this Article. Amounts contributed under this Option 2 may be allocated between the
401(k) Account and/or the Regular Account based on multiples of 1%. Notwithstanding
anything herein to the contrary, a Member making a Roth 401(k) Elective Deferral may
only make such deferral to his 401(k) Account.

If so adopted, Employer contributions under the Plan, which shall be made on behalf of
each Member in an amount equal to a percentage of the Member’s 401(k) Elective
Deferrals to his 401(k) Account and contributions to his Regular Account as specified by
the Employer under Section 2 of Article III of his Salary, shall first be allocated to a
Member’s 401(k) Account until total Member deferrals and Employer contributions
allocated to the Member’s 401(k) Account equal a percentage specified by the Employer.
Thereafter, the Employer contributions, with respect to both Member 401(k) Elective
Deferrals and Regular contributions, shall be contributed to the Member’s Regular
Account in an amount pursuant to the percentage elected in the preceding sentence.

Notwithstanding the Employer election made under this Option 2, if the Member has
deferred amounts of his Salary equal to the maximum specified under the provisions of
Paragraph (I) below, the Employer shall contribute the remaining Employer contributions
to the Member’s Regular Account.
	 
	 	 	Option 3 - Under this Feature each Member may make deferrals to his 401(k) Account,
but not contributions to his Regular Account. The Employer shall contribute under the
Plan on behalf of each Member an amount equal to a percentage, specified by the
Employer under Section 2 of Article III, of the Member’s 401(k) Elective Deferrals to his
401(k) Account. The Employer’s contributions under this Feature shall be made to the
Member’s Regular Account.
	 
	(D)	 	Roth Elective Deferrals.

	 	(1)	 	General Application.

	 	(a)	 	This subsection will apply to contributions beginning June 1, 2006.
	 
	 	(b)	 	As of June 1, 2006, if an Employer so elects, the Plan will accept Roth
Elective Deferrals made on behalf of Members. A Member’s Roth
Elective Deferrals will be allocated to a separate account maintained for
such deferrals as described in Paragraph (D)(2).
	 
	 	(c)	 	Unless specifically stated otherwise or as provided under applicable law,
Roth Elective Deferrals will be treated as elective deferrals for all
purposes under the Plan.

 

16

 

	 	(2)	 	Separate Accounting.

	 	(a)	 	Contributions and withdrawals of Roth Elective Deferrals will be credited
and debited, respectively, to the Roth 401(k) Account maintained for each
Member.

	 	(b)	 	The Plan will maintain a record of the amount of Roth Elective Deferrals
in each Member’s Roth 401(k) Account.
	 
	 	(c)	 	Gains, losses and other credits or charges must be separately allocated on
a reasonable and consistent basis to each Member’s Roth 401(k) Account
and the Member’s other Accounts under the Plan.
	 
	 	(d)	 	No contributions other than Roth Elective Deferrals and properly
attributable earnings will be credited to Member’s Roth 401(k) Account.

	(E)	 	The actual deferral percentages for Highly Compensated Employees shall, in accordance
with the Code and IRS Regulations, satisfy either (1) or (2) as follows:

	 	(1)	 	Prior Year Testing:
	 
	 	 	 	Notwithstanding any other provision of this Section 4, the actual deferral
percentage for a Plan Year for Highly Compensated Employees for such Plan
Year and the prior year’s actual deferral percentage for Members who were Non-highly Compensated Employees for the prior Plan Year must satisfy one of the
following tests: (a) the actual deferral percentage for a Plan Year of those
Employees who are Highly Compensated Employees for the Plan Year shall not
exceed the prior year’s actual deferral percentage of those Members who are Non-highly Compensated Employees for the prior Plan Year multiplied by 1.25; or (b)
the actual deferral percentage for a Plan Year for Members who are Highly
Compensated Employees for the Plan Year shall not exceed the prior year’s actual
deferral percentage for Members who were Non-highly Compensated Employees
for the prior Plan Year multiplied by 2.0, provided that the actual deferral
percentage for Members who are Highly Compensated Employees does not
exceed the actual deferral percentage for Members who were Non-highly
Compensated Employees in the prior Plan year by more than 2 percentage points.
	 
	 	 	 	For the first Plan Year that the Plan permits any Member to make elective
deferrals and this is not a successor plan, for purposes of the foregoing tests, the
prior year’s Non-highly Compensated Employees’ actual deferral percentage shall
be 3 percent unless the Employer has elected to use the current Plan Year’s actual
deferral percentage for these Members. The Employer may elect to change from
the Prior Year Testing method to the Current Year Testing method in accordance
with the Code and IRS Regulations.
	 
	 	(2)	 	Current Year Testing:
	 
	 	 	 	If elected by the Employer, the actual deferral percentage tests in (a) and (b)
above, will be applied by comparing the current Plan Year’s actual deferral
percentage for Members who are Highly Compensated Employees for such Plan
Year with the current Plan Year’s actual deferral percentage for Members who are
Non-highly Compensated Employees for such year. Once made, this election can
only be changed and the Prior Year Testing method applied if the Plan meets the
requirements for changing to Prior Year Testing set forth in applicable IRS
regulations.

 

17

 

For purposes of this Section 4, the “actual deferral percentage” for a Plan Year
means, for a specified group of Members for a Plan Year, the average of the ratios
(calculated separately for each Member in such group) of (a) the amount of
deferrals and/or contributions made to the Member’s 401(k) Account for the Plan
Year, to (b) the amount of the Member’s compensation (as defined in Section
414(s) of the Code) which, at the Employer’s election, shall include the
compensation required to be reported under Section 6041 or 6051 of the Code
(i.e., “W-2 compensation”) for the Plan Year or, alternatively, where specifically
elected by the Employer, for only that part of the Plan Year during which the
Member was eligible to participate in the Plan. An Employee’s actual deferral
percentage shall be zero if no 401(k) Elective Deferral or contribution is made by
him or on his behalf for such applicable Plan Year. If the Plan and one or more
other plans which include cash or deferred arrangements are considered as one
plan for purposes of Sections 401(a)(4) and 410(b) of the Code, the cash or
deferred arrangements included in such plans shall be treated as one arrangement
for purposes of this Section 4.

In accordance with IRS Regulations, the actual deferral percentage of a Member
who is a Highly Compensated Employee and who is eligible to participate in two
or more cash or deferred arrangements maintained by his Employer shall be
determined by treating all such cash or deferred arrangements as a single
arrangement.

	 	(3)	 	Notwithstanding anything herein to the contrary, and in accordance with IRS
Regulation Section 1.401(k)-2(a)(6)(iv) and 1.401(m)-2(a)(6)(v), no qualified
nonelective contributions shall be taken into account in determining the actual
deferral percentage for a Plan Year for a Non-highly Compensated Employee
under the Plan to the extent such contributions exceed for such Non-highly
Compensated Employee the greater of (a) 5% of the Non-highly Compensated
Employee’s compensation (as defined in Code Section 414(s)) and (b) the product
of (i) two times the “Plan’s representative contribution rate” (within the meaning,
as applicable, of IRS Regulation Section 1.401(k)-2(a)(6)(iv) and Section
1.401(m)-2(a)(6)(v) and (ii) the Non-highly Compensated Employee’s
compensation (as defined in Code Section 414(s)).

	(F)	 	The Pentegra DC Plan Office shall determine as of the end of the Plan Year whether one
of the actual deferral percentage tests specified in Paragraph (E) above is satisfied for
such Plan Year. This determination shall be made after first determining the treatment of
excess deferrals within the meaning of Section 402(g) of the Code under Paragraph (I)
below.

	 	(1)	 	In the event that neither of such actual deferral percentage tests is satisfied, the
Pentegra DC Plan Office shall, to the extent permissible under the Code and the
IRS Regulations, refund the excess contributions for the Plan Year in the
following order of priority: by (i) refunding such amounts deferred by the
Member and allocated to his 401(k) Account, or Roth 401(k) Account in
accordance with Paragraph F(2) below which were not matched by his Employer
(and any earnings and losses allocable thereto), and (ii) refunding amounts
deferred for such Plan Year by the Member and allocated to his 401(k) Account,
or Roth 401(k) Account in accordance with Paragraph (F)(2) below, (and any
earnings and losses allocable thereto) and, in accordance with the Code and
applicable IRS Regulations, forfeiting the amounts contributed for such Plan Year
by the Employer with respect to the Member’s 401(k) Elective Deferrals that are
returned pursuant to this Paragraph (and any earnings and losses allocable
thereto).

 

18

 

	 	(2)	 	In the case of a distribution of excess contributions, the Plan will distribute pre-
tax elective deferrals first.
	 
	 	(3)	 	The distribution of such excess contributions shall be made to Highly
Compensated Members to the extent practicable before the 15th day of the third
month immediately following the Plan Year for which such excess contributions
were made, but in no event later than the end of the Plan Year following such
Plan Year or, in the case of the termination of the Plan in accordance with Article
XII or termination of Employer participation in the Plan in accordance with
Article XI, no later than the end of the twelve-month period immediately
following the date of such termination. For purposes of this Section 4, “excess
contributions” means, with respect to any Plan Year, the excess of the aggregate
amount of 401(k) Elective Deferrals and/or contributions (and any earnings and
losses allocable thereto) made to the 401(k) Accounts of Highly Compensated
Members for such Plan Year, over the maximum amount of such deferrals and/or
contributions that could be made to the 401(k) Accounts of such Members
without violating the requirements of Paragraph (E) above, determined by
reducing 401(k) deferrals and/or contributions made by or on behalf of Highly
Compensated Members in order of the actual deferral percentages beginning with
the Highly Compensated Employee with the largest 401(k) Elective Deferral
amount for the Plan Year until such amount is reduced to be equal to the Highly
Compensated Employee with the next largest 401(k) Elective Deferral amount.
The procedure described in the preceding sentence shall be repeated until all
excess contributions have been eliminated and, as applicable, refunded.
Notwithstanding anything herein to the contrary, and in accordance with IRS
Regulation Section 1.401(k)-2(b)(2)(iv), the income allocable to the excess
contributions to be refunded shall be equal to the allocable gain or loss for the
Plan Year in question and, as applicable, for the “gap period” following the close
of the Plan Year and ending on the date that is seven days preceding the
distribution date. The Plan shall determine the allocable income in accordance
with IRS Regulation Section 1.401(k)-2(b)(2)(iv)(C) or (D) or, in accordance with
IRS Regulation Section 1.401(k)-2(b)(2)(iv)(B), any reasonable method for
computing the income allocable to the excess contribution.

	(G)	 	Notwithstanding the provisions of Paragraphs (E) and (F) above, the amount of excess
contributions to be distributed pursuant to Paragraph (F) above, with respect to a Member
for a Plan Year, shall be reduced by any excess deferrals distributed to such Member for
such Plan Year pursuant to Paragraph (I) below.

 

19

 

	(H)	 	A withdrawal from the vested portion of a Member’s 401(k) Account may be made only
upon (a) attainment of age 591/2, (b) hardship (as determined by the Board in accordance
with this Paragraph (H)), (c) termination of Employment, (d) death, (e) disability or (f)
termination of an Employer’s participation in the Plan provided the Employer certifies in
writing in such form as is satisfactory to counsel that no “alternative defined contribution
plan” within the meaning of Code Section 401(k)(10) and IRS Regulations Section
1.401(k)-1(d)(4) will be established or maintained by the Employer at the time of
termination of participation in the Plan or will be maintained through the period ending
twelve months after distribution of all assets from the Plan attributable to the Employer’s
participation in the Plan and amounts distributed upon such event shall be in the form of a
“lump sum distribution” within the meaning of Section 402(e)(4)(D) of the Code (without
regard to Code Sections 402(e)(4)(D)(i)(i)-(iv)). A withdrawal is on account of hardship
only if the distribution is both made on account of an immediate and heavy financial need
of the Member and is necessary to satisfy such financial need, and further provided that
no earnings in the Member’s 401(k) Account credited on or after January 1, 1989 and/or
Employer contributions made to the Member’s 401(k) Account on or after January 1,
1989 may be distributed in satisfying such need. For the purposes of this Paragraph (H),
the term “immediate and heavy financial need” shall be limited to the need of funds for
(i) the payment of medical expenses described in Section 213(d) of the Code previously
incurred by the Member, the Member’s Spouse, or any of the Member’s dependents (as
defined in Section 152 of the Code) or necessary for those persons to obtain such care,
(ii) the payment of tuition and room and board for the next twelve months of post
secondary education of the Member, the Member’s Spouse, the Member’s children, or any
of the Member’s dependents (as defined in Section 152 of the Code and, for taxable years
beginning on or after January 1, 2005, without regard to Section 152(b)(1),(b)(2) and
(d)(1)(B)), (iii) the purchase (excluding mortgage payments) of a principal residence for
the Member, (iv) the prevention of eviction of the Member from his principal residence
or the prevention of foreclosure on the mortgage of the Member’s principal residence; (v)
payments for burial or funeral expenses for the Member’s deceased parent, Spouse,
children or dependents (as defined in Section 152 of the Code, without regard to Code
Section 152(d)(1)(B)); or (vi) expenses for the repair of damage to the Member’s
principal residence that would qualify for the casualty deduction under Code Section 165
(determined without regard to whether the loss exceeds 10% of adjusted gross income).
For purposes of this Paragraph (H), a distribution generally may be treated as “necessary
to satisfy a financial need” if the Employer reasonably relies upon the Member’s written
representation that the need cannot be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by reasonable liquidation of the Member’s
assets, to the extent such liquidation would not itself cause an immediate and heavy
financial need, (iii) by cessation of Member 401(k) Elective Deferrals pursuant to Article
III, Section 4 of the Plan or Member Regular contributions pursuant to Article III, Section
1 of the Plan or (iv) by other distributions or nontaxable (at the time of the loan) loans
from plans maintained by the Employer or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms. The amount of any withdrawal
pursuant to this Paragraph (H) shall not exceed the amount required to meet the
demonstrated financial hardship, including any amounts necessary to pay any federal
income taxes and penalties reasonably anticipated to result from the distribution, as
certified to the Plan by the Member.
	 
	 	 	No amounts may be withdrawn on account of hardship pursuant to this Paragraph prior to
a Member’s withdrawal of the remaining vested balance of his Regular Account and
Rollover Account, notwithstanding the withdrawal restrictions contained in Article VII,
Section 2 or below.

 

20

 

Only one in-service withdrawal under this Paragraph may be made in any Plan Year, and any
amounts paid under this Article may not be returned to the Plan. The amount of a withdrawal
under this Paragraph (H) must be not less than the lesser of (i) $1,000, (ii) the full value
of the vested portion of the 401(k) Account (reduced by the amount of post-December 31, 1988
earnings and Employer 401(k) contributions for those Members who have not attained age 591/2),
if such value is less than $1,000, or (iii) the amount approved as a hardship withdrawal by
the Board.

	(I)	 	Notwithstanding any other provision of the Plan, no Member may defer to his 401(k) Account
during any Plan Year an amount in excess of $15,500 (in 2008) or such other amount as may be
provided in Section 402(g)(1) of the Code, and as adjusted for cost-of-living increases in
accordance with Section 402(g)(4) of the Code. In the event that the 401(k) Elective Deferrals
for a Member exceeds the limitation in the previous sentence, the amount of such excess,
increased by any income and decreased by any losses attributable thereto, shall be refunded to
such Member no later than the April 15 of the Plan Year following the Plan Year for which the
elective deferrals were made.

For purposes of Article III, Section 4 of the Plan, no Member shall be permitted to have
elective deferrals made under this Plan, or any other qualified plan maintained by the
Employer during the taxable year, in excess of the dollar limitation contained in section
402(g) of the Code in effect for such taxable year, except to the extent permitted under
Section 9 of this Article and section 414(v) of the Code, if applicable.

	(J)	 	Safe Harbor CODA

If the Employer has elected the Safe Harbor CODA option, the provisions of this Section shall
apply for the Plan Year and any provisions relating to the actual deferral percentage test
described in Section 401(k)(3) of the Code or the actual contribution percentage test
described in Section 401(m)(2) of the Code do not apply. Notwithstanding anything in the Plan
to the contrary, if the Employer has elected the Safe Harbor CODA option, then such option
shall comply and be administered in accordance with the applicable provisions of the safe
harbor requirements under the IRS Regulation Sections 1.401(k)-3 and 1.401(m)-3. To the
extent that any other provision of the Plan is inconsistent with the provisions of this
section, the provisions of the section govern.

	 	(i)	 	Actual Deferral Percentage Test Safe Harbor

	 	(1)	 	Unless the Employer elects to make enhanced matching contributions (within the
meaning of Section 401(k)(12)(B) of the Code and IRS Regulations Section
1.401(k)-3(c)(3)), the Employer will elect to contribute monthly or on another basis for
the Plan Year: (a) a safe harbor matching contribution to the Plan on behalf of each
eligible Employee equal to (I) 100 percent of the amount of the Employee’s 401(k)
Elective Deferrals that do not exceed 3 percent of the Employee’s Salary for the Plan
Year, plus (II) 50 percent of the amount of the Employee’s 401(k) Elective Deferrals
that exceed 3 percent of the Employee’s Salary but that do not exceed 5 percent of the
Employee’s Salary (“Basic Matching Contributions”); or (b) a safe harbor non-elective
contribution to the Plan on behalf of each eligible Employee equal to at least 3 percent
of the Employee’s Salary for the Plan Year.

 

21

 

	 	(2)	 	The Member’s benefit derived from the Actual Deferral Percentage Test Safe Harbor
Contributions is nonforfeitable and may not be distributed earlier than separation from
service, death, disability, an event described in Section 401(k)(10) of the Code, or the
attainment of age 591/2. In addition, such contributions must satisfy the Actual Deferral
Percentage Test Safe Harbor without regard to permitted disparity under Section 401(l)
of the Code.

	 	(3)	 	At least 30 days, but not more that 90 days, before the beginning of the Plan
Year, the Employer will provide each Eligible Employee a comprehensive notice of the
Employee’s rights and obligations under the Plan, written in a manner calculated to be
understood by the average Eligible Employee. If an Employee becomes eligible after the
90th day before the beginning of the Plan Year and does not receive the notice for that
reason, the notice must be provided no more than 90 days before the Employee becomes
eligible but not later than the date the Employee becomes eligible.

	 	(4)	 	In addition to any other election periods provided under the Plan, each Eligible
Employee may make or modify a deferral election during the 30-day period immediately
following receipt of the notice described above.

