Document:

Exhibit 10(L)

 

TARGET CORPORATION

 

OFFICER INCOME CONTINUANCE
POLICY STATEMENT

 

As Amended and Restated January 13,
2010

 

I.                                         CONCEPTS

 

A.                                   GENERAL

 

The present policy of the Corporation is to
provide, under certain defined circumstances, Income Continuance Payments to
certain “Officers” or “Executives” whose employment is terminated at the
instance of the Corporation or who involuntarily or for good reason terminate
within two years after a Change in Control. This policy is intended to assist
in the occupational transition and financial security of those identified
Executives whose services are no longer deemed required within the Corporation,
who have during their tenure been faithful and honest employees, who do not
during the period of those payments engage in disqualifying misconduct, and to
the extent not compensated for services to a directly competitive employer and
to assist Executives who involuntarily or for good reason terminate employment
with the Corporation within two years after a Change in Control.

 

This will be known as the Officer Income
Continuance Policy (“Officer-ICP”) of the Corporation. It will be interpreted
and applied in accordance with this Statement of policy and with any subsequent
amendment or restatement applicable to the Executive. The Corporation’s Income
Continuance Policy Statement has been consolidated and transferred into the
Officer-ICP.

 

The Officer-ICP has been operated in
compliance with Internal Revenue Code (“Code”) Section 409A since January 1,
2005.  Effective January 1, 2009,
the Officer-ICP was amended to comply with Code Section 409A with respect
to all amounts payable from the Officer-ICP that are considered nonqualified
deferred compensation.

 

B.                                     ELIGIBILITY

 

To be eligible under Officer-ICP, an
individual must be an Officer as specified in this Statement.

 

C.                                     REASSIGNMENT

 

An Executive will continue to have income
protection under Officer-ICP for at least 12 calendar months (Eligibility
Period) after internal reassignment to a position which does not otherwise include
eligibility for Officer-ICP benefits.

 

 

D.                                    SPIN-OFF

 

An Executive who is employed by a business
unit on the closing date of any Spin-Off which includes such business unit is
no longer eligible for Officer-ICP.

 

E.                                      DISQUALIFICATION
AND REDUCTION

 

Serious and deliberate misconduct in
employment by an Executive resulting in discharge for cause can disqualify an
Executive from Officer-ICP eligibility. Except as otherwise expressly provided
in this Statement, after termination under Officer-ICP and normal windup of
former duties an Executive will not be required to perform any regular services
for the Corporation, and will be free to accept any other employment. Except as
otherwise provided in this Statement, Officer-ICP Payments otherwise payable to
an Executive will be reduced or excused in the amount of compensation from
Directly Competitive Employment as specifically defined to the Executive in
advance according to this Statement. An Executive otherwise entitled to
Officer-ICP Payments after Termination or Reassignment will be disqualified
from receiving future Payments by reason of serious and deliberate misconduct
which is unlawful or clearly and seriously harmful to the Corporation, or to
its interests.

 

F.                                      INTERPRETATION

 

Subject to the express terms of this
Statement, the Chief Executive Officer of the Corporation will have sole and
final authority to interpret the Officer-ICP and determine its application, and
will interpret it consistently. Section I of this Statement is intended as
a summary of the more detailed provisions of Section II. For that reason, Section II
will control in the event of any difference.

 

II.                                     APPLICATION

 

A.                                   ELIGIBILITY
PERIOD - DEFINITION

 

The “Eligibility Period” of an Executive is
determined by the Executive’s most recent Salary Grade on the Notice of
Termination or Reassignment by the Corporation; provided, however, in the event
of a downgrade or downgrades, the Eligibility Period of the Executive’s highest
Salary Grade shall continue to be applicable until the expiration of the
Eligibility Period for that Salary Grade and then the Eligibility Period for
the next highest Salary Grade shall be used until it expires and this process
shall continue until the Eligibility Period for the last Salary Grade for which
this Statement covers expires. It will be calculated according to the following
schedule:

 

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  Salary Grade

  	
   

  	
  Eligibility
  Period

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  37
  or higher

  	
   

  	
  24 months

  	
   

  
	
  35-36

  	
   

  	
  22 months

  	
   

  
	
  32-34

  	
   

  	
  20 months

  	
   

  
	
  30-31

  	
   

  	
  18 months

  	
   

  
	
  28-29

  	
   

  	
  16 months

  	
   

  
	
  26-27

  	
   

  	
  14 months

  	
   

  
	
  lower than 26

  	
   

  	
  12 months

  	
   

  

 

An Executive entitled to Officer-ICP Payments
will not be entitled to prepayment or other change in the payment schedule.