Section 5. Remittance of Contributions

The contributions of both Members and their Employer (including an administrative fee, as
determined by the Board, to be paid by the Employer to defray expenses attributable to its
participation in the Plan) shall be recorded by the Employer and remitted to the Board so that (i)
in the case of Employer Contributions the Board shall be in receipt thereof by the 15th day of the
month next following the month in respect of which such contributions are payable and (ii) in the
case of Member after-tax contributions and 401(k) Elective Deferrals, the Trustee or custodian
shall be in receipt thereof as soon as reasonably practicable, but in no event later than the 15th
business day of the month following the month in which the Member contributions are received by the
Employer or the 15th business day of the month following the month in which such amount would
otherwise have been payable to the Member in cash. Such amounts shall be credited to the Member’s
Account pursuant to Article V.

Section 6. Transfer of Funds and Rollover Contributions

	(A)	 	Upon such terms and conditions as the Board and the IRS shall approve, and provided that all
benefits (including all optional forms of benefit) under the prior retirement plan are
protected in accordance with Section 411(d)(6) of the Code, or any successor thereto, and the
IRS Regulations thereunder, a transfer of funds may be made to the Plan from a prior
retirement plan of an employer which was qualified under Section 401(a) of the Code so long as
such funds (a) have been allocated to the individual members of such prior plan, (b) shall be
allocated to the Accounts of the Members of the Plan to whom they were allocated under such
prior plan, and (c) shall be applied so that each Member affected thereby would receive a
benefit immediately after the transfer, if the Plan then terminated, at least equal to the
benefit he would have received upon a termination of such prior plan immediately before such
transfer. In addition to protecting those prior retirement plan benefits as required in the
preceding sentence, the Pentegra DC Plan Office may, in its discretion, preserve any other
prior retirement plan options which it
determines to be economically and administratively feasible and which are not required to be
protected under Section 411(d)(6) of the Code. Each Employee with respect to whom such a
transfer is made shall, upon such transfer, be eligible for membership in the Plan.

 

22

 

	(B)	 	If the funds so transferred are transferred from a retirement plan subject to Code Section
401(a)(11), then such funds shall be maintained in a separate account (including, as
applicable, a separate account for any such transfers that represent after-tax contributions
and related earnings) and any subsequent distribution of those funds, and earnings thereon,
shall be subject to the following provisions:

	 	(1)	 	The benefit to which a married Member is entitled shall, except as otherwise
provided in this Paragraph (B), be payable by purchase from an insurance company of a
single premium contract providing for a Qualified Joint and Survivor Annuity. The term,
“Qualified Joint and Survivor Annuity,” means a benefit providing an annuity commencing
immediately for the life of the Member, ending with the payment due on the last day of
the month coincident with or preceding the date of his death, and, if the Member dies
leaving a Surviving Spouse, a survivor annuity for the life of such Surviving Spouse
equal to one half of the annuity payable for the life of the Member under his Qualified
Joint and Survivor Annuity, commencing on the last day of the month following the date
of the Member’s death and ending with the payment due on the first day of the month
coincident with or preceding the date of such Surviving Spouse’s death.

	 	(2)	 	In lieu of the form of benefit described immediately above, any benefit payable
pursuant to this Paragraph (B) may be paid in one cash payment thereof, subject to the
provisions of Subparagraph (5) below.

	 	(3)	 	If a Member dies prior to the date payment of his benefit commences (i) without
leaving a Surviving Spouse, or (ii) leaving a Surviving Spouse and having made a valid
election to waive the Preretirement Survivor Annuity in accordance with Subparagraph (5)
below, then the remaining value of the Member’s account subject to this Paragraph (B)
shall become payable to his Beneficiary in a lump sum subject to Article III, Section
8(E)(2) and Article VII, Section 3(B).

	 	(4)	 	A Preretirement Survivor Annuity shall be paid to the Surviving Spouse of a
Member or former Member who dies before the commencement of payment of any benefit from
an account subject to this Paragraph (B). The term “Preretirement Survivor Annuity”
means a benefit providing for payment of 50% of the Member’s account balance as of the
Valuation Date coincident with or preceding the date of his death, by the purchase of a
single premium contract issued by an insurance company providing a survivor annuity to
his Surviving Spouse, for the life of such Surviving Spouse. Payment of a Preretirement
Survivor Annuity shall commence in the month following the month in which the Member
dies or as soon as practicable thereafter; provided, however, that to the extent
required by law, if the value of the amount used to purchase a Preretirement Survivor
Annuity exceeds $500, then payment of the Preretirement Survivor Annuity shall not
commence prior to the date the Member reached (or would have reached, had he lived)
Normal Retirement Age without the written consent of the Member’s Surviving Spouse.
Absence of any required consent will result in a deferral of payment of the
Preretirement Survivor Annuity to the month following the month in which occurs the
earlier of (i) the date the required consent is received by the Board or (ii) the date
the Member would have reached Normal Retirement Age had he lived.

 

23

 

	 	(5)	 	(i) In the case of the Qualified Joint and Survivor Annuity, the Fund shall no
less than 30 days and no more than 90 days prior to the annuity starting date provide
each Member a written explanation of: (i) the terms and conditions of the Qualified
Joint and Survivor Annuity; (ii) the Member’s right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the
rights of a Member’s Spouse; and (iv) the right to make, and the effect of, a
revocation of a previous election to waive the Qualified Joint and Survivor Annuity. In
the case of the Preretirement Survivor Annuity, the Fund shall provide each Member
within the applicable period for such Member a written explanation of the Preretirement
Survivor Annuity in such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements applicable to the Qualified Joint and
Survivor Annuity.

The applicable period for a Member is whichever of the following periods ends last:
(i) the period beginning with the first day of the Plan Year in which the Member
attains age 32 and ending with the close of the Plan Year preceding the Plan Year in
which the Member attains age 35; (ii) a reasonable period ending after the individual
becomes a Member; or (iii) a reasonable period ending after this subparagraph (i)
first applies to the Member. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from service in the case of a
Member who separated from service before attaining age 35.

For purposes of applying the preceding paragraph, a reasonable period ending after
the enumerated events described in (ii) and (iii) is the end of the two-year period
beginning one year prior to the date the applicable event occurs, and ending one year
after that date. In the case of a Member who separates from service before the Plan
Year in which age 35 is attained, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year after separation. If such
a Member thereafter returns to employment with an Employer, the applicable period for
such Member shall be redetermined.

(ii) A Member may, with the written consent of his Spouse (unless the Board makes a
written determination in accordance with the Code and the Regulations that no such
consent is required), elect in writing (i) to receive his benefit in a single lump sum
payment within the 90-day period ending on his annuity starting date (which is the
first day of the first period for which an amount is paid as an annuity or any other
form); and (ii) to waive the Preretirement Survivor Annuity within the period
beginning on the first day of the Plan Year in which the Member attains age 35 and
ending on the date of his death. Any election made pursuant to this Subparagraph (5)
may be revoked by a Member, without spousal consent at any time within which such
election could have been made. Such an election or revocation must be made in
accordance with procedures developed by the Board and shall be notarized.

 

24

 

Any consent by a Spouse obtained under this provision (or establishment that the
consent of a Spouse may not be obtained) shall be effective only with respect to such
Spouse. A consent that permits designations by the Member without any requirement of
further consent by such Spouse must acknowledge that the Spouse has the right to limit
consent to a specific Beneficiary, and a specific form of benefit where applicable,
and that the Spouse voluntarily elects to relinquish either or both of such rights. No
consent obtained under this provision shall be valid unless the Member has received
the notice described in subparagraph (i) above.

Notwithstanding anything to the contrary, effective for Plan Years beginning after
December 31, 1996, the 90-day period in which a Member may, with the written consent
of his Spouse, elect in writing to receive his benefit in a single lump sum shall not
end before the 30th day after the date on which explanations of the Qualified Joint
and Survivor Annuity and Preretirement Survivor Annuity are provided. A Member may
elect (with any applicable spousal consent) to waive any requirement that the written
explanation be provided at least 30 days before the annuity starting date (or to waive
the 30-day requirement under the preceding sentence) if the distribution commences
more than seven days after such explanation is provided.

	 	(6)	 	Notwithstanding the preceding provisions of this Paragraph (B), any benefit of
$500, subject to the limits of Article X, Section 4, or less shall be paid in a lump
cash sum in full settlement of the Plan’s liability therefor; provided, however, that in
the case of a married Member, no such lump sum payment shall be made after benefits have
commenced without the consent of the Member and his Spouse or, if the Member has died,
the Member’s Surviving Spouse. Furthermore, if the value of the benefit payable to a
Member or his Surviving Spouse is greater than $500 and the Member has or had not
reached his Normal Retirement Age, then to the extent required by law, unless the Member
(and, if the Member is married and his benefit is to be paid in a form other than a
Qualified Joint and Survivor Annuity, his Spouse, or, if the Member was married, his
Surviving Spouse) consents in writing to an immediate distribution of such benefit, his
benefit shall continue to be held in the Trust until a date following the earlier of (i)
the date of the Board’s receipt of all required consents or (ii) the date the Member
reaches his earliest possible Normal Retirement Age under the Plan (or would have
reached such date had he lived), and thereafter shall be paid in accordance with this
Paragraph (B).

	(C)	 	Upon such terms and conditions as the Board shall approve, all Members (regardless of whether
their Accounts are active) shall be permitted to make rollover contributions to the Plan of
amounts held on their behalf in:

	 	(1)	 	a qualified plan described in section 401(a) or 403(a) of the Code, (including
after-tax contributions for direct rollovers);

 

25

 

	 	(2)	 	an annuity contract described in section 403(b) of the Code, (excluding after-tax
contributions);

	 	(3)	 	an eligible plan under section 457(b) of the Code which is maintained by a state,
political subdivision of a state, or an agency or instrumentality of a state or
political subdivision of a state; and

	 	(4)	 	an individual retirement account or annuity described in section 408(a) or 408(b)
of the Code that is eligible to be rolled over and would otherwise be includible in
gross income.

An Employer may, at its option, permit its Employees to make rollover contributions
prior to the date as of which the Employees become eligible for membership in the
Plan. All such amounts which are accepted by the Pentegra DC Plan Office shall be
certified in form and substance satisfactory to the Pentegra DC Plan Office by the
Member as consisting of all or a portion of an “eligible rollover distribution” or a
“rollover contribution” within the meaning of Section 402(c)(4) or Section 408(d)(3),
respectively, of the Code. A Member shall have a nonforfeitable vested interest in all
such amounts credited to his Rollover Account.

	 	(5)	 	Notwithstanding anything in this paragraph (C) to the contrary, the Plan will
accept a rollover contribution to a Roth 401(k) Account if it is a direct rollover from
another Roth elective deferral account under an applicable retirement plan described in
Section 402A(e)(1) of the Code, and only to the extent the rollover is permitted under
the rules of Section 402(c) of the Code and the IRS Regulations issued thereunder. The
Plan will accept a rollover contribution to a Roth 401(k)
Account which is not a direct rollover only to the extent the rollover is permitted
under applicable law.

	 	(6)	 	Upon such terms and conditions as the Board and the IRS shall approve, a Member
shall be permitted to transfer amounts deferred and/or contributed on behalf of such
Member to a nonqualified Plan maintained by his Employer to the Plan. Such transfer to
the Plan from the Employer’s nonqualified deferred compensation Plan shall be made by
the 15th day of the third month immediately following the Plan Year for which
compensation was deferred by the Member. The transferred amounts shall be treated as
contributions under Article III for such Plan Year and shall be categorized as 401(k)
Elective Deferrals under Article III, Section 4 or as Employer Matching Contributions
under Article III, Section 2, as applicable.

 

26

 

Section 7. Limitations on Member Contributions and Matching Employer Contributions

	(A)	 	Notwithstanding any other provision of this Section 7, the actual contribution percentage for
a Plan Year for Highly Compensated Employees shall, in accordance with the Code and IRS
Regulations, satisfy either (i) or (ii) as follows:

	 	(1)	 	Prior Year Testing:

	 	(a)	 	the actual contribution percentage for a Plan Year for Members who
are Highly Compensated Employees for the Plan Year shall not exceed the prior
Plan Year’s actual contribution percentage for Members who were Non-highly
Compensated Employees for the prior Plan Year multiplied by 1.25; or (b) the
actual contribution percentage for Members who are Highly Compensated Employees
for the Plan Year shall not exceed the prior year’s actual contribution
percentage for Members who were Non-highly Compensated Employees for the prior
Plan Year multiplied by 2, provided that the actual contribution percentage for
Members who are Highly Compensated Employees does not exceed the “actual
contribution percentage” for Members who were Non-highly Compensated Employees in
the prior Plan Year by more than 2 percentage points.

For the first Plan Year this Plan permits any Member to make contributions under Article III,
Section 1 (after-tax), provides for Employer matching contributions or both, and this is not
a successor plan, for purposes of the foregoing tests, the prior Plan Year’s Non-highly
Compensated Employees’ actual contribution percentage shall be 3 percent unless the Employer
has elected to use the current Plan Year’s actual contribution percentage for these Members.

	 	(ii)	 	Current Year Testing:

If elected by the Employer, the actual contribution percentage tests in (a) and (b),
above, will be applied by comparing the current Plan Year’s actual contribution
percentage for Members who are Highly Compensated Employees for such Plan Year with
the current Plan Year’s actual contribution percentage for Members who are Non-highly
Compensated Employees for such year. Once made, this election can only be changed and
the Prior Year Testing method applied if the Plan meets the requirements for changing
to Prior Year Testing set forth in applicable IRS regulations.

For purposes of this Section 7, the “actual contribution percentage” for a Plan Year
means, for a specified group of Employees, the average of the ratios (calculated
separately for each Employee in such group) of (a) the sum of (i) Employer matching
contributions credited to his Regular Account as described in Section 2 and Section 3,
Formula (1) of this Article for the Plan Year, (ii) Member contributions credited to
his Regular Account for the Plan Year, and (iii) in accordance with and to the extent
permitted by the IRS Regulations, 401(k) Elective Deferrals credited to his 401(k)
Account, to (b) the amount of the Member’s compensation (as defined in Section 414(s)
of the Code) which, at the Employer’s election, shall include the compensation
required to be reported under Section 6041 or 6051 of the Code (i.e., “W-2
compensation”) for the Plan Year or, alternatively, where specifically elected by the
Employer, for only that part of the Plan Year during which the Member was eligible to
participate in the Plan. The 401(k) Elective Deferrals referred to in (iii) above in
this Paragraph (A) may be taken into account in determining the actual contribution
percentage for a Plan Year if the actual deferral percentage test is satisfied prior
to and following the exclusion of the 401(k) Elective Deferrals that are used to
satisfy the actual contribution percentage test. An Employee’s actual contribution
percentage shall be zero if no such contributions are made by him or on his behalf for
such Plan Year. The
actual contribution percentage taken into account under this Paragraph (A) for any
Highly Compensated Employee who is eligible to make Member contributions or receive
Employer matching contributions under two or more plans described in Section 401(a) of
the Code or arrangements described in Section 401(k) of the Code that are maintained
by the Employer shall be determined as if all such contributions were made under a
single plan.

 

27

 

	 	(iii)	 	Notwithstanding anything in this Section 7 to the contrary, and in accordance
with IRS Regulation 1.401(m)-2(a)(5), no Employer matching contributions shall be taken
into account in determining the actual contribution percentage for a Plan Year for a
Non-highly Compensated Employee under the Plan to the extent such contributions exceed
for such Non-highly Compensated Employee the greatest of (A) 5% of the Non-highly
Compensated Employee’s compensation (as defined in Code Section 414(s)); (B) the
Non-highly Compensated Employee’s 401(k) Elective Deferrals for the Plan Year; and (C)
the product of (1) two times the Plan’s “representative matching rate” (within the
meaning of IRS Regulation Section 1.401(m)-2(a)(5)(ii)) and (2) the Non-highly
Compensated Employee’s 401(k) Elective Deferrals. The foregoing limitation on Employer
matching contributions shall also apply to matching contributions with respect to a
Non-highly Compensated Employee’s after-tax contributions or the total of a Non-highly
Compensated Employee’s 401(k) Elective Deferrals and after-tax contributions.

	(B)	 	The Pentegra DC Plan Office shall determine as of the end of the Plan Year whether one of the
actual contribution percentage tests specified in Paragraph (A) above is satisfied for such
Plan Year. This determination shall be made after first determining the treatment of excess
deferrals within the meaning of Section 402(g) of the Code under Article III, Section 4(I) and
then determining the treatment of excess contributions under Article III, Section 4(F). In the
event that neither of the actual contribution percentage tests is satisfied, the Pentegra DC
Plan Office shall (i) refund the excess aggregate contributions to the extent attributable to
Member after-tax contributions and vesting matching contributions for which the underlying
Member after-tax contributions or 401(k) Elective Deferrals are not subject to correction
under the actual deferral percentage or actual contribution percentage tests for such year
(and any income related thereto) and (ii) forfeit the excess aggregate contributions to the
extent attributable to non-vested Employer matching contributions and vested Employer matching
contributions for which the underlying Member after-tax contributions or 401(k) Elective
Deferrals are subject to correction under the actual deferral percentage or actual
contribution percentage tests for such year (and any income related thereto) in the manner
described in Paragraph (C) below. For purposes of this Section 7, “excess aggregate
contributions” means, with respect to any Plan Year and with respect to any Member, the excess
of the aggregate amount of contributions (and any earnings and losses allocable thereto) made
as (a) Employer matching contributions to their Regular Accounts, (b) Member contributions to
their Regular Accounts and (c) 401(k) Elective Deferrals by Members to their 401(k) Accounts
(to the extent permitted by the IRS Regulations and if the Pentegra DC Plan Office elects to
take into account such elective deferrals when calculating the actual contribution percentage)
of Highly Compensated Members for such Plan Year, over the maximum amount of such
contributions that could be made as Employer matching contributions to Regular Accounts,
Member contributions to Regular Accounts and 401(k) Elective Deferrals by Members to 401(k)
Accounts of such Members without violating the requirements of Paragraph (A) above.

 

28

 

	(C)	 	To the extent excess aggregate contributions must be refunded or forfeited for a Plan Year,
such excess amounts will be refunded (or, as applicable, forfeited) first to the Highly
Compensated Employees with the largest Contribution Percentage Amounts (as defined below)
taken into account in calculating the actual contribution percentage test for the year the
excess arose and continuing in descending order until all the excess aggregate contributions
are refunded (or, as applicable, forfeited). For purposes for the preceding sentence, the
“largest amount” is determined after distribution of any excess aggregate contributions. For
purposes of this paragraph, “Contribution Percentage Amounts” means the sum of Member
after-tax contributions, Employer matching contributions, and Employer supplemental
contributions under Formula (1) made under the Plan on behalf of the Member for the Plan Year.
However, such Contribution Percentage Amounts shall not include Employer matching
contributions that are forfeited either to correct excess aggregate contributions or because
the contributions to which they relate are excess deferrals, excess contributions or excess
aggregate contributions. The refund or forfeitures of such excess aggregate contributions
shall be made with respect to such Highly Compensated Members to the extent practicable before
the 15th day of the third month immediately following the Plan Year for which such excess
aggregate contributions were made, but in no event later than the end of the Plan Year
following such Plan Year or, in the case of the termination of the Plan in accordance with
Article XII or termination of Employer participation in the Plan in accordance with Article
XI, no later than the end of the twelve-month period immediately following the date of such
termination.

	(D)	 	Notwithstanding anything in this Article III, Section 7 to the contrary, and in accordance
with IRS Regulation Section 1.401(m)-2(b)(2)(iv), the income allocable to the excess aggregate
contributions shall be equal to the allocable gain or loss for the Plan Year in question and,
as applicable, for the “gap period” following the close of the Plan Year and ending on the
date that is seven days preceding the distribution date. The Plan shall determine the
allocable income in accordance with IRS Regulation Section 1.401(m)-2(b)(2)(iv)(C) or (D) or,
in accordance with IRS Regulation Section 1.401(m)-2(b)(2)(iv)(B), any reasonable method for
computing the income allocable to the excess aggregate contributions.

	(E)	 	Should an Employer’s matching formula fail to satisfy the applicable nondiscrimination
requirements under the Code, the Employer shall be permitted to make additional matching
contributions to the Regular account of Non-highly Compensated Employees (to be determined at
the Employer’s discretion) and shall be contributed by the Employer by March 15th following
the Plan Year in which matching contributions is discriminatory. Such matching contributions
shall be added to the matching contributions for the immediately preceding Plan Year and shall
be subject to this Section 7.

 

29

 

Section 8. Profit Sharing Feature

	(A)	 	An Employer may, at its option, adopt a Profit Sharing Feature as described herein, subject
to any other provisions of the Plan, where applicable. This Feature may be adopted either in
lieu of, or in addition to, any other Plan Feature contained in this Article III, including
the contributions described in Sections 1 through 4 of this Article. The Profit Sharing
Feature is designed to provide the Employer a means by which to provide discretionary
contributions on behalf of Employees eligible under the Plan.

Where investments provided for the contributions permitted under Article III, Sections 1
through 4 were subject to the Members’ investment directions among the Investment Funds, and
the Profit Sharing Feature elected by the Employer requires that all account balances be
invested in the Stable Value Fund or the Government Money Market Fund (subject to rules
adopted by the Board), the accounts provided under Article III, Sections 1 through 4 will
continue to be subject to the Members’ directions, pursuant to the provisions of Article IV.

	(B)	(1)	 	Subject to the provisions of Article X, Section 1, an Employer may, but shall not be
required to, contribute on behalf of each of its Members, on an annual (or at the election of
the Employer, quarterly) basis for any Plan Year or fiscal year of the Employer (as the
Employer shall elect), a discretionary amount not to exceed the maximum amount allowable as a
deduction to the Employer under the provisions of Section 404 of the Code. Such Profit Sharing
contribution must be received by the Pentegra DC Plan Office within the time prescribed by
law, including extensions of time, for filing of the Employer’s federal income tax return
following the close of the Contribution Determination Period on behalf of all those Members
who were in its employ on the last working day of such Contribution Determination Period. For
purposes of making the allocations described in this Subparagraph (B)(1), a Member who is on a
Type 1 non-military Leave of Absence (as defined in Article I, Paragraph (23) and Article X,
Section 8(B)(1)) or a Type 4 military Leave of Absence (as defined in Article I, Paragraph
(23) and Article X, Section 8(B)(4)), shall, notwithstanding the provisions of this Paragraph,
be treated as if he were a Member who was an Employee in Employment on the last day of such
Contribution Determination Period.

	 	(2)	 	A Profit Sharing Account shall be established and maintained on behalf of each
Member whose Employer has adopted the Profit Sharing Feature showing each Member’s
interests in the Investment Funds or other investment vehicles attributable solely to
such Profit Sharing contributions. The interest in each Investment Fund shall be
represented by Units. These Units will be valued in accordance with Article V. Such
account shall be known as the “Profit Sharing Account,” as defined under Article I,
Paragraph (31) and shall be an account segregated from all other accounts maintained
under the Plan with respect to such Member.

	(C)	(1)	 	Contributions shall be allocated to each Member’s Profit Sharing Account for the
Contribution Determination Period at the election of the Employer, in accordance with one of
the options selected below: (i) in the same ratio as each Member’s Salary during such
Contribution Determination Period bears to the total of such Salary of all Members, (ii) in
the same ratio as each Member’s Salary for the portion of the Contribution Determination
Period during which the Member satisfied the Employer’s eligibility requirement(s) bears to
the total of such Salary of all Members or (iii) an Employer may integrate the Profit Sharing
Feature with Social Security in accordance with the following provision.

 

30

 

	 	(a)	 	If the annual (or quarterly, if applicable) contribution for
any Contribution Determination Period (which period shall include, for the
purposes of the following maximum Social Security integration levels
provided under Subparagraphs (C)(1) and (2) for those Employers who have
elected quarterly allocations of contributions, the four quarters of a
Plan Year or fiscal year) is allocated based on a uniform percentage, such
contribution shall be allocated to each Member who is employed by the
Employer on the last day of such Contribution Determination Period in a
uniform percentage (i) of each Member’s Salary during the Contribution
Determination Period (the “Base Contribution Percentage”), plus a uniform
percentage of each Member’s Salary for the Contribution Determination
Period in excess of the Social Security Taxable Wage Base for such
Contribution Determination Period (the “Excess Contribution Percentage”),
or (ii) of each Member’s Salary for the portion of the Contribution
Determination Period during which the Member satisfied the Employer’s
eligibility requirement(s), if any, up to the Base Contribution Percentage
for such Contribution Determination Period, plus a uniform percentage of
each Member’s Salary for the portion of the Contribution Determination
Period during which the Member satisfied the Employer’s eligibility
requirement(s), equal to the Excess Contribution Percentage.

	 	(b)	 	If the annual (or quarterly, if applicable) contribution for
any Contribution Determination Period (which period shall include, for the
purposes of the following maximum Social Security integration levels
provided under Subparagraphs (C)(1) and (2) for those Employers who have
elected quarterly allocations of contributions, the four quarters of a
Plan Year or fiscal year) is allocated based on a specified dollar amount,
such contribution shall be allocated to each Member who is employed by the
Employer on the last day of such Contribution Determination Period as
follows:

	 	(i)	 	If the Plan is top heavy with respect to the
Employer, (A) contributions will be allocated to each Member’s
Account in the ratio that each Member’s Salary bears to the total
of all Members’ Salary, but not in excess of 3% of such Member’s
Salary; (B) any remaining contributions after the application of
(A) will be allocated to each Member’s Account in the ratio of
each Member’s Salary for the Plan Year in excess of the
Integration Level (as defined in the applicable Employer
resolution) bears to the sum of all Members’ Salary in excess of
the Integration Level, but not in excess of 3% of such Member’s
excess Salary; (C) any remaining contributions after the
application of clauses (A) and (B) will be allocated to each
Member’s Account in the ratio that the sum of each Member’s total
Salary and Salary in excess of the Integration Level bears to the
sum of all Members’ total Salary and Salary in excess of the
Integration Level, but not in excess of the profit sharing Maximum
Disparity Rate (as defined below); and (D) any remaining
contributions after the application of clauses (A), (B) and (C)
will be allocated to each Member’s Account in the ratio that each
Member’s Salary bears to the total of all Members’ Salary. If the
Plan is not top-heavy with respect to the Employer, or if the
minimum top heavy contribution or benefit is provided under
another plan, clauses (A) and (B) may be disregarded.

 

31

 

	 	(ii)	 	The profit sharing Maximum Disparity Rate is equal to
the lesser of (A) or (B), reduced by the percentage of Salary allocated
under Paragraph (C)(1)(b)(i)(A) above,: (A) 5.7%; or (B) the applicable
percentage determined as follows: (1) if the Integration Level is more
than twenty percent (20%), but less than eighty percent (80%), of the
Social Security Taxable Wage Base, the applicable percentage is 4.3%; (2)
if the Integration Level is eighty percent (80%) or more of the Social
Security Taxable Wage Base, the applicable percentage is 5.4%.

	 	(2)	 	The Excess Contribution Percentage described in Subparagraph (1) above may not
exceed the lesser of (i) the Base Contribution Percentage, or (ii) the greater of (1)
5.7% or (2) the percentage equal to the portion of the Code Section 3111(a) tax imposed
on employers under the Federal Insurance Contributions Act (as in effect as of the
beginning of the Plan Year) which is attributable to old-age insurance. For purposes of
this Subparagraph (2), “compensation” as defined in Section 414(s) of the Code shall be
substituted for “Salary” in determining the Excess Contribution Percentage and the Base
Contribution Percentage.

	 	(3)	 	The Employer may not adopt the Social Security integration options provided above
if any other integrated defined contribution or defined benefit plan is maintained by
the Employer during any Contribution Determination Period.

	 	(4)	 	No contributions by Members shall be made under the Profit Sharing Feature
provided under this Section 8 of Article III.

	(D)	(1)	 	Contributions under the Profit Sharing Feature shall be invested in accordance with the
provisions and procedures of Article IV, except as otherwise provided in this Paragraph (D).
At the Employer’s election, contributions on behalf of Members may be invested (i) entirely in the Stable Value Fund or the
Government Money Market Fund, subject to Board-adopted rules, (ii) pursuant to the
Member’s directions among the Investment Funds and other investment vehicles or (iii)
entirely in a QDIA. If the Employer does not so elect, or until an effective direction
is made by Members, all contributions made pursuant to this Article III, Section 8,
shall be invested in a QDIA.

	 	(2)	 	A Member’s investment directions, if any, with respect to contributions made
under the Profit Sharing Feature, shall be submitted in writing and shall be separate
from the directions submitted with respect to all other contributions under the Plan.

 

32

 

	 	(3)	 	Where an Employer previously elected to invest contributions pursuant to Article
IV and subsequently elects to have all future contributions invested entirely in
accordance with Subparagraph (D)(1) above, Units previously accumulated in the
Investment Funds or other investment vehicles prior to such election will continue to be
subject to the Members’ investment directions in accordance with Article IV.
All future Employer contribution allocations made following the Employer’s election
shall be allocated in accordance with Subparagraph (D)(1).

	(E)	(1)	 	Except as otherwise provided under Article VII, Section 2, no amounts may be withdrawn
from a Member’s Profit Sharing Account while still employed by the Employer, other than (i)
amounts required to be distributed pursuant to the terms of a Qualified Domestic Relations
Order, as defined in Article X, Section 6 of the Plan; or (ii) amounts withdrawn on account of
mistake of fact, within one year after the payment of the contribution, as reviewed and
approved by the Pentegra DC Plan Office.

	 	(2)	 	Subject to the provisions of Article VII of the Plan, upon receipt by the Plan of
a notice of termination of Employment, a Member may request to withdraw any or all
vested amounts in his Profit Sharing Account, including any amounts held in a Rollover
Account for such Member, following the filing of a notice of withdrawal with the
Pentegra DC Plan Office.

Section 9. Catch-up Contributions

All employees who are eligible to make elective deferrals under this Plan and who have attained age
50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance
with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions
shall not be taken into account for purposes of the provisions of the Plan implementing the
required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as
failing to satisfy the provisions of the Plan implementing the requirements of section 401(k)(3),
401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such
catch-up contributions. Catch-up contributions made pursuant to this Article III, Section 9 shall,
at the Employer’s election, be eligible for matching contributions in accordance with Article III,
Section 2.

Section 10. Automatic Enrollment

	(A)	 	An Employer may elect that 401(k) Elective Deferrals shall automatically be made to the Plan
on behalf of a Member in lieu of Salary, unless a Member affirmatively elects: (1) that no
such 401(k) Elective Deferrals shall be made to the Plan, or (2) in accordance with Article
III, Section 1, the percentage of Salary, or specified dollar amount that shall be contributed
to the Plan as a 401(k) Elective Deferrals.

	 	(1)	 	An Employer so electing shall also elect: (a) whether such 401(k) Elective
Deferrals shall be pre-tax elective deferrals or Roth Elective Deferrals; and (b) the
percentage of the Member’s Salary, or, as applicable, flat dollar amount, which shall be
contributed to the Plan.

 

33

 

	 	(2)	 	Notwithstanding anything in Article III, Section 10(A) to the contrary, an
Employer may elect to limit the automatic enrollment feature to Employees who commence
Employment on or after the date the automatic enrollment feature becomes effective with
respect to the Employer, or to those Employees who have not yet commenced participation
in the Plan, provided that such Employer election shall not apply if the Employer has
elected to meet the requirements of (C) or (D) of this Article III, Section 10.

	 	(3)	 	The automatic contributions under this Section 10 shall cease to apply with
respect to a Member if the Member affirmatively elects: (a) to have 401(k) Elective
Deferrals made in a different amount or percentage of Salary, as applicable; or (b) not
to have 401(k) Elective Deferrals made on his behalf.

	 	(4)	 	Automatic 401(k) Elective Deferrals will be invested in a QDIA, until a Member
affirmatively indicates how such amounts shall be invested.

	(B)	 	An Employer who elects that 401(k) Elective Deferrals be automatically made under Article
III, Section 10(A) may elect that such elective deferrals be made pursuant to either Paragraph
(C) or (D) of this Article III, Section 10.

	(C)	 	Eligible Automatic Contribution Arrangement. In accordance with Section 414(w) of the
Code and the IRS Regulations issued thereunder, an “eligible automatic contribution
arrangement” shall provide as follows:

	 	(1)	 	The default level of a Member’s automatic 401(k) Elective Deferral shall be a
uniform percentage of Salary elected by the Employer.

	 	(2)	 	If an Employer elects, with respect to all of its Employees or a specified group
of its Employees, to allow Members to receive a distribution of automatic 401(k)
Elective Deferrals subject to the terms of the Plan and applicable law, a Member, on
whose behalf automatic 401(k) Elective Deferrals have been made, may elect to receive a
distribution equal to the amount of the automatic 401(k) Elective Deferrals (as adjusted
for attributable earnings or losses), provided such election is made within 90 days of
the first automatic 401(k) Elective Deferral. Such distribution may be reduced by any
generally applicable fees.

	 	(a)	 	An Employer matching contribution contributed in connection with an
automatic 401(k) Elective Deferral shall be forfeited in the event a Member
elects to withdraw his 401(k) Elective Deferrals under this Paragraph (C)(2).
Such forfeited matching contribution shall be subject to
Article VI, Section 2.

	 	(3)	 	The Employer shall provide each Member to whom this Paragraph (C) applies a
notice which includes the following information: the level of 401(k) Elective Deferrals
which will automatically be made if a Member does not make an affirmative election, the
Member’s right to elect not to have 401(k) Elective Deferrals made on his behalf (or to
elect to have contributions made in a different amount or percentage of Salary) and how
401(k) Elective Deferrals under this Paragraph (C) will be invested.

 

34

 

	(D)	 	Qualified Automatic Contribution Arrangement. In accordance with Section 401(k)(13) of the
Code and the IRS Regulations issued thereunder, a “qualified automatic contribution
arrangement” shall provide as follows:

	 	(1)	 	Amount of Automatic Deferral. The Employer shall elect a default 401(k)
Elective Deferral level which shall be a uniform percentage of Salary. The percentage
that first applies to a Member shall apply until the end of the last day of the Plan
Year following the Plan Year in which the initial default 401(k) Elective Deferral was
made. An Employer shall also elect default 401(k) Elective Deferral levels for the
following Plan Years, and such default levels shall increase by at least 1% in each of
the next 3 successive Plan Years, unless the default 401(k) Elective Deferral
satisfies the minimum default levels in (D)(1)(a).

	 	(a)	 	The minimum percentage an Employer may elect shall be 3% of Salary.
Such minimum percentage shall increase by 1% in the each of the 3 successive Plan
Years discussed above to a minimum percentage of no less than 6%.

	 	(b)	 	Notwithstanding anything herein to the contrary, the default 401(k)
Elective deferral level shall not exceed 10% of Salary.

	 	(2)	 	An Employer who has elected to have 401(k) Elective Deferrals automatically be
made under this Paragraph (D) shall be required to make contributions on behalf of
Non-highly Compensated Employees. An Employer shall elect whether such contributions
shall be made in accordance with (a) or (b) below.

	 	(a)	 	An Employer may elect to make a nonelective contribution equal to
at least 3% of each eligible Non-highly Compensated Employee’s Salary.

	 	(b)	 	An Employer may elect to make a matching contribution to eligible
employees equal to: (i) 100% of the 401(k) Elective Deferrals made under this
Paragraph (D) that do not exceed 1% of the applicable Member’s Salary; and (ii)
at least 50% of the 401(k) Elective Deferrals made under this Paragraph (D)
exceeding 1%, but not exceeding 6%, of the Member’s Salary.

	 	(c)	 	Notwithstanding anything in Article VI to the contrary, all
Employer contributions under this Paragraph (D) shall be fully vested after the
Member completes two Years of Employment.

	 	(d)	 	Employer contributions under this Paragraph (D) may not be
distributed earlier than separation from service, death, disability, an event
described in Section 401(k)(10) of the Code, or the attainment of age 591/2.

	 	(3)	 	The Employer shall provide each Member to whom this Paragraph (D) applies a
notice which includes the following information: the Member’s right to elect not to have
401(k) Elective Deferrals made on his behalf (or to elect to have contributions made in
a different amount or percentage of Salary) and how 401(k) Elective Deferrals under this
Paragraph (C) will be invested. Such notice shall also include such information as
specified in Article III, Section 4(J)(3).

 

35

 

	(E)	 	Timing of Notices. The Employer shall provide the notices required by Paragraphs (C) and (D)
in accordance with the following timeframes. An initial notice shall be provided to newly
eligible Members no more than 90 days before the Member is first eligible to make 401(k)
Elective Deferrals under the Plan, but no later than the date he first becomes eligible. An
annual notice shall be provided to Members within a reasonable time before the beginning of
each Plan Year. Such annual notice shall be provided at least 30 days, but no earlier than 90
days, in advance of each subsequent Plan Year, or such other period as may be permitted by
law.