 

B.                                     ELIGIBILITY
PERIOD - USE

 

The Eligibility Period of an Executive will
determine the number of consecutive calendar months for which an Executive
remains eligible for Officer-ICP Payments under this Statement after:

 

1.                                       Reassignment to
a new position within the Corporation which is not designated an Officer
Position, or

 

2.                                       A downgrade as
set forth in A. above.

 

C.                                     PAYMENT PERIOD
- DEFINITION

 

The Payment Period for an Executive will
consist of the same number of months as the Executive’s Eligibility Period,
measured from the time when Officer-ICP Payments first become payable to the
Executive under the terms of this Statement.

 

D.                                    PAYMENTS

 

1.                                       Amount

 

Each monthly Officer-ICP amount during the
Payment Period will equal one twelfth (1/12) of the Executive’s Final Annual
Cash Compensation from the Corporation which will consist of the sum of:

 

a.                                       Base
Compensation

 

The annual Base (regular monthly or other
fixed salary) rate payable as Cash Compensation to the Executive at the time of
Notice of Termination or effective date of Reassignment or downgrade, but in no
event less than the highest annual rate paid to the Executive at any time
during a number of months equal to the Executive’s Eligibility Period
immediately before the Notice of Termination or effective date of Reassignment
or downgrade, and

 

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b.                                      Performance
Bonus

 

The average amount of the three annual
Performance Bonuses most recently paid or credited to the Executive as Cash
Compensation or deferred bonus, prior to Executive’s Notice of Termination or
effective date of Reassignment or downgrade. For purposes of Officer-ICP, the
Performance Bonus of an Executive shall be determined according to the
applicable Short Term Incentive Plan of the Corporation, shall also include, if
applicable, any discretionary bonus paid during said applicable period on
account of the Executive’s performance but outside of the purview of the then
applicable Short Term Incentive Plan.

 

c.                                       Adjustment

 

The annual rate in dollars of each merit
increase awarded to an Executive before Notice of Termination will be included
in Base Compensation to determine the Executive’s Officer-ICP Payments. If the
Executive’s annual rate of Base Compensation at the time of Notice of
Termination has been increased or decreased to reflect a change from the Short
Term Incentive Plan used to determine the Performance Bonus defined above, and
the change is for the purpose of altering the future relationship of Bonus to
total Annual Cash Compensation of the Executive, then the dollar amount of that
increase or decrease in annual rate of Base Compensation will be excluded in
determining ICP Payments.

 

d.                                      Installment
Payments

 

Although the amount of an Executive’s benefit
is determined on a monthly basis, such monthly amount shall be converted to and
made at the same frequency as the Corporation’s standard payroll practices.
With respect to any benefit under Officer-ICP that is considered deferred
compensation pursuant to Code Section 409A, each installment payment shall
be considered a separate payment.

 

2.                                       Commencement

 

Officer-ICP Payments, or entitlement to begin
receiving them, will commence after the Corporation has received a valid
unrevoked Release and Agreement from Executive, subject to any Set-offs,
Adjustments and Withholding as specified herein. Unless the Executive is a
Specified Employee, Officer-ICP Payments shall commence not later than ninety
(90) days following the date of the Executive’s separation from service, as
defined under Code Section 409A. If at the time of the Executive’s
separation from service, as defined under Code Section 409A, the Executive
is a Specified Employee then no distribution of an Officer-ICP Payment that is
considered deferred compensation pursuant to Code Section 409A will be
made within 6 months of the separation from service, as defined under Code Section 409A,
unless such Officer-ICP Payment would 

 

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otherwise be exempt from the requirements of
Code Section 409A. Any Officer-ICP Payments suspended during such 6 month
period will be paid at the time of the first Officer-ICP Payment after such 6
month period. The Executive shall not be entitled to any compensation, benefits
or perquisites, other than Officer-ICP Payments, after the date of the
Executive’s separation from service, as defined under Code Section 409A.