 

36

 

ARTICLE IV INVESTMENT OF CONTRIBUTIONS

Section 1. General

All contributions to the Plan shall, upon receipt by the Board, be delivered to the Trustee to be
held in the Trust Fund and invested and distributed by the Trustee in accordance with the
provisions of the Plan and Trust Agreement. The Trust Fund shall consist of certain investment
funds (each an “Investment Fund”) or other investment vehicles as described in the Trust Agreements
and as designated by the Board.

To the extent made available under the Plan, an Employer may elect to allow Members to direct the
investment of their Accounts, pursuant to, and in accordance with, such rules and procedures as may
be prescribed by the Employer or the Board, to a self directed brokerage account. Should a self
directed brokerage account be made available under the Plan, the Board may elect to provide, to all
Members who have terminated employment with their Employer, the option to direct the investment of
their Account to a self directed brokerage account. Where an Employer or the Board elects to
provide a self directed brokerage account under the Plan, the Trustee may invest amounts held by it
in a self directed brokerage account maintained by Charles Schwab & Co., Inc. (or any other such
entity which provides a self directed brokerage account) on behalf of Plan Members who elect to
utilize such investment vehicle.

A Trustee may in its discretion invest any amounts held by it in any Investment Fund in any
commingled or group trust fund described in Section 401(a) of the Code and exempt under Section
501(a) of the Code or in any common trust fund exempt under Section 584 of the Code, provided that
such trust fund satisfies the requirements of this Plan applicable to such investment fund and that
the Trustees serve as Trustee of such commingled, group or common trust fund. To the extent that
the Investment Funds are at any time invested in any commingled, group or common trust fund, the
declaration of trust or other instrument pertaining to such fund and any amendments thereto are
hereby adopted as part of this Agreement and deemed to form a part of the Plan.

Except as provided in Article III, Section 8(D)(1), each Member shall direct in writing that his
contributions (including 401(k) Elective Deferrals and rollover contributions, if any) and the
contributions made by his Employer (including Profit Sharing contributions) on his behalf shall be
invested (a) entirely in any single Investment Fund or other investment vehicle (subject to
additional restrictions imposed by the Board), or (b) in any combination of Investment Funds or
investment vehicles offered under the Plan, in multiples of 1% (subject to additional restrictions
imposed by the Board). Until an effective direction is made by the Member, all such contributions
shall be invested in a QDIA.

Any such investment direction shall be followed until changed. Subject to the provisions of the
following paragraphs of this Section, one time each business day (or, as elected by the Employer,
once per month, or once per quarter) a Member may change his investment direction as to future
contributions and also as to the value of his accumulated amounts in the Investment Funds or other
investment vehicles. Such directed change will become effective upon the Valuation Date coinciding
with or next following the date which his notice was received and processed by the Pentegra DC Plan
Office subject to the same conditions with respect to the amount to be transferred under this
Section which are specified in the Plan procedures for determining the amount of payments made
under Article VII, Section 1(A) of the Plan.

 

37

 

Except as otherwise provided below, a Member may not direct a transfer of his accumulated units in
the Stable Value Fund to the Government Money Market Fund. A Member may direct a transfer from any
other Investment Fund to the Government Money Market Fund provided that, except as otherwise
provided below, amounts previously transferred from the Stable Value Fund, to such Investment Fund
remain in such funds for a period of three months prior to being transferred to the Government
Money Market Fund.

Notwithstanding anything in this Article IV to the contrary, if a Member participates in the
automatic enrollment feature provided in Article III, Section 10 (other than an automatic
enrollment feature provided in Section 10(C) of Article III which shall always be invested in a
Qualified Default Investment Alternative), and fails to make an effective investment direction with
respect to such deferral contributions, such amounts shall be invested in a Qualified Default
Investment Alternative.

Section 2. Qualified Default Investment Alternative

	(A)	 	The Accounts of a Member, who fails to provide affirmative instructions with respect to the
investment of such Accounts, shall be invested in accordance with this Article IV, Section 2.
For purposes of this Article IV, Section 2, the term “Member” shall include a
Beneficiary.

	(B)	 	The Employer shall furnish the following materials to the Member:

	 	(1)	 	An initial notice shall be provided to the Member: (1) at least 30 days in
advance of Membership eligibility, or least 30 days in advance of the date of any first
investment in the QDIA on behalf of the Member, or (2) on or before the date of becoming
a Member under Article II, Section 2, if the Member has an opportunity to make a
withdrawal in accordance with Article III, Section 10(C).

	 	(2)	 	An annual notice shall be provided to the Member within a reasonable period of
time of at least 30 days, but no earlier than 90 days, in advance of each subsequent
Plan Year, or such other period as may be permitted by law.

	 	(3)	 	The notice provided under Paragraphs (B)(1) and (2) of this Article IV, Section 2
shall include : (a) a description of the circumstances under which assets in the
Member’s Account may be invested on behalf of the Member in a QDIA; (b) an explanation
of the Member’s right to direct the investments of his Accounts; (c) a description of
the QDIA, including a description of the investment objectives, risk and return
characteristics and fees and expenses attendant to the investment alternative; (d) a
description of the right of the Members on whose behalf assets are invested in a QDIA to
direct the investment of those assets to any other investment alternative under the Plan
without financial penalty; and (e) an explanation of where Members can obtain investment
information concerning the other investment alternatives available under the Plan. In
addition, a notice required for a Member’s Account in connection with Article III,
Section 10 shall also contain an explanation of the circumstances under which an
elective deferral will be made for a Member, the percentage of such contribution and the
right to elect not to have such contribution made on his or her behalf (or to elect to
defer a different percentage).

 

38

 

	 	(4)	 	Such information as relating to a Member’s investment in a QDIA as is required
under U.S. Department of Labor Regulation Section 2550.404c-(5)(c)(4).

	(C)	 	A Member may transfer the investment of his Account to another investment alternative
available under the Plan with a frequency consistent with that afforded to a Member who
affirmatively elected to invest his Accounts in the QDIA. Notwithstanding anything herein to
the contrary, a Member whose Accounts are invested in a QDIA pursuant to this Article IV,
Section 2 shall be able to transfer the investment of his Accounts to another investment
alternative no less frequently than once within any three-month period.

	(D)	 	Any fees or restrictions imposed in connection with a Member’s withdrawal of his investment
from a QDIA shall satisfy the requirements of U.S. Department of Labor Regulation Section
2550.404c-(5)(c)(5).

 

39

 

ARTICLE V MEMBERS’ ACCOUNTS, UNITS AND VALUATION

An Account shall be established and maintained for each Member showing his interests in the
Investment Funds or other investment vehicles. The interest in each Investment Fund shall be
represented by Units.

As of each Valuation Date, the value of a Unit in each Investment Fund shall be determined by
dividing (a) the sum of the net assets at market value determined by the Trustee by (b) the total
number of outstanding Units.

The number of additional Units to be credited to a Member’s interest in each Investment Fund, as of
any Valuation Date, shall be determined by dividing (a) that portion of the aggregate contributions
by and on behalf of the Member which was directed to be invested in such Investment Fund and
received by the Board by (b) the Unit value of such Investment Fund.

The value of a Member’s Account may be determined as of any Valuation Date by multiplying the
number of Units to his credit in each Investment Fund by the value of the Investment Fund Unit on
such date and aggregating the results. If, and to the extent, a Member’s Account is invested
pursuant to a self-directed brokerage account, the investments held in that account shall be valued
by the brokerage firm maintaining such account in accordance with such procedures as may be
determined by such brokerage firm.

 

40

 

ARTICLE VI VESTING OF UNITS

Section 1. Vesting

	(A)	 	All amounts credited to a Member’s Account shall immediately and fully vest in him, except
amounts with respect to which the Employer has elected to adopt a vesting schedule as provided
in this Article.

	(B)	 	An Employer may adopt a different vesting schedule for its Members’ (i) Profit Sharing
Accounts, (ii) Matching Amounts (including amounts contributed by the Employer under Article
III, Section 3, Formula 1) and (iii) Basic Amounts and Supplemental Amounts (under Article
III, Section 3, Formula 2).

	(C)	 	If an Employer elects to adopt an automatic enrollment program, as provided in Article III,
Section 10(D), Employer contributions shall vest as specified in such Article III, Section
10(D).

	(D)	 	In accordance with Subsection (A) above, one or more of the following schedules may be
elected by the Employer:

Schedule 1: Applicable Employer contributions (and related earnings) shall immediately and
fully vest. If the eligibility requirement(s) selected by the Employer under Article II,
Section 2(B), require(s) that an Employee complete a period of Employment which is longer
than 12 consecutive months, this vesting Schedule 1 shall be automatically applicable.

Schedule 2: Applicable Employer contributions (and related earnings) shall become
nonforfeitable and fully vested in accordance with the schedule set forth below:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 2
	 	 	0 	%
	2 but less than 3
	 	 	20 	%
	3 but less than 4
	 	 	40 	%
	4 but less than 5
	 	 	60 	%
	5 but less than 6
	 	 	80 	%
	6 or more
	 	 	100 	%

Schedule 3: Applicable Employer Contributions (and related earnings) shall become
nonforfeitable and fully vested in accordance with the schedule set forth below:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 5
	 	 	0	%
	5 or more
	 	 	100             	%

 

41

 

Effective with respect to Employer contributions attributable to Employer basic,
supplemental or profit sharing contributions made on or after January 1, 2007, this vesting
schedule shall not be available for such contributions. Employer contributions, attributable
to basic, supplemental or profit-sharing contributions, with respect to an Employer that had
elected this Schedule 3 vesting schedule for such contributions, made on or after January 1,
2007, shall vest in accordance with Schedule 4.

Schedule 4: Applicable Employer Contributions (and related earnings) shall become
nonforfeitable and fully vested in accordance with the schedule set forth below:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 3
	 	 	0	%
	3 or more
	 	 	100	%

Schedule 5: Applicable Employer Contributions (and related earnings) shall become
nonforfeitable and fully vested in accordance with the schedule set forth below:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 1
	 	 	0	%
	1 but less than 2
	 	 	25	%
	2 but less than 3
	 	 	50	%
	3 but less than 4
	 	 	75	%
	4 or more
	 	 	100	%

Schedule 6: Applicable Employer Contributions (and related earnings) shall become
nonforfeitable and fully vested in accordance with the schedule set forth by the Employer in
accordance with applicable law.

Notwithstanding the vesting schedules above, a Member’s interest in his Account shall become
100% vested in the event that (i) the Member dies while in service with the Employer and the
Plan has received notification of death, (ii) the Member has been approved for Disability,
pursuant to the provisions of Article VII, Section 4, and the Plan has received notification
of Disability, or (iii) the Member has attained Normal Retirement Age while in service with
the Employer.

 

42

 

	(E)	 	Vesting Election

	 	(1)	 	Except as otherwise provided in the next following paragraph, in the event that
the Employer adopts the Plan as a successor plan to another defined contribution plan
qualified under Section 401(a) and 501(a) of the Code, or in the event that the Employer
changes or amends a vesting schedule adopted under this Article, any Member who was
covered under such predecessor plan or the pre-amendment vesting schedule under the
Plan, and who has completed at least 3 Years of
Employment with such Employer, may elect to have the nonforfeitable percentage
of the portion of his Account which is subject to such vesting schedule
computed under such predecessor plan’s vesting provisions, or computed without
regard to such change or amendment (a “Vesting Election”). Any Vesting Election
shall be made by notifying the Pentegra DC Plan Office in writing within the
election period hereinafter described. The election period shall begin on the
date such amendment is adopted or the date such change is effective, or the
date the Plan which serves as a successor plan is adopted or effective, as the
case may be, and shall end no earlier than the latest of the following dates:
(i) the date which is 60 days after the day such amendment is adopted; (ii) the
date which is 60 days after the day such amendment or change becomes effective;
(iii) the date which is 60 days after the day the Member is given written
notice of such amendment or change by the Pentegra DC Plan Office; (iv) the
date which is 60 days after the day the Plan is adopted by the Employer or
becomes effective; or (v) the date which is 60 days after the day the Member is
given written notice that the Plan has been designated as a successor plan. Any
such election once made shall be irrevocable.

	 	(2)	 	To the extent permitted under the Code and Regulations, an Employer described in
the foregoing paragraph may elect to treat all of its Members who are eligible to make a
Vesting Election as having made such Vesting Election if the Vesting Schedule resulting
from such an election is more favorable than the Vesting Schedule that would apply
pursuant to the Plan amendment. Furthermore, subject to the requirements of the
applicable Regulations, the Employer may elect to treat all its Members, who were
employed by the Employer on or before the effective date of the change or amendment, as
subject to the prior vesting schedule, provided such prior schedule is more favorable.

	(F)	 	An Employer may, at its option, fully vest any Employer contributions (as elected by the
Employer) and related earnings allocated to Members’ Accounts whose employment terminated
pursuant to a sale of a line of business, subsidiary, or a division, except that the
Employer’s election shall be ineffective if it is determined that such election is
discriminatory.

	(G)	 	Effective January 1, 2002, a Member’s accrued benefit derived from Employer matching
contributions shall vest as provided by the Employer, except that the vesting schedule elected
by the Employer for Employer matching contributions (and related earnings) credited to the
Member’s Account on or after January 1, 2002 must be nonforfeitable and fully vested in
accordance with the minimum vesting schedules under Section 411(a)(12) of the Code. If the
Employer has elected a vesting schedule for Employer matching contributions which does not
satisfy Section 411(a)(12) of the Code as of January 1, 2002, the Member’s vested interest in
his Account attributable to Employer matching contributions made on or after January 1, 2002,
shall not be less than the percentage determined in accordance with the following schedule:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 2
	 	 	0	%
	2 but less than 3
	 	 	20              	%
	3 but less than 4
	 	 	40              	%
	4 but less than 5
	 	 	60              	%
	5 but less than 6
	 	 	80              	%
	6 or more
	 	 	100             	%

 

43

 

Notwithstanding the schedule provided above, if, as of December 31, 2001, an Employer has
elected a five (5) year cliff vesting schedule, under Schedule 3 above, for Employer matching
contributions, the vested interest of each Member for Employer matching contributions (and
related earnings) credited to the Member’s Account on or after January 1, 2002, shall not be
less than the percentage determined in accordance with the following schedule:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 3
	 	 	0               	%
	3 or more
	 	 	100             	%

Section 2. Forfeitures

	(A)	 	If a Member who was partially vested in his Account on the date of his termination of
Employment returns to Employment, his years of Employment prior to the Break in Service shall
be included in determining future vesting and, if he returns before incurring 5 consecutive
one-year Breaks in Service, any amounts forfeited from his Account shall be restored to his
Account; provided, however, that if such a Member has received a distribution pursuant to
Article VII, Section 3 or Article III, Section 8, his non-vested account Units shall not be
restored unless he repays to the Plan the full amount distributed to him before the earlier of
(i) 5 years after the first date on which the Member is subsequently reemployed by the
Employer, or (ii) the close of the first period of 5 consecutive one-year Breaks in Service
commencing after the withdrawal. The amounts restored to the Member’s Account will be valued
on the Valuation Date coincident with or next following the later of (i) the date the Employee
is rehired, or (ii) the date a new enrollment application is received by the Pentegra DC Plan
Office and (iii) the date the Employee repays the full amount previously distributed to him
that resulted in the forfeiture. If a Member terminates Employment without any vested interest
in his Account, he shall (i) immediately be deemed to have received a total distribution of
his Account and (ii) thereupon forfeit his entire Account; provided that if such Member
returns to Employment before the number of consecutive one-year Breaks in Service equals or
exceeds the greater of (i) 5, or (ii) the aggregate number of the Member’s Years of Service
prior to such Break in Service, his Account shall be restored in the same manner as if such
Member had been partially vested at the time of his termination of Employment and had his
non-vested Account restored upon a return to employment, and his Years of Employment prior to
incurring the first Break in Service shall be included in any subsequent determination of his
vesting service. Notwithstanding anything herein to
the contrary, in determining whether a Member has a vested interest in his Account
derived from Employer contributions for purposes of Code Sections 410(a)(5)(D) and
411(a)(6)(D), the Member’s 401(k) Elective Deferrals shall be taken into account and
treated as derived from Employer contributions.

 

44

 

	(B)	 	Forfeited amounts, as described in the preceding Paragraph A, shall be made available to the
Employer through a transfer from the Member’s Account to the Employer Hold Account, upon: (1)
if the Member had a vested interest in his Account at his termination of Employment, the
earlier of (i) the date as of which the Member receives a distribution of his entire vested
interest in his Account or (ii) the date upon which the Member incurs 5 consecutive one-year
Breaks in Service or (2) the date of the Member’s termination of Employment, if the Member
then had no vested interest in his Account. Once so transferred, such amounts shall be used at
the option of the Employer to (i) reduce administrative expenses (in accordance with Article
IX, Section 2) for that Contribution Determination Period, (ii) offset any contribution to be
made by such Employer for that Contribution Determination Period, or (iii) be allocated to all
eligible Members at the end of such Contribution Determination Period in accordance with
clause (ii) of the first sentence in Article III, Section 8(C)(1). The Employer Hold Account,
referenced in this Paragraph (B), shall be maintained to receive, in addition to the
forfeitures described above, (i) contributions in excess of the limitations contained in
Section 415 of the Code, as described in Article X, Section 1(C),(ii) amounts, if any,
forfeited pursuant to Sections 4 and 7 of Article III, and (iii) Employer contributions made
in advance of the date allocable to Members.

 

45

 

ARTICLE VII WITHDRAWAL PAYMENTS

Section 1. General

	(A)	 	All payments in respect of a Member’s Account shall be made in cash from the Trust Fund and
in accordance with the provisions of this Article or Articles XI or XII or Article III,
Section 4. The amount of payment will be determined in accordance with the value of the
Member’s Account on the Valuation Date coinciding with or next following the date proper
notice is filed with the Board, unless following such Valuation Date a decrease in the value
of the Member’s investment in any of the Investment Funds or other Account investment occurs
prior to the date the Member’s Account is paid in which case that part of the payment which is
based on such investments shall equal the value of such increments determined as of the date
of payment which date shall occur as soon as administratively practicable on or following the
Valuation Date such proper notice is filed with the Board. If Units are redeemed to make a
payment of benefits, the redemption date Unit value with respect to a Member’s investment in
any Investment Fund shall equal the value of a Unit in such Investment Fund, as determined in
accordance with the valuation method applicable to Unit investments in such Fund on the date
the Member’s investment is redeemed.