 

3.                                       Set-Off and
Withholding

 

Officer-ICP Payments are not intended to
duplicate or be in addition to any other payment due between the Corporation
and the Executive.

 

a.                                       Reduction

 

Each Payment otherwise due from the Corporation
to the Executive will be reduced, dollar for dollar and in timing by all
amounts which the Executive receives or is entitled to receive from the
Corporation or under a plan, program or agreement maintained by and at the
expense of the Corporation after the Employment Severance Date. This will
include but not be limited to legally required payments during any required
notice period or in connection with a plant closing, mass layoff, termination,
severance or redundancy under any law, regulation or order. This will also
include such sources as life and disability insurance. It will not apply to
accrued vacation or expense reimbursement (both will be paid in cash at
termination), pension proceeds, 401(k) proceeds, deferred compensation
plans, Social Security, equity awards (for example, stock options, performance
shares or restricted stock awards) or benefits payable under any Worker’s
Compensation or similar law or regulation. Termination of employment by reason
of mandatory retirement under a lawful and uniform policy of the employer
applicable to the Executive will not be treated as a termination for
Officer-ICP purposes. In no circumstance whatsoever shall there be any
combination or duplication of any Officer-ICP Payments with any such other
legally required payment or payments which shall result in the Executive
receiving because of or due to termination of employment a combined total
amount from the Corporation which is greater than the amount of Officer-ICP
Payments to which Executive is entitled under this Officer-ICP before
accounting for such legally required other payments.

 

b.                                      Adjustments

 

Taxes and other amounts which the Corporation
reasonably determines are required by law or by the Executive’s written
instruction will be withheld from Officer-ICP amounts otherwise payable.

 

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E.                                      DEATH OF
EXECUTIVE

 

If an Executive should die after Notice of
Termination and before completion of the Executive’s Payment Period, the
remaining Payments will be made by the Corporation as follows, without
unnecessary interruption:

 

1.                                       Unless the
Executive has otherwise designated in unrevoked writing, acknowledged in
writing by the CEO, the surviving spouse of the Executive, if any, will be
entitled to all remaining Payments.

 

2.                                       If the
Executive has otherwise effectively designated in unrevoked writing,
acknowledged in writing by the CEO, then Payment will be made to or for the
account of the person or persons so designated as identified by the
Corporation.

 

3.                                       In the absence
of effective prior written designation by the Executive and of a known
surviving spouse, the Corporation shall pay any remaining Payments to the
Executive’s estate.

 

4.                                       In the interest
of providing uninterrupted income to authorized beneficiaries of the Executive,
any Officer-ICP Payment made with reasonable care and in good faith by the
Corporation shall conclusively constitute Payment by the Corporation in
accordance with and satisfaction of the entitlement of the Executive and
Executive’s beneficiaries under Officer-ICP. No interest or other charge shall
be payable by the Corporation or its representatives on any Payment delayed by
the Corporation to permit reasonable verification of authorized recipient(s).

 

F.                                      DISQUALIFICATION

 

1.                                       No Executive will
be disqualified from receipt of future Officer-ICP Payments by reason of any
act or omission of anyone other than the Executive or one or more persons
acting pursuant to the conscious and effective control of the Executive.
Disqualification will be interpreted as follows:

 

a.                                       While Employed in the
Corporation

 

Deliberate and serious disloyal or dishonest
conduct in the course of employment will disqualify if it justifies and results
in prompt discharge for specific cause under the established policies and
practices of the Corporation as interpreted by the CEO for this purpose.
Examples would include material unlawful conduct, material and conscious
falsification or unauthorized disclosure of important records or reports,
embezzlement or unauthorized conversion of property, serious violation of
conflict of interest or vendor relations policies, and misuse or disclosure of
significant trade secrets or other information likely to be of use to the
detriment of the Corporation or its interests.