Payments provided under this Section will be made in a lump sum as soon as practicable after
such Valuation Date or date of redemption, as may be applicable, subject to any applicable
restriction on redemption imposed on amounts invested in any of the available Investment
Funds.

	(B)	 	At the election of the Employer, the Employer can suspend matching contributions to the Plan
on behalf of a Member, during his uninterrupted period of Service with such Employer, who
makes a withdrawal from his Regular Account for a period of 6 months after such withdrawal,
except that (i) if the withdrawal does not exceed the amount of the Member’s contributions in
his Regular Account plus earnings thereon, Employer contributions on his behalf may resume 3
months after such withdrawal, and (ii) if the withdrawal does not exceed the amount, if any,
of the Member’s contributions in his Regular Account made prior to January 1, 1987 without
earnings, then Employer contributions on his behalf shall not be affected by such withdrawal.

	(C)	 	Any partial withdrawal from a Member’s Regular Account or Rollover Account shall be in an
amount of at least $1,000 or shall be for the full amount of either (a) the Member’s
contributions made prior to January 1, 1987 without earnings or (b) the Member’s contributions
plus earnings thereon. Any partial withdrawal shall be deemed to come first from the Member’s
contributions made prior to January 1, 1987 without earnings referred to in (ii) above, second
proportionately from the Member contributions made after December 31, 1986 plus earnings
thereon, and finally from the balance of his Regular Account or Rollover Account.

	(D)	 	Any amounts paid under this Article may not be returned to the Plan.

 

46

 

Section 2. Account Withdrawal While Employed

A Member may voluntarily withdraw his Account (other than his 401(k) Account, Safe Harbor CODA
Account, Profit Sharing Account, or Profit Sharing Rollover Amounts, if any) while in
Employment by filing a notice of withdrawal with the Pentegra DC Plan Office; provided, however,
that in the event his Employer has elected to provide annuity options under Article VII, Section
3(B)(2) and a Member has elected an annuity form of payment, no withdrawals may be made from a
married Member’s Account without the written consent of such Member’s Spouse (which consent shall
be subject to the procedures set forth in Article III, Section 6(B)).
Notwithstanding, the Employer may, at its option, provide that a Member be allowed to withdraw all
or a portion of his Profit Sharing Account or Profit Sharing Rollover Amounts, if any. Only one in
service withdrawal under this Section may be made in any Plan Year from each of the Member’s
Regular Account and Rollover Account. This restriction shall not, however, apply to a withdrawal of
a Member’s contributions made prior to January 1, 1987 without earnings, or a withdrawal under this
Section in conjunction with a hardship withdrawal as defined under Article III, Section 4(H).

Notwithstanding the foregoing paragraph, a Member shall not withdraw any Matching, Basic, Profit
Sharing, or Supplemental contributions made by his Employer under Article III, Section 2 or Section
3 and credited to his Regular Account unless (i) the Member has completed 60 months of
participation in the Plan, (ii) the withdrawal occurs at least 24 months after such Matching,
Basic, Profit Sharing, or Supplemental contributions were made by the Employer, (iii) the Member’s
Employer terminates its participation in the Plan or (iv) the Member dies, is disabled, retires,
terminates Employment or attains age 591/2. For purposes of the preceding requirements, if the
Member’s Account includes amounts which have been transferred from a defined contribution plan
established prior to the adoption of the Plan by the Member’s Employer, the period of time during
which amounts were held on behalf of such Member and the periods of participation of such Member
under such defined contribution plan shall be taken into account.

Section 3. Account Withdrawal Upon Termination of Employment or Employer Participation

	(A)	 	Except as provided in Article III, Sections 4 and 8, a Member who terminates Employment with
a participating Employer, or whose Employer terminates its participation in the Plan under
Article XI, may withdraw his Account at any time thereafter up to attainment of age 701/2 or, if
elected by his Employer in accordance with the provisions of Article XI, Section 3, may
transfer his Account, including all outstanding loan balances, to a qualified successor plan
maintained by his Employer following the termination by the Employer of its participation
under the Plan; provided, however, that the Member may not transfer outstanding loan balances
unless such qualified successor plan provides participant loans. For purposes of this Section
3, a qualified successor plan is an employee benefit plan established or maintained by the
Employer which (i) has received a favorable determination letter from the IRS stating that
such plan satisfies the then current qualification and tax exemption requirements of the Code
or with respect to which an opinion of counsel to the same effect, and in such form as may be
satisfactory to the Pentegra DC Plan Office, (ii) has provided the Pentegra DC Plan Office
with written certification by its appropriate fiduciaries that in the event of a transfer to
such successor plan of the withdrawn assets, the successor plan shall be fully liable for the
payment of all transferred benefits of the Members of such Employer (who consent to the
transfer), and that the Plan shall not be liable for the payment of any part of such benefits,
(iii) has provided each Member’s written consent to the transfer and his release of all claims
against the Plan arising out of his membership therein, (iv) meets such other requirements of
the IRS, other appropriate governmental authority or of the Board, which may apply, and (v)
meets such other procedures as may be established by the Board from time to time.

 

47

 

Any withdrawal under this Section requires that a notice of withdrawal be filed with the
Pentegra DC Plan Office. If a Member does not file such notice, the value of his Account will
be paid to him as soon as practicable after his attainment of age 701/2, but in no event shall
payment commence later than April 1 of the calendar year following the calendar year in which
the Member attains age 70 1/2, unless otherwise provided by Article VII, Section 3(C) or
applicable law.

	 	 	 	 	 	 	 
	(B)

	 	 	(1	)	 	In lieu of any lump sum payment of his total Account, a Member who has terminated his
Employment may elect in his notice of withdrawal to be paid in installments (no less
frequently than annually), provided that a Member shall not be permitted to elect an
installment period in excess of his remaining life expectancy (or the joint life expectancy of
the Member and his designated beneficiary) and if a Member attempts such an election, he shall
be deemed to have elected the installment period with the next lowest multiple within the
Member’s remaining life expectancy, subject to the provisions of Article X, Section 4. The
amount of each installment will be equal to the value of the Member’s Account, multiplied by a
fraction, the numerator of which is one and the denominator of which is the number of
remaining installments including the one then being paid, so that at the end of the
installment period so elected, the total Account will be liquidated. The value of the Units
will be determined in accordance with the Unit values on the Valuation Date on or next
following the Pentegra DC Plan Office’s receipt of his notice of withdrawal and on each
anniversary thereafter. Payment will be made as soon as practicable after each such Valuation
Date, but in no event shall payment commence later than April 1 of the calendar year following
the calendar year in which the Member attains age 701/2 subject to Paragraph (C) below. The
election of installments hereunder may not be subsequently changed by the Member, except that
upon written notice to the Pentegra DC Plan Office, the Member may withdraw the balance of the
Units in his Account in a lump sum at any time.

	 	(2)	 	Annuity Option. An Employer may, at its option, elect to provide an annuity
option in addition to the lump sum payment and installment payment options described in
Section 1(A) and Subsection (B)(1) above. In the event an Employer elects to provide an
annuity option, the following provisions shall apply:

Unmarried Members: Any unmarried Member who has terminated his Employment may
elect, in lieu of any lump sum or installment payment of his total Account(s)
under Section 1(A) or Subsection (B) above, to receive a benefit payable by
purchase from an insurance company of a single premium contract providing for
(i) a single life annuity for the life of the Member or (ii) an annuity for
the life of the Member and, if the Member dies leaving a designated
Beneficiary, a 50% survivor annuity for the life of such designated
Beneficiary.

 

48

 

Married Members: Except as otherwise provided below, (i) any married Member who has
terminated his Employment and who elected an annuity form of payment shall receive a
benefit payable by purchase from an insurance company of a single premium contract
providing for a Qualified Joint and Survivor Annuity, as defined under Section 6(B)(1)
of Article III, unless the Member’s spouse executed a valid waiver of the Qualified
Joint and Survivor Annuity and (ii) the Surviving Spouse of any married Member who
dies prior to the date payment of his benefit commences and who elected to receive an
annuity form of payment shall be entitled to a Preretirement Survivor Annuity, as
defined under Section 6(B)(4) of Article III, unless the Member’s spouse executed a
valid waiver of the Preretirement Survivor Annuity.

	(C)	 	Unless the Member elects otherwise, distribution of benefits will begin no later than the
60th day after the latest of the close of the Plan Year in which (i) the Member attains age
65; (ii) occurs the 10th anniversary of the year in which the Member commenced participation
in the Plan; or (iii) the Member terminates Employment with an Employer. Notwithstanding the
foregoing, the failure of a Member and Spouse to consent to a distribution while a benefit is
immediately distributable shall be deemed to be an election to defer commencement of payment
of any benefit.

Effective as of January 1, 1997, and subject to Section 6 of this Article, payment of a
Member’s Account shall not commence later than April 1 of the calendar year following the
later of (i) the calendar year in which the Member attains age 701/2 or (ii) the calendar year
in which the Member retires; provided however, if the Member is a 5 percent owner (as
described in Section 416(i) of the Code), at any time during the Plan Year ending with or
within the calendar year in which the Employee attains age 701/2, any benefit payable to such
Member shall commence no later than April 1 of the calendar year following the calendar year
in which the Member attains age 701/2. Such benefit shall be paid, in accordance with the
Regulations, over a period not extending beyond the life expectancy of such Member (or the
joint life expectancy of the Member and his designated Beneficiary). For purposes of this
Section, life expectancy of a Member and/or a Member’s spouse may at the election of the
Member be recalculated annually in accordance with the Regulations. The election, once made,
shall be irrevocable. If the Member does not make an election prior to the time that
distributions are required to commence, then life expectancies shall not be recalculated. If
a Member dies after distribution of his interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Member’s death. In addition, to the extent any payments
from the Member’s Account would be made after the Member’s death, such payments shall be made
in accordance with Section 401(a)(9) of the Code and the IRS Regulations thereunder
(including the minimum distribution incidental benefit requirements).

Except as provided in Article VII, Section 6, with respect to distributions under the Plan
made on or after November 1, 2001, for 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 the regulations under section 401(a)(9) that were
proposed on January 17, 2001 (the 2001 Proposed Regulations), notwithstanding any provision
of the Plan to the contrary. If the total amount of the 2001 required minimum distributions
made to a participant prior to November 1, 2001 are equal to or greater than the amount of
required minimum distributions determined under the 2001 Proposed Regulations, then no
additional distributions are required for such participant for 2001 on or after such date. If
the total amount of required minimum distributions made to a participant prior to November 1,
2001 for 2001 are less than the amount determined under the 2001 Proposed Regulations, then
the amount of required minimum distributions for 2001 on or after such date will be
determined so that the total amount of required minimum distributions for 2001 is the amount
determined under the 2001 proposed Regulations. This amendment shall continue in effect until
the last calendar year beginning before the effective date of the final regulations under
section 401(a)(9) or such other date as may be published by the Internal Revenue Service.

 

49

 

	(D)	 	Solely to the extent required under applicable law and regulations, and notwithstanding any
provision of the Plan to the contrary that would otherwise limit a Distributee’s election
under this Subsection (D), a Distributee may elect, at the time and in the manner prescribed
by the Board, 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
anything herein to the contrary, a Distributee who is a non-spousal Beneficiary shall only
make an Eligible Rollover Distribution to an Eligible Retirement Pan if such Direct Rollover
is accomplished through a direct trustee to trustee rollover.

For purposes of this Subsection (D), the following terms shall have the following
meanings:

	 	(1)	 	Eligible Rollover Distribution: Solely to the extent required under applicable
law and regulations, an Eligible Rollover Distribution is 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; and the portion of any distribution
that is not includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).

A portion of a distribution shall not fail to be an Eligible Rollover
Distribution merely because the portion consists of after-tax employee
contributions which are not includible in gross income. However, such portion
may be transferred only to an individual retirement account or annuity
described in section 408(a) or (b) of the Code, or to a qualified defined
contribution plan described in section 401(a) or 403(a) of the Code that agrees
to separately account for amounts so transferred, including separately
accounting for the portion of such distribution which is includible in gross
income and the portion of such distribution which is not so includible.

	 	(2)	 	Eligible Retirement Plan: An Eligible Retirement Plan is 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. However, in the case of an
Eligible Rollover Distribution to a Surviving Spouse, an Eligible Retirement Plan is
an individual retirement account or individual retirement annuity.

 

50

 

An Eligible Rollover Distribution excludes hardship withdrawals as defined in Section
401(k)(2)(B)(i)(IV) of the Code which are attributable to Member’s 401(k) deferrals
under Treasury Regulation Section 1.401(k)-1(d)(2)(ii).

An Eligible Retirement Plan shall also mean an annuity contract described in
section 403(b) of the Code and an eligible plan under section 457(b) of the
Code which is maintained by a state, political subdivision of a state, or any
agency or instrumentality of a state or political subdivision of a state and
which agrees to separately account for amounts transferred into such plan from
this plan.

Notwithstanding anything herein to the contrary with respect to Distributees
who are non-spousal Beneficiaries, only an individual retirement plan under
Sections 408(a) or (b) of the Code shall constitute an Eligible Retirement
Plan.

	 	(3)	 	Distributee: A Distributee includes an employee or former employee and effective
January 1, 2002, Distributee shall also include the Member’s Surviving Spouse. 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 interest of the spouse or former spouse.

A Distributee shall also include a non-spousal Beneficiary.

	 	(4)	 	Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.

	 	(5)	 	Roth Elective Deferral Direct Rollover: Notwithstanding anything in this
Paragraph (D) to the contrary, a Direct Rollover of a distribution from a Roth 401(k)
Account under the Plan will only be made to another Roth elective deferral account under
an applicable retirement plan described in Section 402A(e)(1) or to a Roth IRA described
in Section 408A of the Code, and only to the extent the rollover is permitted under the
rules of Section 402(c) of the Code.

	 	(a)	 	The Plan will not provide for a Direct Rollover (including an
automatic rollover) for distributions from a Member’s Roth 401(k) Account if the
amount of the distributions that are Eligible Rollover Distributions are
reasonably expected to total less than $200 during a year. In addition, any
distribution from a Member’s Roth 401(k) Account is not taken into account in
determining whether distributions from a Member’s other Accounts are reasonably
expected to total less than $200 during a year. However, Eligible Rollover
Distributions from a Member’s Roth 401(k) Account are taken into account in
determining whether the total amount of the Member’s account balances under the
Plan exceeds $500 for purposes of mandatory distributions from the Plan.

 

51

 

	 	(b)	 	The provisions of the Plan that allow a Member to elect a Direct
Rollover of only a portion of an Eligible Rollover Distribution, but only if the
amount rolled over is at least $500, is applied by treating any amount
distributed from the Member’s Roth 401(k) Account as a separate distribution from
any amount distributed from the Member’s other accounts in the Plan, even if the
amounts are distributed at the same time.

	(E)	 	Effective for distributions after December 31, 2001, a Member’s elective deferrals and
earnings attributable to these contributions may be distributed on account of severance from
employment. However, such a distribution shall be subject to the other provisions of the Plan
regarding distributions, other than provisions that require a separation from service before
such amounts may be distributed.

Section 4. Account Withdrawal Upon Member’s Disability

	(A)	 	A Member who is separated from Employment by reason of a disability which is
expected to last in excess of 12 consecutive months and who is either (i) eligible for,
or is receiving, disability insurance benefits under the Federal Social Security Act,
(ii) approved for disability under the provisions of the Pentegra Defined Benefit Plan
for Financial Institutions, formerly known as the Financial Institutions Retirement Fund
(a defined benefit pension plan through which federally insured financial institutions
and organizations serving them may cooperate in providing for the retirement of their
employees), or (iii) approved for disability under the provisions of any other benefit
program or policy maintained by his Employer, which policy or program is applied on a
uniform and nondiscriminatory basis to all Employees of such Employer, shall be deemed
to be disabled for all purposes under the Plan.

	(B)	 	The Pentegra DC Plan Office shall determine whether a Member is disabled in
accordance with the terms of Paragraph (A) above; provided, however, approval of
Disability is conditioned upon notice to the Pentegra DC Plan Office of such Member’s
Disability by the Employer within 13 months of the Member’s separation from Employment.
The notice of Disability shall include a certification that the Member meets one or more
of the criteria listed in Paragraph (A) above.

	(C)	 	Upon an Employer’s filing a written notice of Disability, a Member may withdraw
his total Account balance under the Plan (including his Rollover Account and/or total
Profit Sharing Account balance, if any) and have such amounts paid to him in accordance
with Article VII, Section 3. In lieu of such lump sum payment, the Member may elect in
his notice of withdrawal to (i) defer receipt of some or all of his vested Account until
April 1 of the calendar year following the calendar year in which the Member attains
701/2, (ii) elect installment payments, as described in Section 3(B) of this Article and
Article III, Section 8(E)(2), or (iii) make periodic withdrawals not more frequently
than once per year pursuant to the provisions of Article VII, Section 1; provided,
however, if a disabled Member becomes reemployed subsequent to withdrawal of some or all
of his Account balance, such Member may not repay to the Plan any such withdrawn
amounts.

 

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Section 5. Member’s Death

	(A)	 	Subject to Section 3(B)(2) above, if a married Member dies, his Spouse, as Beneficiary, will
receive a death benefit equal to the value of the Member’s Account determined on the Valuation
Date on or next following the Board’s receipt of notice that such Member died; provided,
however, that if such Member’s Spouse had consented in writing to the designation of a
different Beneficiary, the Member’s Account will be paid to such designated Beneficiary. Such
nonspousal designation may be revoked by the Member without spousal consent at any time prior
to the Member’s death. If a Member is not married at the time of his death, his Account will
be paid to his designated Beneficiary.

	(B)	 	Subject to Section 3(B)(2) above, a Member may elect that upon his death, his Beneficiary,
pursuant to Paragraph (A) above, may receive, in lieu of any lump sum payment, payment in 5
annual installments (10 if the Spouse is the Beneficiary, provided that the Spouse’s remaining
life expectancy is at least 10 years) whereby the value of 1/5th of such Member’s Units (or
1/10th in the case of a spousal Beneficiary, provided that the Spouse’s remaining life
expectancy is at least 10 years) in each Investment Fund will be determined in accordance with
the Unit values on the Valuation Date on or next following the Board’s receipt of notice of
the Member’s death and on each anniversary of such Valuation Date. Payment will be made as
soon as practicable after each Valuation Date until the Member’s Account is exhausted. Such
election may be filed at any time with the Board prior to the Member’s death and may not be
changed or revoked after such Member’s death. If such an election is not in effect at the time
of the Member’s death, his Beneficiary (including any spousal Beneficiary) may elect to make
withdrawals in accordance with this Article, provided that any balance remaining in the
deceased Member’s Account be withdrawn (i) on or before the December 31 of the calendar year
which contains the 5th anniversary, or (ii) in periodic payments over such longer
life-expectancy period as shall be allowed by Section 401(a)(9) of the Code and the IRS
regulations issued thereunder. Notwithstanding the foregoing provisions of this Paragraph (B),
payment of a Member’s Account shall commence not later than the December 31 of the calendar
year immediately following the calendar year in which the Member died or, in the event such
Beneficiary is the Member’s Surviving Spouse, on or before the December 31 of the calendar
year in which such Member would have attained age 701/2, if later (or, in either case, on any
later date prescribed by the IRS Regulations). If, upon the Spouse’s or Beneficiary’s death,
there is still a balance in the Account, the value of the remaining Units will be paid in a
lump sum to such Spouse’s or Beneficiary’s estate. Notwithstanding anything in this Subsection
(B) to the contrary, if a Member dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Member’s death. In addition, to the
extent any payments from a Member’s Account would be made after a Member’s death, such
payments shall be made in accordance with Section 401(a)(9) of the Code and the IRS
Regulations thereunder (including the minimum distribution incidental benefit requirements).

 

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Section 6. Minimum Distribution Requirements

	(A)	 	General Rules.

	 	(1)	 	Effective Date. The provisions of this Section 6 will apply for purposes of
determining required minimum distributions commencing as of November 1, 2002 and
thereafter.

	 	(2)	 	Precedence. The requirements of this Section 6 will take precedence over any
inconsistent provisions of the Plan.

	 	(3)	 	Requirements of Treasury Regulations Incorporated. All distributions required
under this Plan will be determined in accordance with Treasury Regulations under Section
401(a)(9) of the Code, and the minimum distribution incidental death benefit requirement
of Section 401(a)(9)(G) of the Code.

	 	(4)	 	Limits on Distributions Periods. As of the fist distribution calendar year,
distributions to a Member, if not made in a single sum, may only be made over the
following periods:

	 	(a)	 	the life of the Member,

	 	(b)	 	the joint lives of the Member and a designated Beneficiary,

	 	(c)	 	a period certain not extending beyond the life expectancy of the Member, or

	 	(d)	 	a period certain not extending beyond the joint life and last
survivor expectancy of the Member and a designated Beneficiary.

	(B)	 	Time and Manner of Distribution.

	 	(1)	 	Required Beginning Date. The Member’s entire interest will be distributed, or
begin to be distributed, to the member no later than the Member’s Required Beginning
Date (as defined below).

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

	 	(a)	 	If the Member’s Surviving Spouse is the Member’s sole designated
Beneficiary, then, except as provided in the adoption agreement, distributions to
the Surviving Spouse will begin by December 31 of the calendar year immediately
following the calendar year in which the Member died, or by December 31 of the
calendar year in which the member would have attained age 70 1/2, if later.

	 	(b)	 	If the Member’s Surviving Spouse is not the Member’s sole
designated Beneficiary, then, except as provided in the adoption agreement,
distributions to the designated Beneficiary will begin by December 31 of the
calendar year immediately following the calendar year in which the Member died.

 

54

 

	 	(c)	 	If there is no designated Beneficiary as of September 30 of
the year following the year of the member’s death, the Member’s entire
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Member’s death.

	 	(d)	 	If the Member’s Surviving Spouse is the Member’s sole
designated Beneficiary and the surviving spouse dies after the Member but
before distributions to the Surviving Spouse begin, this Section 6(B)(2),
other than Section 6(B)(2)(a), will apply as if the Surviving Spouse were
the Member.

For purposes of this Section 6(B)(2) and Section 6(D), unless Section 6(B)(2)(d) applies,
distributions are considered to begin on the Member’s Required Beginning Date. If Section
6(B)(2)(d) applies, distributions are considered to begin on the date distributions are required to
begin to the surviving spouse under Section 6(B)(2)(a). If distributions under an annuity purchased
from an insurance company irrevocably commence to the Member before the member’s Required Beginning
Date (or to the Member’s Surviving Spouse before the date distributions are required to begin to
the surviving spouse under Section 6(B)(2)(a)), the date distributions are considered to begin is
the date distributions actually commence.

	 	(3)	 	Forms of Distribution. Unless the Member’s interest is distributed in the form of
an annuity purchased from an insurance company or in a single sum on or before the
Required Beginning Date, as of the first distribution calendar year distributions will
be made in accordance with Sections 6.3 and 6.4 of this Article. If the Member’s
interest is distributed in the form of an annuity purchased from an insurance company,
distributions thereunder will be made in accordance with the requirements of Section
401(a)(9) of the Code and the Treasury Regulations.

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

	 	(1)	 	Amount of Required Minimum Distribution For Each Distribution Calendar Year.
During the Member’s lifetime, the minimum amount that will be distributed for each
distribution calendar year is the lesser of:

	 	(a)	 	the quotient obtained by dividing the Member’s account balance by
the distribution period in the Uniform Lifetime Table set forth in Section
1.401(a)(9)-9, Q&A-2, of the Treasury Regulations, using the Member’s age as of
the Member’s birthday in the distribution calendar year; or

	 	(b)	 	if the Member’s sole designated Beneficiary for the distribution
calendar year is the Member’s Spouse, the quotient obtained by dividing the
Member’s account balance by the number in the Joint and Last Survivor Table set
forth in Section 1.401(a)(9)-9, Q&A-3 of the Treasury Regulations, using the
Member’s and Spouse’s attained ages as of the Member’s and Spouse’s birthdays in
the distribution calendar year.

 

55

 

	 	(2)	 	Lifetime Required Minimum Distributions Continue Through Year of Participant’s
Death. Required minimum distributions will be determined under this section 6(C) of
Article VII beginning with the first distribution calendar year and up to and including
the distribution calendar year that includes the Member’s date of death.

	(D)	 	Required Minimum Distributions After Member’s Death.

	 	(1)	 	Death On or After Date Distributions Begin.

	 	(a)	 	Member Survived by Designated Beneficiary. If the Member dies on or
after the date distributions begin and there is a designated Beneficiary, the
minimum amount that will be distributed for each distribution calendar year after
the year of the Member’s death is the quotient obtained by dividing the Member’s
account balance by the longer of the remaining life expectancy of the Member or
the remaining life expectancy of the Member’s designated Beneficiary, determined
as follows:

	 	(i)	 	The Member’s remaining life expectancy is calculated
using the age of the Member in the year of death, reduced by one for each
subsequent year.

	 	(ii)	 	If the Member’s Surviving Spouse is the Member’s sole
designated Beneficiary, the remaining life expectancy of the Surviving
Spouse is calculated for each distribution calendar year after the year of
the Member’s death using the Surviving Spouse’s age as of the Spouse’s
birthday in that year. For distribution calendar years after the year of
the Surviving Spouse’s death, the remaining life expectancy of the
Surviving Spouse is calculated using the age of the Surviving Spouse as of
the Spouse’s birthday in the calendar year of the Spouse’s death, reduced
by one for each subsequent calendar year.

	 	(iii)	 	If the Member’s Surviving Spouse is not the Member’s
sole designated Beneficiary, the designated Beneficiary’s remaining life
expectancy is calculated using the age of the Beneficiary in the year
following the year of the Member’s death, reduced by one for each
subsequent year.

	 	(b)	 	No Designated Beneficiary. If the Member dies on or after the date
distributions begin and there is no designated Beneficiary as of September 30 of
the year after the year of the Member’s death, the minimum amount that will be
distributed for each distribution calendar year after the year of the Member’s
death is the quotient obtained by dividing the Member’s account balance by the
Member’s remaining life expectancy calculated using the age of the Member in the
year of death, reduced by one for each subsequent year.

 

56

 

	 	(2)	 	Death Before Date Distributions Begin.

	 	(a)	 	Participant Survived by Designated Beneficiary. Except as provided
in the adoption agreement, if the Member dies before the date distributions begin
and there is a designated Beneficiary, the minimum amount that will be
distributed for each distribution calendar year after the year of the Member’s
death is the quotient obtained by dividing the Member’s account balance by the
remaining life expectancy of the Member’s designated Beneficiary, determined as
provided in section 6(D)(1) of Article VII.

	 	(b)	 	No Designated Beneficiary. If the Member dies before the date
distributions begin and there is no designated Beneficiary as of September 30 of
the year following the year of the Member’s death, distribution of the Member’s
entire interest will be completed by December 31 of the calendar year containing
the fifth anniversary of the Member’s death.

	 	(c)	 	Death of Surviving Spouse Before Distributions to Surviving Spouse
Are Required to Begin. If the Member dies before the date distributions begin,
the Member’s surviving spouse is the Member’s sole designated Beneficiary, and
the Surviving Spouse dies before distributions are required to begin to the
Surviving Spouse under section 6(B)(2)(a) of Article VII, this section 6(D)(2) of
Article VII will apply as if the Surviving Spouse were the Member.

	(E)	 	Definitions.

	 	(1)	 	Designated Beneficiary. The individual who is designated by the Member (or the
Member’s Surviving Spouse) as the Beneficiary of the Member’s interest under the Plan
and who is the designated Beneficiary under Section 401(a)(9) of Code and Section
1.401(a)(9)-4 of the Treasury Regulations.

	 	(2)	 	Distribution Calendar Year. A calendar year for which a minimum distribution is
required. For distributions beginning before the Member’s death, the first distribution
calendar year is the calendar year immediately preceding the calendar year which
contains the Member’s Required Beginning Date. For distributions beginning after the
Member’s death, the first distribution calendar year is the calendar year in which
distributions are required to begin under section 6(B)(2) of Article VII. The required
minimum distribution for the Member’s first distribution calendar year will be made on
or before the Member’s Required Beginning Date. The required minimum distribution for
other distribution calendar years, including the required minimum distribution for the
distribution calendar year in which the Member’s Required Beginning Date occurs, will be
made on or before December 31 of that distribution calendar year.

	 	(3)	 	Life Expectancy. Life expectancy as computed by use of the Single Life Table in
Section 1.401(a)(9)-9, Q&A-1 of the Treasury Regulations.

	 	(4)	 	Member’s Account Balance. The account balance as of the last valuation date in
the calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions made and allocated or
forfeitures allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation calendar
year after the valuation date. The account balance for the valuation calendar year
includes any amounts rolled over or transferred to the Plan either in the valuation
calendar year or in the distribution calendar year if distributed or transferred in the
valuation calendar year.

 

57

 

	 	(5)	 	Required Beginning Date. The required beginning date of a Member is April 1 of
the calendar year following the later of the calendar year in which the Member attains
age 701/2 or the calendar year in which the participant retires, except that the benefit
distributions to a 5% owner must commence by April 1 of the calendar year following the
calendar year in which the Member attains age 701/2.

	 	(6)	 	5% owner. A Member is treated as a 5% owner for purposes of this Section 5 if
such Member is a 5% owner as defined in Section 416 of the Code at any time during the
Plan Year ending with or within the calendar year in which such owner attains age 70 1/2.
Once distributions have begun to a 5% owner under this Section 5 they must continue to
be distributed, even if the Member ceases to be a 5% owner in a subsequent year.

	(F)	 	TEFRA Section 242(b)(2) Elections.

	 	(1)	 	Notwithstanding the other requirements of this Section 6 of Article VII,
distribution on behalf of any Employee, including a 5% owner who has made a designation
under section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (a “section
242(b)(2) election”) may be made in accordance with all of the following requirements
(regardless of when such distribution commences):

	 	(a)	 	The distribution by the Plan is one which would not have
disqualified such Plan under section 401(a)(9) of the Code as in effect prior to
amendment by the Deficit Reduction Act of 1984.

	 	(b)	 	The distribution is in accordance with a method of distribution
designated by the Member whose interest in the Plan is being distributed or, if
the Member is deceased, by a Beneficiary of such Member.

	 	(c)	 	Such designation was in writing, was signed by the Member or the
Beneficiary, and was made before January 1, 1984.

	 	(d)	 	The Member had accrued a benefit under the Plan as of December 31,
1983.

	 	(e)	 	The method of distribution designated by the Member or the
Beneficiary specifies the time at which distributions will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Member’s death, the Beneficiaries of the Member listed in order of priority.

	 	(2)	 	A distribution upon death will not be covered by this transitional rule unless
the information in the designation contains the required information described above
with respect to the distributions to be made upon the death of the Member.

 

58

 

	 	(3)	 	For any distribution which commences before January 1, 1984, but continues after
December 31, 1983, the Member, or the Beneficiary, to whom such distribution is being
made, will be presumed to have designated the method of distribution under which the
distribution is being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in Sections 6(F)(1)(a) and 6(F)(1)(e) of
Article VII.

	 	(4)	 	If a designation is revoked, any subsequent distribution must satisfy the
requirements of Section 401(a)(9) of the Code and the Treasury Regulations thereunder.
If a designation is revoked subsequent to the date distributions are required to begin,
the Plan must distribute by the end of the calendar year following the calendar year in
which the revocation occurs the total amount not yet distributed which would have been
required to have been distributed to satisfy Section 401(a)(9) of the Code and the
Treasury Regulations thereunder, but for the section 242(b)(2) election. For calendar
years beginning after December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere substitution or
addition of another Beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by altering the
relevant measuring life).

	 	(5)	 	In the case in which an amount is transferred or rolled over from one plan to
another plan, the rules in Treasury Regulations Section 1.401(a)(9)-8, Q&A-14 and
Q&A-15, shall apply.

	(G)	 	Transition Rules.

	 	(1)	 	Required minimum distributions before November 1, 2002 were made pursuant to
Article VII, Sections 3(C) and 6(G)(2) through 6(G)(3) below, as applicable.

	 	(2)	 	2000 and Before. Required minimum distributions for calendar years after 1984 and
before 2001 were made in accordance with Section 401(a)(9) and the proposed Treasury
Regulations thereunder published in the Federal Register on July 27, 1987 (the “1987
Proposed Regulations”).

	 	(3)	 	2001 and 2002 . Required minimum distributions for calendar years 2001 and 2002
(made on or after November 1, 2001 and on or before October 31, 2002) were made in
accordance with Section 401(a)(9) and the Treasury Regulations thereunder that were
proposed on January 17, 2001.

 

59

 

ARTICLE VIII LOAN PROGRAM

Section 1. General

An Employer may, at its option, make available this loan program for any Member (and, if applicable
under Section 8 of this Article, any Beneficiary), subject to applicable law. In the event amounts
are transferred to the Plan from a retirement plan subject to Section 401(a)(11) of the Code, no
loans may be made from a married Member’s Account without the written consent of such Member’s
Spouse which shall be obtained no earlier than the beginning of the 90-day period that ends on the
date on which the loan is to be secured by any portion of such Member’s Account. The consent must
be in writing, must acknowledge the effect of the loan, and must be notarized. Such consent shall
thereafter be binding with respect to the consenting Spouse or any subsequent Spouse with respect
to that loan. In the event an Employer elects the loan program under this Article VIII, loans shall
be available from the Rollover Accounts of any Employees of the Employer who have not yet become
Members.

Section 2. Loan Application

	(A)	 	Subject to the restrictions described in Paragraph (B) of this Section, a Member in
Employment may borrow from his Account by filing an application with the Pentegra DC Plan
Office. Such application (hereinafter referred to as a “completed application”) shall (i)
specify the terms pursuant to which the loan is requested to be made and (ii) provide such
information and documentation as the Board shall require, including a note, duly executed by
the Member, granting a security interest of an amount not greater than 50% of his vested
Account, to secure the loan. With respect to such Member, the completed application shall
authorize the repayment of the loan through payroll deductions. Such loan will become
effective upon the Valuation Date coinciding with or next following the date on which his
completed application and other required documents were received by the Pentegra DC Plan
Office, subject to the same conditions with respect to the amount to be transferred under this
Section which are specified in the Plan procedures for determining the amount of payments made
under Article VII, Section 1(A) of the Plan.

	(B)	 	The Board shall establish standards in accordance with the Code and ERISA which shall be
uniformly applicable to all Members eligible to borrow from their interests in the Trust Fund
similarly situated and shall govern the approval or disapproval of completed applications. The
terms for each loan shall be set solely in accordance with such standards.

	(C)	 	In accordance with the Board’s established standards, each completed application shall be
reviewed and approved or disapproved as soon as practicable after the receipt thereof, and the
applying Member shall be promptly notified of such approval or disapproval. Notwithstanding the
foregoing, the review of a completed application, or payment of the proceeds of an approved
loan, may be deferred if the proceeds of the loan would otherwise be paid during the period
commencing on December 1 and ending on the following January 31.

 

60

 

	(D)	 	Subject to Paragraph (C) of this Section and Paragraph (C) of Section 6 of this Article VIII,
upon approval of a completed application, payment of the loan to the Member shall be made from
the Investment Fund(s) in the same proportion that the designated portion of the Member’s
Account is invested at the time of the loan, and the relevant portion of the Member’s interest
in such Investment Fund(s) shall be cancelled and shall be transferred in cash to the Member.
The Pentegra DC Plan Office shall maintain sufficient records regarding such amounts to permit
an accurate crediting of repayments of the loan.

Section 3. Permitted Loan Amount

The amount of each loan may not be less than $1,000 nor more than the maximum amount as described
below. The maximum amount available for loan under the Plan (when added to the outstanding balance
of all other loans from the Plan to the borrowing Member) shall not exceed the lesser of: (a)
$50,000 reduced by the excess (if any) of (i) the highest outstanding loan balance attributable to
the Account of the Member requesting the loan from the Plan during the one year period ending on
the day preceding the date of the loan, over (ii) the outstanding balance of all other loans from
the Plan to the Member on the date of the loan, or (b) 50 percent of the value of the Member’s
vested Account based on the latest available information on the date on which the Pentegra DC Plan
Office receives the completed application for the loan and other required documents. In determining
the maximum amount that a Member may borrow, all vested assets of his Account, will be taken into
consideration, provided that, where the Employer has not elected to make a Member’s entire Account
available for loans or where a Member’s Account contains investments in a brokerage account which
shall not be available for loans, in no event shall the amount of the loan exceed the value of such
vested portion of the Member’s Account from which loans are permissible.