 

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b.                                      After Notice of Termination

 

The Officer-ICP will not restrict an
Executive’s conduct or employment opportunities after Notice of Termination, or
any independent remedy of the Corporation or its representatives by reason of
the Executive’s conduct while employed. The obligation of the Corporation to or
for an Executive during the Eligibility and Payment Periods can be terminated
only by the deliberate conduct of the Executive or one acting under the
Executive’s conscious and effective control, and only as to any Officer-ICP
Payments not yet due, by reason of one or more of the following events:

 

1)              Unauthorized removal, use or
disclosure of strategic or operating plans, trade secrets, customer lists,
internal systems or other significant proprietary information of or concerning
the Corporation or its personnel, the use or disclosure of which is intended or
likely to cause loss or reduction of business advantage or substantial injury
to the Corporation or its management, business opportunities or interests.

 

2)              Expressing or endorsing
publication of untrue statements which are intended or likely to receive broad
public attention and to bring the Corporation or its interests, methods or
representatives into disrepute.

 

3)              Providing materially false
or misleading information concerning post-termination employment, or failure or
refusal promptly and accurately to provide required information, verification
or authorization required by the CEO as provided in this Statement and affecting
any Officer-ICP payment due from the Corporation.

 

4)              Solicitation of or an offer
to an employee within the Corporation to accept employment elsewhere, where the
selection of or offer to the recruited employee was based in the whole or in
part upon Executive’s knowledge or experience concerning the employee which was
acquired by the Executive while employed within the Corporation or through one
or more personal acquaintances employed within the Corporation.

 

5)              Exercising the discretion,
authority or powers of an office or position held by an Executive after Notice
of Termination, and whether or not before an Employment Severance Date, unless
specifically authorized or directed in writing in advance by an authorized
executive of the Corporation.

 

2.                                       Recoupment

 

Notwithstanding
any other provisions of the Officer-ICP, pursuant to the Corporation’s
recoupment policy as adopted by the Compensation Committee of 

 

7

 

the
Board of Directors (the “Committee”) and as amended from time to time (“Recoupment
Policy”), an Officer who engaged in intentional misconduct that contributed
directly or indirectly, in whole or in part, to the need for a restatement of
the Corporation’s consolidated financial statements may be disqualified from
receipt of Officer-ICP Payments and the Committee retains the discretion to
recover Officer-ICP Payments in such event.

 

a.                                       If the
Committee determines Officer-ICP Payments are subject to recovery by the
Corporation under this Section II.F.2. and the Recoupment Policy, the
Committee shall be entitled, in its discretion, to demand repayment or
cancellation of all or a portion of the maximum amount that can be recovered or
cancelled, to the extent necessary to avoid unjust enrichment of the recipient
under the circumstances.

 

b.                                      Pending a
determination by the Committee on the application of this Section II.F.2.
and the Recoupment Policy to a recipient of Officer-ICP Payments, the Committee
shall have the authority to suspend any payments under the Officer-ICP.

 

c.                                       Upon a
determination by the Committee that Officer-ICP payments are subject to
recovery by the Corporation, the Corporation shall have the right, to the
extent permitted by law, to set-off amounts due under this Section II.F.2.
and the Recoupment Policy against any amount owed by the Corporation to the
recipient of Officer-ICP Payments under any deferred compensation plan.

 

d.                                      An amendment of
the Recoupment Policy shall not be treated as an amendment of the Officer-ICP
under Section II.M.

 

3.                                       Preservation of
Rights

 

Neither Officer-ICP nor its application shall
waive, excuse, preclude or otherwise affect any right or remedy which the
Corporation or any agent or representative of the Corporation may have,
individually or collectively, under law by reason of conduct of the Executive
during or after employment within the Corporation. Any remedies or rights set
forth in this Section II.F. will be additional and not exclusive remedies.