Section 4. Source of Funds for Loan

The amount of the loan will be deducted from the Member’s Account in the Investment Funds in
accordance with Section 2(D) of this Article and the Plan procedures for determining the amount of
payments made under Article VII, Section 1(A). An Employer may elect to not make loans available to
Members from a Member’s Regular Account, 401(k) Account, Safe Harbor CODA Account, Profit Sharing
Account (including Profit Sharing Rollover amounts), and/or Rollover Account from which the loan
shall be allocable based upon the Member’s designation. Any portion of a Member’s Account which is
invested in a brokerage account shall not be available for loans. The account from which the Member
first chooses to borrow must be exhausted before the Member can borrow any amount from the other
account. A loan will first be allocable (to the extent the Employer permits Members to take loans
from one or more of the Members’ Accounts) out of the amounts which are the least accessible to the
Member unless elected otherwise.

Section 5. Conditions of Loan

	(A)	 	Each loan to a Member under the Plan shall be repaid in level amounts through regular payroll
deductions after the effective date of the loan, and continuing thereafter with each payroll.
Notwithstanding the foregoing sentence, at the election of the Employer, a loan may be repaid
in level monthly payments or on a payroll period basis, provided that the Employer applies
such election uniformly to all Members. Except as otherwise required by the Code and the IRS
Regulations, each loan shall have a repayment period of not less than 12 months and not in
excess of 60 months except that, if the purpose of the loan is the purchase of a primary
residence, not more than 180 months. After the first 3 monthly payments of the loan have been
satisfied, the Member may pay the outstanding loan balance (including accrued interest from
the due date).

 

61

 

	(B)	 	The rate of interest for the term of the loan will be established as of the loan date, and
will be the Barron’s Prime Rate (base rate) plus 1% as published on the last Saturday of the
preceding month, or such other rate as may be required by applicable law and determined by
reference to the prevailing interest rate charged by commercial lenders under similar
circumstances. The applicable rate would then be in effect through the last business day of
the month.

	(C)	 	Repayment of all loans under the Plan shall be secured by 50% of the Member’s vested interest
in his Account determined as of the origination of such loan.

	(D)	 	Only one loan may be made to a Member in the Plan Year from his Account (excluding the
Member’s Rollover Account), except that a second loan may be made from the Member’s Rollover
Account, if any, in such Plan Year, unless the Employer does not permit loans to be made from
the Member’s Rollover Account.

	(E)	 	There shall be a reasonable origination fee and/or an annual administration fee assessed to
the Member’s Account for each loan made to a Member or Beneficiary.

Section 6. Crediting of Repayment

	(A)	 	Upon lending any amount to a Member, the Board shall establish and maintain a loan receivable
account with respect to, and for the term of, the loan. The allocations described in this
Section shall be made from the loan receivable account.

	(B)	 	Upon receipt of each monthly or payroll period installment payment and the crediting thereof
to the Member’s loan receivable account, there shall be allocated to the Member’s Account in
the Investment Funds in accordance with his most recent investment instruction the principal
portion of the installment payment plus that portion of the interest equal to the rate
determined in Section 5(B) of this Article.

	(C)	 	The unpaid balance owed by a Member on a loan under the Plan shall not reduce the amount
credited to his Account. However, from the time of payment of the proceeds of the loan to the
Member, such Account shall be deemed invested, to the extent of such unpaid balance, in such
loan until the complete repayment thereof or distribution from such Account. Any loan
repayment shall first be deemed allocable to a Member’s Regular Account contributions, then
earnings on such Member’s Regular Account contributions and finally Employer contributions
plus earnings. Notwithstanding the preceding sentence, any loan repayment of amounts derived
from a Member’s 401(k) Account, Regular Account and Rollover Account shall be applied to such
accounts on a proportionate basis that reflects the allocable portion of those Member accounts
deemed invested in the loan.

 

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Section 7. Cessation of Payments on Loan

	(A)	 	If a Member, while employed, fails to make a monthly or payroll period installment payment
when due, as specified in the completed application, subject to applicable law, he will be
deemed to have received a distribution of the outstanding balance of the loan. If such default
occurs after the first 3 monthly payments of the loan have been satisfied, the Member may pay
the outstanding balance, including accrued interest from the due date, by the last day of the
calendar quarter following the calendar quarter which contains the due date of the last
monthly installment payment, in which case no such distribution will be deemed to have
occurred. Subject to applicable law, notwithstanding the foregoing, a Member that borrows
amounts from his 401(k) Account may not cease to make monthly installment payments while
employed and receiving a Salary from the Employer.

	(B)	 	Except as otherwise provided under Section 8 below, upon a Member’s termination of
Employment, death or Disability, or the termination of his Employer’s participation in the
Plan, no further monthly installment payments may be made. Unless the outstanding balance,
including accrued interest from the due date, is paid by the last day of the calendar quarter
following the calendar quarter of the date of such occurrence, the Member will be deemed to
have received a distribution of the outstanding balance of the loan including accrued interest
from the due date. This Subsection (B) shall also apply to a Member (i) whose Employer
terminates its participation in the Plan without establishing or maintaining a qualified
successor plan (as defined in Article VII, Section 3) to which the Member’s Account could be
transferred, (ii) who elects not to transfer the total accumulated balance of his Account to
such qualified successor plan, as provided under Article VII, Section 3(A), where the Employer
has satisfied all conditions and requirements to permit such transfer, or (iii) who fails to
transfer outstanding loan balances as provided under Article VII, Section 3(A)(2).

Section 8. Loans to Former Members and Beneficiaries

Notwithstanding any other provisions of this Article VIII, a Member who terminates Employment
for any reason or whose Employer terminates participation in the Plan (a “Terminated Member”)
shall be permitted to continue making scheduled repayments with respect to any loan balance
outstanding at the time he becomes a Terminated Member and any Terminated Member (or
Beneficiary) shall be permitted to borrow from his Account if his Employer (or the Employer of
the Member with respect to whom he is a Beneficiary) permitted loans under the Plan at the time
he became a Terminated Member (or became entitled to benefits as a Beneficiary). If any
individual who continues to make repayments or who borrows from his Account pursuant to this
Section 8 fails to make a monthly installment payment by the end of the calendar quarter
following the calendar quarter of the scheduled payment date, he will be deemed to have received
a distribution of the outstanding balance of the loan.

 

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ARTICLE IX ADMINISTRATION OF PLAN

Section 1. Board of Directors

	(A)	 	The general administration of the Plan and the general responsibility for carrying out the
provisions of the Plan shall be placed in a Board of Directors who must be Members of the
Plan. The President of the Plan shall be the chief administrative officer of the Plan, a
member ex officio of the Board and, for purposes of ERISA, the “plan administrator.” The Board
shall constitute the “named fiduciary” for purposes of ERISA. The Board may adopt, and amend
from time to time, by-laws not inconsistent with the Trust and the Plan and shall have such
duties and exercise such powers as are provided in the Plan, Trust Agreement and by-laws. The
number of Directors, their method of election and their terms of office shall be governed by
such by-laws. The Board shall hold an annual meeting each year and may hold additional
meetings from time to time.

	(B)	 	The Board members shall serve without compensation, but shall be reimbursed for any
reasonable expenses incurred in their capacities as Board members. Neither the Plan
Administrator, nor any Board member, officer or employee of the Plan shall be personally
liable by virtue of any contract or other instrument executed by him or on his behalf in such
capacity nor for any mistake of judgment made in good faith. Each Employer, by its
participation in the Plan, agrees that each member of the Board and officer and employee of
the Plan shall be indemnified by the Employer for any liability, in excess of that which is
covered by insurance, arising out of any act or omission to act in connection with the Plan,
except for fraud or willful misconduct. The obligation to pay any such expense shall be
allocated among the Employers by the Board in such manner as the Board deems equitable.

	(C)	 	The Board shall elect from its membership a chairman and a vice chairman of the Board, and
shall elect such other officers of the Plan as the Board deems desirable. The Board may
appoint committees and shall arrange for such legal, accounting, investment advisory or
management, administrative and other services as it deems appropriate to carry out the Plan,
and may act in reliance upon the advice and actions of the persons or firms providing such
services. The Board may delegate to any committee, officer, employee or agent the authority to
perform any act pertaining to the Plan or the administration thereof. No Employer shall under
any circumstances or for any purpose be deemed an agent of the Board. The Board shall cause to
be maintained proper accounts and accounting procedures and shall submit an Annual Report on
the operations of the Plan to each Employer for the information of its members. The Board may
adopt by-laws governing the conduct of its affairs and may amend such by-laws from time to
time.

	(D)	 	The Board shall have the exclusive right to interpret the Plan and to determine any question
arising under or in connection with the administration of the Plan. Its decision or action in
respect thereof shall be conclusive and binding upon all persons having an interest in the
Trust or under the Plan. The Board shall have no duty to see that contributions received by
the Trustee under the Plan comply with the provisions of the Plan, nor any duty to enforce
payment of any contributions under the Plan.

 

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	(E)

	 	 	(1	)	 	All claims for benefits under the Plan shall be submitted in writing to, and within a
reasonable period of time decided by, the President of the Plan. If the claim is wholly or
partially denied, written notice of the denial shall be furnished within 90 days after receipt
of the claim; provided that, if special circumstances require an extension of time for
processing the claim, an additional 90 days from the end of the initial period shall be
allowed for processing the claim, in which event the claimant shall be furnished with a
written notice of the extension prior to the termination of the initial 90-day period
indicating the special circumstances requiring an extension. The written notice denying the
claim shall set forth the reasons for the denial, including specific reference to pertinent
provisions of the Plan on which the denial is based, a description of any additional
information necessary to perfect the claim and information regarding review of the claim and
its denial.

	 	(2)	 	A claimant may review all pertinent documents and may request a review by the
Board of a decision denying the claim. Such a request shall be made in writing and filed
with the Board within 60 days after delivery to the claimant of written notice of the
decision. Such written request for review shall contain all additional information which
the claimant wishes the Board to consider. The Board may hold a hearing or conduct an
independent investigation, and the decision on review shall be made as soon as possible
after the Board’s receipt of the request for review. Written notice of the decision on
review shall be furnished to the claimant within 60 days after receipt by the Board of a
request for review, unless special circumstances require an extension of time for
processing, in which event an additional 60 days shall be allowed for review and the
claimant shall be so notified in writing. Written notice of the decision on review shall
include specific reasons for the decision. For all purposes under the Plan, such
decision on claims (where no review is requested) and decision on review (where review
is requested) shall be final, binding and conclusive on all interested persons as to
participation and benefits eligibility, the amount of benefits and as to any other
matter of fact or interpretation relating to the Plan.

Section 2. Trust Agreement

	(A)	 	The Board shall enter into one or more Trust Agreements with a Trustee or Trustees selected
by the Board. The Trust established under any such agreement shall be a part of the Plan and
shall provide that all funds received by the Trustee as contributions under the Plan and the
income therefrom (other than such part as is necessary to pay the expenses and charges
referred to in Paragraph (B) of this Section) shall be held in the Trust Fund for the
exclusive benefit of the Members or their Beneficiaries, and managed, invested and reinvested
and distributed by the Trustee in accordance with the Plan. Sums received for investment may
be invested (i) wholly or partly through the medium of any common, collective or commingled
trust fund maintained by a bank or other financial institution and which is qualified under
Sections 401(a) and 501(a) of the Code and constitutes a part of the Plan, or (ii) wholly or
partly through the medium of a group annuity or other type of contract issued by an insurance
company and constituting a part of the Plan, and utilizing, under any such contract, general,
commingled or individual investment accounts. Subject to the provisions of Article XII, the
Board may from time to time and without the consent of any Employer, Member or Beneficiary (a)
amend the Trust Agreement or any such insurance contract in such manner as the Board may deem
necessary or desirable to carry out the Plan, (b) remove the Trustee and designate a successor
Trustee upon such removal or upon the resignation of the Trustee, and (c) provide for an
alternate funding agency under the Plan. The Trustee shall make payments under the Plan only
to the extent, in the amounts, in the manner, at the time, and to the persons as shall from
time to time be set forth and designated in written authorizations from the Board.

 

65

 

	(B)	 	The Trustee shall from time to time charge against and pay out of the Trust Fund taxes of any
and all kinds whatsoever which are levied or assessed upon or become payable in respect of
such Fund, the income or any property forming a part thereof, or any security transaction
pertaining thereto. To the extent not paid by the Employers, the Trustee shall also charge
against and pay out of the Trust Fund other expenses incurred by the Trustee in the
performance of its duties under the Trust, the expenses incurred by the Board in the
performance of its duties under the Plan (including reasonable compensation for agents and
cost of services rendered in respect of the Plan), such compensation of the Trustee as may be
agreed upon from time to time between the Board and the Trustee, and all other proper charges
and disbursements of the Trustee or the Board.

 

66

 

ARTICLE X MISCELLANEOUS PROVISIONS

Section 1. General Limitations

	(A)	 	In order that the Plan be maintained as a qualified plan and trust under the Code,
contributions in respect of a Member shall be subject to the limitations set forth in this
Section, notwithstanding any other provision of the Plan. The contributions in respect of a
Member to which this Section is applicable are his own contributions and his Employer’s
contributions.

For purposes of this Section 1, a Member’s contributions shall be determined without regard to
any rollover contributions (as defined by Section 401(a)(5) of the Code). For purposes of
this Section 1, a Member’s compensation shall be a Member’s Form W-2 compensation (within
the meaning of IRS Regulation Section 1.415(c)-2(d)(4)).

	(B)	 	Annual additions to a Member’s Account (including his 401(k) Account, Regular Accounts and
his Profit Sharing Account) and to any other defined contribution plan maintained by the
Member’s Employer in respect of any Plan Year may not exceed the limitations set forth in
Section 415 of the Code, which are incorporated by reference. For these purposes, “annual
additions” shall have the meaning set forth in Section 415(c)(2) of the Code, as modified
elsewhere in the Code and the Regulations, and the limitation year shall mean the Plan Year
unless any other twelve consecutive month period is designated pursuant to a written
resolution adopted by the Employer and approved by the Board.

Effective for limitation years beginning after December 31, 2001, except to the extent
permitted under Article III, Section 9 of the Plan and Section 414(v) of the Code, if
applicable, the annual additions that may be contributed or allocated to a Member’s
Account under the Plan for any limitation year shall not exceed the lesser of:

	 	(i)	 	$40,000, as adjusted for increases in the cost-of-living under
section 415(d) of the Code, or

	 	(ii)	 	100 percent of the Member’s compensation, within the meaning of
section 415(c)(3) of the Code, for the limitation year.

	(C)	 	In the event that, due to forfeitures, reasonable error in estimating a Member’s
compensation, or other limited facts and circumstances, total contributions to a Member’s
Account are found to exceed the limitations of this Section, the Board shall cause
contributions made under Article III, Section 1 in excess of such limitations to be refunded
to the affected Member, with earnings thereon, and shall take appropriate steps to reduce, if
necessary, the Employer contributions made with respect to those returned contributions. Such
refunds shall not be deemed to be withdrawals, loans, or distributions from the Plan. If a
Member’s annual contributions exceed the limitations contained in Paragraph (B) of this
Section after the Member’s Article III, Section 1 contributions, with earnings thereon, if
any, have been refunded to such Member, the Profit Sharing contribution to be allocated to any
Member in respect of any Contribution Determination Period (including allocations as provided
in this Paragraph) shall instead be allocated to or for the benefit of all other Members who
are 

 

67

 

Employees in Employment as of the last day of the Contribution Determination Period as
determined under Article III, Section 8(c) and allocated in the same proportion that each such Member’s
Salary for such Contribution Determination Period bears to the total Salary for such
Contribution Determination Period of all such Members or, the Board may, at the election of
the Employer, utilize such excess to reduce the contributions which would otherwise be made
for the succeeding Contribution Determination Period by the Employer. If, with respect to any
Contribution Determination Period, there is an excess Profit Sharing contribution, and such
excess cannot be fully allocated in accordance with the preceding sentence because of the
limitations prescribed in Paragraph (B) of this Section, the amount of such excess which
cannot be so allocated shall be allocated to the Employer Hold Account and made available to
the Employer pursuant to the terms of Article VI, Section 2(B)(2) except that any such excess
contribution may not be applied to reduce administrative expenses (in accordance with Article
IX, Section 2). The Board, in accordance with Paragraph (D) of this Section, shall take
whatever additional action may be necessary to assure that contributions to Members’ Accounts
meet the requirements of this Section.

	(D)	 	In addition to the steps set forth in Paragraph (C) above, the Board may from time to time
adjust or modify the maximum limitations applicable to contributions made in respect of a
Member under this Section 1 as may be required or permitted by the Code or ERISA prior to or
following the date that allocation of any such contributions commence and shall take
appropriate action to real locate the annual contributions which would otherwise have been
made but for the application of this Section.

	(E)	 	Membership in the Plan shall not give any Employee the right to be retained in the Employment
of his Employer and shall not affect the right of the Employer to discharge any Employee.

	(F)	 	Each Member, Spouse and Beneficiary assumes all risk in connection with any decrease in the
market value of the assets of the Trust Fund. Neither the Board nor the Trustee guarantees
that upon withdrawal the value of a Member’s Account, his Profit Sharing Account, and/or his
Rollover Account will be equal to or greater than the amount of the Member’s own deferrals or
contributions, or those credited on his behalf in which the Member has a vested interest,
under the Plan.

	(G)	 	The establishment, maintenance or crediting of a Member’s Account pursuant to the Plan shall
not vest in such Member any right, title or interest in the Trust Fund except at the times and
upon the terms and conditions and to the extent expressly set forth in the Plan and the Trust
Agreement.

	(H)	 	The Trust Fund shall be the sole source of payments under the Plan and the Employer and the
Board assume no liability or responsibility for such payments, and each Member, Spouse or
Beneficiary who shall claim the right to any payment under the Plan shall be entitled to look
only to the Trust Fund for such payment. All contributions to the Trust Fund shall be deemed
to have been made in the State of New York.

 

68

 

Section 2. Top Heavy Provisions

In respect of any Employer, the Plan will be considered a Top Heavy Plan for any Plan Year if it is
determined to be a Top Heavy Plan as of the last day of the preceding Plan Year.

The provisions of this Section 2 shall apply and supersede all other provisions in the Plan during
each Plan Year with respect to which the Plan, with regard to such Employer, is determined to be a
Top Heavy Plan.