 

G.                                     COMPETITIVE
EMPLOYMENT

 

An Executive will receive not less than the
full amount of the specified Officer-ICP Payments from the Employment Severance
Date through the full Payment Period whether or not compensated by another
employer for services in that period, unless disqualified under Section F.,
immediately above or as provided in this Section G. Compensation from
employment which is not identified as Directly Competitive Employment (“DCE”)
will be in addition to and will not reduce any Officer-ICP Payment. If an
Executive engages in DCE as specifically defined in advance and by this
Statement, then each Officer-ICP Payment otherwise payable to the Executive
will be 

 

8

 

currently reduced, dollar for dollar and in
timing, by the amount of all Cash Compensation earned (whether on a current or
deferred payment basis) from that source during the Payment Period.

 

These provisions will be interpreted and
administered as follows:

 

1.                                       Purpose of
Set-Off

 

Reduction of Officer-ICP Payments by the
amount of Cash Compensation determined to be from DCE is not intended to
restrict or penalize an Executive’s choice of alternative career opportunities,
but only to preserve and reconcile the personal income security intended to be
provided to Executives by Officer-ICP with the legitimate interests of the
Shareholders of the Corporation in its highly competitive business context.

 

2.                                       Competitors
Identified

 

At or about the time of Notice of
Termination, the Corporation will inform the Executive in writing of those
employers who have been individually and specifically determined to offer DCE
for Officer-ICP purposes with respect to the Executive’s former employment
within the Corporation. This designation will take into account existing
operations and known plans of the Corporation and of the employers listed, and
will not change during the Eligibility Period by reason of subsequent and
mutually unanticipated changes in the operations or plans of either.

 

3.                                       Criteria

 

The following criteria will be employed in
determining and administering Officer-ICP application to DCE.

 

a.                                       Selective
Potential Detriment

 

A position will not be determined to
constitute DCE for this purpose unless the CEO determines that the competitive
effectiveness of the Executive and the new employer would be materially
enhanced by the Executive’s current knowledge of such matters as the particular
methods, policies, customers, suppliers, personnel or plans of the Corporation
or its relevant business unit, as distinguished from the skills, experience and
services of the Executive generally. The Corporation will identify for DCE
purposes not more than five persons, firms or corporations who are determined
for this purpose to be the leading direct and immediate competitors of the
affected business of the Corporation.

 

b.                                      Preservation of
Employment Opportunities

 

Whether or not an Executive’s most recent
employment within the Corporation involved direct participation in the
management of one or 

 

9

 

more business units, this section will not be
used to discourage or penalize otherwise suitable employment opportunities in
retailing or otherwise. The Corporation may require, as a condition of avoiding
DCE designation for the Executive, a suitable written undertaking by the
Executive and the new employer that the Executive remains obliged not to use or
divulge trade secrets or proprietary information of the Corporation and that
the Executive will not volunteer or be expected or required to violate that
obligation in the course of the new employment.

 

c.                                       Relevant
Considerations

 

In determining DCE, the CEO will give
suitable consideration to geographic, product and price-line marketing
overlaps, the nature and content of the Executive’s particular knowledge of
strategies and plans within the Corporation, and the extent to which the
Executive’s knowledge, as distinguished from skills, is likely to be a
significant factor in generating an employment opportunity. Employment
exclusively with a component of a larger business entity, which component is
not presently or known to be planned to be a direct and immediate competitor of
the Executive’s former business unit, will not be treated as DCE merely because
one or more other components of that entity is or may become a competitor of
the Corporation or one or more of its business units.

 

4.                                       Officer-ICP
Payment Reduction

 

Uniform and responsible administration of
Officer-ICP will require reliable information and verification to the
Corporation.

 

a.                                       Reporting

 

To be eligible for any Officer-ICP Payment
during a period of DCE, an Executive must, in addition to all other required
reporting, provide to the Corporation in writing an accurate statement of the
amount and payment schedule of all Cash Compensation or its equivalent to be
received from the new DCE employer and of any subsequent change or correction
of that amount, in such form and with such verification as the CEO may request
in writing. An Executive will not be or become entitled to receive or retain
any portion of any Officer-ICP Payment on account of any Payment Period for
which that information, and any required verification, is not currently and
accurately provided.

 

b.                                      Verification
and Reconciliation

 

Required verification may include
authorization for written confirmation from the employer and confidential
disclosure of completed W-2, payroll and income tax forms of the Executive on
which taxes have been or will be paid. If the Corporation withholds for more
than 30 days any Officer-

 

10

 

 

ICP
Payment pending receipt of required information or verification which is later
received and found satisfactory, the Corporation will pay interest at a
realistic rate determined by the CEO for the period of delay. The Corporation
and the Executive will each fairly and promptly adjust by payment any
discrepancy later discovered between reported and actual Cash Compensation of
the Executive, but the Corporation will have no liability for any amount not
claimed by an Executive in writing before final expiration of the Executive’s
Payment Period.

 

H.            REASSIGNMENT
AND SPIN-OFF

 

1.             Reassignment
and Other Adjustments

 

The Corporation may transfer an Executive to
another position within the Corporation or reduce the Executive’s Base
Compensation in Executive’s current position (collectively referred to as “Reassignment”).
An Executive in the case of either event may elect Officer-ICP Payments if the
Executive’s total monetary compensation after Reassignment will be measurably
and substantially below the total monetary compensation of the Executive
immediately before notice of Reassignment. For this purpose, total monetary
compensation will include salary and bonus and continuation, or payment of the
substantial equivalent in Cash Compensation, of all non-cash personal benefits
and perquisites which the Executive was receiving immediately before and does
not receive after the Reassignment and which are susceptible of accurate and
objective measurement in dollars as determined by the CEO. An Executive who
elects Officer-ICP Payments must terminate employment with the Corporation
within thirty (30) days after notice of Reassignment to be eligible for such
payments.

 

2.             Spin-Off

 

An Executive who is employed by a business
unit on the closing date of any Spin-Off that includes such business unit is no
longer eligible for Officer-ICP. A Spin-Off will be deemed to have occurred for
purposes of this paragraph whether or not afterward: (a) the Executive has
a personal ownership or incentive interest in the severed business unit or
operation; or (b) the severed business unit or operation becomes, as a
result of or after the severance, a part of one or more other legal entity or
entities.

 

I.              REPORTING

 

For convenience and uniformity of
administration, each Executive while eligible for or entitled to Officer-ICP
Payments after Notice of Termination will be expected as a pre-condition
currently and accurately to inform the Corporation in writing of the name and
business address of each employer of Executive during the Eligibility and
Payment Periods, including a summary description of the nature and principal
business locations of the new employer and the title, principal duties, address
and telephone number of the Executive. Significant changes in employment,
duties or location will also be promptly reported. The Corporation will not be
required to make any Officer-ICP Payment for 

 

11

 

any period for which it has not received a
current and accurate report as required by, or by the CEO in accordance with,
this Statement.

 

J.             INTERPRETATION

 

1.             Any decision of the CEO will
be: (1) Final and conclusive of the rights and obligations of all affected
parties and (2) Applied uniformly as to all Executives then similarly
situated (subject to subsequent Officer-ICP amendment); and (3) Not
subject to separate determination or review by any public or private agency or
authority except as expressly provided in this Statement.

 

2.             References to compensation
and other monetary rates or measurements in this Statement and its applications
are in current dollars, unadjusted by reason of inflation, deflation or
otherwise.

 

3.             Any portion of a full
calendar month or year will be prorated on a full calendar basis, without
differential related to such considerations as working days or holidays. Any
portion of a day will be treated as a full day, and measurement days will begin
and end at midnight, current time. The fiscal year of the Corporation will be
treated for all purposes as it is for financial reporting purposes.

 

4.             In the event of application
or interpretation of Officer-ICP to an individual Executive who is a Director
of the Corporation, or otherwise in its sole discretion, the Board of Directors
of the Corporation or its authorized committee shall have and may exercise the
sole, exclusive and final authority and discretion of the CEO for any purpose
under Officer-ICP.