	(A)	 	For purposes of this Section 2, the following terms shall have the meanings set forth below:

	 	(1)	 	“Affiliate” shall mean any entity affiliated with any Employer within the meaning
of Section 414(b), 414(c) or 414(m) of the Code, or pursuant to the IRS Regulations
under Section 414(o) of the Code, except that for purposes of applying the provisions
hereof with respect to the limitation on contributions, Section 415(h) of the Code shall
apply.

	 	(2)	 	“Aggregation Group” shall mean the group composed of each qualified retirement
plan of the Employer or an Affiliate in which a Key Employee is a member and each other
qualified retirement plan of the Employer or an Affiliate which enables a plan of the
Employer or an Affiliate in which a Key Employee is a member to satisfy Sections
401(a)(4) or 410 of the Code. In addition, the Board may choose to treat any other
qualified retirement plan as a member of the Aggregation Group if such Aggregation Group
will continue to satisfy Sections 401(a)(4) and 410 of the Code with such plan being
taken into account.

	 	(3)	 	“Key Employee” shall mean a “Key Employee” as defined in Sections 416(i)(1) and
(5) of the Code and the IRS Regulations. For purposes of Section 416 of the Code and for
purposes of determining who is a Key Employee, an Employer which is not a corporation
may have “officers” only for Plan Years beginning after December 31, 1985. For purposes
of determining who is a Key Employee pursuant to this Subparagraph (3), compensation
shall have the meaning prescribed in Section 414(s) of the Code or, to the extent
required by the Code or the IRS Regulations, Section 1.415-2(d) of the IRS Regulations.

	 	(4)	 	“Non Key Employee” shall mean a “Non Key Employee” as defined in Section
416(i)(2) of the Code and the IRS Regulations thereunder.

	 	(5)	 	“Top Heavy Plan” shall mean a “Top Heavy Plan” as defined in Section 416(g) of
the Code and the IRS Regulations thereunder.

	 	(6)	 	“Determination Date” shall mean the last day of the preceding Plan Year or, in
the case of the first Plan Year, the last day of such Plan Year.

	 	(7)	 	“Top Heavy Ratio” is a fraction, the numerator of which is the sum of the account
balances of all Key Employees as of the applicable Determination Date (including any
part of any account balance distributed in the five-year period ending on the
Determination Date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five-year period ending on
the Determination Date), both computed in accordance with Section 416 of the Code and
the IRS Regulations thereunder.

 

69

 

	(B)	 	Subject to the provisions of Paragraph (D) below, for each Plan Year that the Plan is a Top
Heavy Plan, the Employer’s contribution allocable to each Employee (other than a Key Employee)
who has satisfied the eligibility requirement(s) of Article II, Section 2, and who is in
service at the end of the Plan Year shall not be less than the lesser of (i) 3% of such
eligible Employee’s compensation (as defined in Section 414(s) of the Code or, to the extent
required by the Code or the IRS Regulations, Section 1.415-2(d) of the Regulations), provided
that for any Plan Year beginning on or after January 1, 1994 no more than $150,000 (adjusted
for cost of living to the extent permitted by the Code and the IRS Regulations) shall be taken
into account), or (ii) the percentage at which Employer contributions for such Plan Year are
made and allocated on behalf of the Key Employee for whom such percentage is the highest. For
the purpose of determining the appropriate percentage under clause (ii), all defined
contribution plans required to be included in an Aggregation Group shall be treated as one
plan. Clause (ii) shall not apply if the Plan is required to be included in an Aggregation
Group which enables a defined benefit plan also required to be included in said Aggregation
Group to satisfy Sections 401(a)(4) or 410 of the Code. Contributions attributable to salary
reduction that are made to a Key Employee’s 401(k) Account and Roth 401(k) Account shall be
taken into account in determining the minimum required contribution under this Subsection (B).

	(C)	 	If the Plan is a Top Heavy Plan for any Plan Year, and (i) the Employer has elected a vesting
schedule under Article VI for an employer contribution type which does not satisfy the minimum
Top Heavy vesting requirements or (ii) if the Employer has not elected a vesting schedule for
an employer contribution type, the vested interest of each Member, who is credited with at
least one Hour of Employment on or after the Plan becomes a Top Heavy Plan, for each employer
contribution type in his Account described in clause (i) or (ii) above, shall not be less than
the percentage determined in accordance with the following schedule:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 2
	 	 	0               	%
	2 but less than 3
	 	 	20              	%
	3 but less than 4
	 	 	40              	%
	4 but less than 5
	 	 	60              	%
	5 but less than 6
	 	 	80              	%
	6 or more
	 	 	100             	%

Notwithstanding the schedule provided above, if the Plan is a Top Heavy Plan for any Plan
Year and if an Employer has elected a cliff vesting schedule for an employer contribution
type described in clause (i) or (ii) above, the vested interest of each Member, who is
credited with at least one Hour of Employment on or after the Plan becomes a Top Heavy Plan,
for such employer contribution type in his Account, shall not be less than the percentage
determined in accordance with the following schedule:

	 	 	 	 	 
	Completed	 	Vested	 
	Years of Employment	 	Percentage	 
	 
	 	 	 	 
	Less than 3
	 	 	0               	%
	3 or more
	 	 	100             	%

 

70

 

	(D)	 	The Board shall, to the maximum extent permitted by the Code and in accordance with the IRS
Regulations, apply the provisions of this Section 2 by taking into account the benefits
payable and the contributions made under the Pentegra Defined Benefit Plan for Financial
Institutions or any other qualified plan maintained by an Employer, to prevent inappropriate
omissions or required duplication of minimum contributions.

	(E)	 	Effective for Plan Years beginning after December 31, 2001, for purposes of determining
whether the Plan is a top-heavy plan under Section 416(g) of the Code, and whether the Plan
satisfies the minimum benefits requirements of Section 416(c) of the Code for such years, the
following provisions shall apply:

	 	(1)	 	“Key Employee” shall mean any Employee or former Employee (including any deceased
employee) who at any time during the Plan Year that includes the determination date was
an officer of the Employer having annual compensation greater than $130,000 (as adjusted
under section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a
5-percent owner of the employer, or a 1-percent owner of the employer having annual
compensation of more than $150,000. For this purpose, annual compensation means
compensation within the meaning of section 415(c)(3) of the Code. The determination of
who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and
the applicable regulations and other guidance of general applicability issued
thereunder.

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

The accrued benefits accounts of any individual who has not performed services
for the employer during the 1-year period ending on the determination date
shall not be taken into account.

	 	(3)	 	Employer matching contributions shall be taken into account for purposes of
satisfying the minimum contribution requirements of section 416(c)(2) of the Code and
the Plan. The preceding sentence shall apply with respect to matching contributions
under the Plan, or any other plan maintained by the Employer, to the maximum extent
permitted by the Code and in accordance with the IRS Regulations. Employer matching
contributions that are used to satisfy the minimum contribution requirements shall be
treated as matching contributions for purposes of the actual contribution percentage
test and other requirements of section 401(m) of the Code.

 

71

 

The employer may elect to provide that the minimum benefit requirement shall be met in
another plan (including another plan that consists solely of a cash or deferred
arrangement which meets the requirements of section 401(k)(12) of the Code and
matching contributions with respect to which the requirements of section 401(m)(11) of
the Code are met).

Section 3. Information and Communications

Each Employer, Member, Spouse and Beneficiary shall be required to furnish the Board with such
information and data as may be considered necessary by the Board. All notices, instructions and
other communications with respect to the Plan shall be in such form as is prescribed from time to
time by the Board, shall be mailed by first class mail or delivered personally, and shall be deemed
to have been duly given and delivered only upon actual receipt thereof by the Board. All
information and data submitted by an Employer or a Member, including a Member’s birth date, marital
status, salary and circumstances of his employment and termination thereof, may be accepted and
relied upon by the Board. All communications from the Board or the Trustee to an Employer, Member,
Spouse or Beneficiary shall be deemed to have been duly given if mailed by first class mail to the
address of such person as last shown on the records of the Plan.

Section 4. Small Account Balances

Notwithstanding the foregoing provisions of the Plan, and except as provided in Article III,
Section 6(B)(6), if the value of all of a Member’s Account under the Plan (including a Profit
Sharing Account and a Rollover Account, if any), when aggregated is equal to or exceeds $500, then
no Account will be distributed without the consent of the Member prior to age 65 (at the earliest).

Section 5. Amounts Payable to Incompetents, Minors or Estates

If the Board shall find that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has died, then any payment
due him or his estate (unless a prior claim therefor has been made by a duly appointed legal
representative) may be paid to his Spouse, relative or any other person deemed by the Board to be a
proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be
a complete discharge of the liability of the Trust Fund therefor.

Section 6. Non-alienation of Amounts Payable

Except insofar as may otherwise be required by applicable law, or Article VIII, or pursuant to the
terms of a Qualified Domestic Relations Order, no amount payable under the Plan shall be subject in
any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind, and any attempt to so alienate shall be void; nor
shall the Trust Fund in any manner be liable for or subject to the debts or liabilities of any
person entitled to any such amount payable; and further, if for any reason any amount payable under
the Plan would not devolve upon such person entitled thereto,

 

72

 

then the Board, in its discretion,
may terminate his interest and hold or apply such amount for the benefit of such person or his dependents as it may deem proper. For the purposes of the Plan, a “Qualified Domestic
Relations Order” means any judgment, decree or order (including approval of a property settlement
agreement) which has been determined by the Board in accordance with procedures established under
the Plan, to constitute a Qualified Domestic Relations Order within the meaning of Section
414(p)(1) of the Code. No amounts may be withdrawn under Article VII and Article III, Section 8,
and no loans granted under Article VIII, if the Pentegra DC Plan Office has received a document
which may be determined following its receipt to be a Qualified Domestic Relations Order prior to
completion of review of such order by the Office within the time period prescribed for such review
by the IRS Regulations.

Section 7. Unclaimed Amounts Payable

If the Board cannot ascertain the whereabouts of any person to whom an amount is payable under the
Plan, and if, after 5 years from the date such payment is due, a notice of such payment due is
mailed to the address of such person, as last shown on the records of the Plan, and within 3 months
after such mailing such person has not filed with the Board written claim therefor, the Board may
direct in accordance with ERISA that the payment (including the amount allocable to the Member’s
contributions) be cancelled, and used in abatement of the Plan’s administrative expenses, provided
that appropriate provision is made for recrediting the payment if such person subsequently makes a
claim therefor.

Section 8. Leaves of Absence

	(A)	 	Contribution allocations and vesting service continue to the extent provided in Paragraphs
(B)(1), (2), (3) or (4), below, during any approved Leave of Absence, provided that the
Employer notifies the Plan of its intention to grant to a specific Employee or Member,
pursuant to the Employer’s policy which is uniformly applicable to all its Employees under
similar circumstances, one of the Leaves of Absence described in Paragraph (B) below, and
agrees to notify the Plan at the conclusion of such leave.

	(B)	 	For purposes of the Plan there are only four types of approved Leaves of Absence:

	 	(1)	 	Non-military leave granted to a Member for a period not in excess of one year
during which service is recognized for vesting purposes and the Member is entitled to
share in any supplemental contributions under Article III, Section 3 or forfeitures
under Article VI, Section 2, if any, on a pro rata basis, determined by the Salary
earned during the Plan Year or Contribution Determination Period; or

	 	(2)	 	Non-military leave or layoff granted to a Member for a period not in excess of
one year during which service is recognized for vesting purposes, but the Member is not
entitled to share in any contributions or forfeitures as defined under (1) above, if
any, during the period of the leave; or

	 	(3)	 	To the extent not otherwise required by applicable law, military or other
governmental service leave granted to a Member from which he returns directly to the
service of the Employer. Under this leave, a Member may not share in any contributions
or forfeitures as defined under (1) above, if any, during the period of the leave, but
vesting service will continue to accrue; or

 

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	 	(4)	 	To the extent not otherwise required by applicable law, a military leave granted
at the option of the Employer to a Member who is subject to military service pursuant to
an involuntary call-up in the Reserves of the U.S. Armed Services from which he returns
to the service of the Employer within 90 days of his discharge from such military
service. Under this leave, a Member is entitled to share in any contributions or
forfeitures as defined under (1) above, if any, and vesting service will continue to
accrue. Notwithstanding any provision of the Plan to the contrary, if a Member has one
or more loans outstanding at the time of this leave, repayments on such loan(s) may be
suspended, if the Member so elects, until such time as the Member returns to the service
of the Employer or the end of the leave, if earlier.

The determination of who is a Highly Compensated Employee will be made in
accordance with Section 414(q) of the Code and the IRS Regulations thereunder.

	(C)	 	Notwithstanding any provision of this Plan to the contrary, effective December 12, 1994,
contribution allocations and vesting service with respect to qualified military service will
be provided in accordance with Section 414(u) of the Code. Loan repayments will be suspended
under this Plan as permitted under Section 414(u)(4) of the Code during such period of
qualified military service.

Section 9. Return of Contributions to Employer

	(A)	 	In the case of a contribution that is made by an Employer by reason of a mistake of fact,
such Employer may request the return to it of such contribution within one year after the
payment of the contribution, provided such refund is made within one year after the payment of
the contribution.

	(B)	 	In the case of a contribution made by an Employer or a contribution otherwise deemed to be an
Employer contribution under the Code, such contribution shall be conditioned upon the
deductibility of the contribution by the Employer under Section 404 of the Code. To the extent
the deduction for such contribution is disallowed, in accordance with IRS Regulations, the
Employer may request the return to it of such contribution within one year after the
disallowance of the deduction.

Section 10. Controlling Law

The Plan and all rights thereunder shall be governed by and construed in accordance with the laws
of the State of New York (without regard to the principles of the conflicts of laws thereof) and
ERISA.

 

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ARTICLE XI TERMINATION OF EMPLOYER PARTICIPATION

Section 1. Termination by Employer

Any Employer may terminate its participation in the Plan by giving the Board written notice
specifying a termination date which shall be a Valuation Date at least 60 days subsequent to the
date such notice is received by the Board.

Section 2. Termination by Board

The Board may terminate any Employer’s participation, as of a termination date specified by the
Board, if the Board determines that the Employer has failed to make proper contributions or to
comply with any other provision of the Plan or any applicable rulings or Regulations under the
Code, within 15 days after notice and demand by the Board. Except as provided under Article III,
Section 3, upon complete discontinuance of an Employer’s contributions, its participation shall
automatically terminate, and its termination date shall be a Valuation Date specified by the Board
which is within 3 months subsequent to the last day through which the Employer’s contributions to
the Trust Fund were paid.

Section 3. Termination Distribution

If an Employer’s participation is terminated, the Board shall promptly notify the IRS and such
other appropriate governmental authority as applicable law may require. Neither the Employer not
its Employees shall make any further contributions under the Plan after the termination date,
except that the Employer shall remit to the Board an amount equal to the product of (i) $60
multiplied by (ii) the number of the Employer’s Members and Employees with a balance in their
Accounts as of the termination date, to defray the cost of implementing its termination. If the
Employer elects to permit transfers to a qualified successor plan in accordance with Article VII,
Section 3, for which Pentegra Services, Inc., will provide services, the Board may waive the
withdrawal fees provided for in this Section 3. Except as Article III, Section 4 may provide, each
Employee may thereafter withdraw the current value of his Accounts in accordance with Article VII.
Subject to the provisions of Article XII, Paragraph (D), an Employer whose participation has been
terminated pursuant to this Article may transfer assets under its prior Plan to a qualified
successor plan, provided such plan satisfies the requirements contained in Article VII, Section 3
and the transfer is otherwise in accordance with the procedures of such Section.

Upon the termination of participation under the Plan of an Employee’s or Member’s Employer, any
rights of the Employee or Member to make contributions, rollovers or transfers to the Plan shall
cease.

 

75

 

ARTICLE XII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST

	(A)	 	The Board shall have the right to amend or terminate the Plan or Trust Agreement at any time
in whole or in part, for any reason, and without the consent of any Employer, Member or
Beneficiary, and each Employer by its adoption of the Plan and Trust shall be deemed to have
delegated this authority to the Board. No amendment, however, shall impair such rights of
payment as the Member or his Beneficiary would have had, if such amendment had not been made,
with respect to contributions made by him or on his behalf prior to such amendment, except to
the extent that such amendment is, in the opinion of the Board, necessary or desirable to
qualify or maintain the Plan and the Trust as a plan and trust meeting the requirements of
Sections 401(a) and 501(a) of the Code as now in effect or hereafter amended, or any other
applicable section of the Code now or hereafter in force from time to time; and no amendment
shall make it possible for any part of the Trust Fund (other than such part as may be
necessary to pay the expenses and charges referred to in Article IX) to be used for purposes
other than for the exclusive benefit of Members or their Beneficiaries.

	(B)	 	In the event of termination of the Plan by the Board or upon a complete discontinuance of
contributions under the Plan, the Units credited to each Member’s Account as of the date of
such termination or complete discontinuance of contributions shall be fully vested in the
Member, and the Trustee shall upon direction of the Board liquidate the assets of the Trust
Fund with such promptness as the Trustee deems prudent. When such liquidation has been
completed and after provision for all expenses and charges referred to in Article IX, and
proportionate adjustment of all Plan Accounts to reflect such expenses, the Trustee shall pay
to each person who was a Member on such termination date (or in the event of his death on or
after such date, to his Spouse or Beneficiary) a lump sum equal to the amount, if any, then
credited to his Account after such liquidation and provision for expenses and charges.

	(C)	 	Notwithstanding any termination of the Plan by the Board, the Board shall remain in existence
and all the provisions of the Plan shall remain in force which are necessary for the execution
of the Plan and the distribution of the Trust Fund assets in accordance with this Article.

	(D)	 	No assets of the Plan shall in any event be merged, consolidated with, or transferred to any
other plan unless each Member affected thereby would, if such plan then terminated immediately
after such event, receive thereunder a benefit which is equal to or greater than the benefit
to which he would have been entitled if the Plan had terminated immediately before such event.

	(E)	 	In the event that any governmental authority or the Board determines that a partial
termination (within the meaning of ERISA) of the Plan has occurred as to any Employer, then
the Units credited to the Account of each Member who is affected thereby shall be fully vested
in such Member and the provisions of Article XI and this Article XII, which in the opinion of
the Board are necessary for the execution of the Plan and the allocation and distribution of
assets of the Plan, shall apply.

 

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TRUSTS ESTABLISHED UNDER THE PLAN

Assets of the Plan are held in trust under Trust Agreements with Bank of New York, pursuant to
Article IX, Section 2 of the Plan. Any Employer or Member may obtain a copy of these Trust
Agreements from the office of the Plan.

 

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