 

K.            RELEASE

 

Payment and receipt of Officer-ICP Payments
will be in full and final satisfaction of all claims by or through an Executive
against the Corporation and its representatives by reason of the employment of
the Executive and its termination, except as otherwise expressly provided in
this Statement or as required by applicable law or regulation. A signed and
unrevoked written Release to that effect, in form approved by the CEO, will be
delivered by the Executive or the Executive’s representative to the Corporation
before any Officer-ICP Payment will become payable by the Corporation to or on
account of the Executive. Such Release must be delivered to the Corporation
within 60 days of the date of Executive’s separation from service, as defined
under Code Section 409A. The Release may, without limitation, require a
representation that no confidential documents concerning the Corporation or its
intentions have been or will be removed or retained by the Executive without
specific authority, and that the Executive will not engage in disqualifying
misconduct as defined in this Statement, in reference to the Corporation. The
Release will not affect any conversion, vested or continuing rights available
to an Executive under a plan of the Corporation other than Officer-ICP.

 

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L.             GENERAL

 

The Officer-ICP and this Statement will not
constitute or infer an obligation or undertaking to employ any person for any
future period of time or in any specific position. Officer-ICP Eligibility or
Payments after Notice of Termination will not create, continue or evidence any
employment relationship with the Corporation. All employment privileges,
benefits and perquisites not expressly and in writing reserved to an Executive
under Officer-ICP will terminate on Executive’s separation from service, as
defined under Code Section 409A, unless otherwise expressly agreed in
advance in writing by the Corporation. This will not affect any conversion,
vested or other continuing benefits or rights available to an Executive under a
plan of the Corporation other than Officer-ICP.

 

M.           AMENDMENT

 

Officer-ICP and this Statement may not be
terminated and may not be amended to reduce benefits with respect an Executive
subject to the Officer-ICP until twelve months after the Executive receives
written notice of the proposed termination or amendment. Except as set forth in
the first sentence hereof, Officer-ICP and this Statement can be amended
(including modification, restatement, suspension and termination) at any time,
without prior written notice to or consultation with any Executive, by the
Board of Directors or any committee appointed by the Board of Directors having
the authority of the Board for that purpose. Any such change will have effect
as follows:

 

1.             Effective Date
of Change

 

Except as set forth below, any amendment will
be effective on the date of its adoption by the Board or committee or such
other such subsequent date or dates as may be specified in the amendment or the
resolution by which it is adopted. Unless otherwise mutually agreed in writing
by the parties, (a) an amendment or termination will have no effect upon
any Executive who at the time has received Notice of Termination under
Officer-ICP and (b) a termination or an amendment that reduces benefits
will not be effective as to an Executive subject to the Officer-ICP until
twelve months after the Executive receives written notice of the termination or
amendment.

 

2.             Notice of
Amendment

 

The Corporation will promptly after any
amendment provide to each Executive then eligible for Officer-ICP benefits a
written statement of Officer-ICP as amended, and no amendment will be effective
as to an Executive until the later of the date the Executive receives such
written statement, or twelve months after notice as provided in 1 above. An
Executive will be deemed to have received the written statement if it is delivered
to the Executive in person, or after 48 hours following its hand delivery or
dispatch by mail or other suitable means of delivery to the last known address
of the Executive.

 

 

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3.             Acquiescence

 

An amendment will apply in full to an
Executive if mutually agreed in writing by the Executive and the Corporation,
or if the Executive or the Executive’s representative knowingly receives a
benefit or improvement under Officer-ICP as amended which would not have been
available without the amendment. If any such benefit from an amendment is
knowingly received by an Executive with the consent of the Corporation, then
all elements of that amendment and all prior Officer-ICP Statements and
amendments then currently in effect will also be applicable to the Executive.

 

4.             Adjustment

 

A change in or addition or deletion of any
benefit or perquisite plan or program of the Corporation applicable to an
Executive may be expressly made subject to prior written agreement by the
Executive upon a corresponding change in the interpretation or application of
Officer-ICP to the Executive, to prevent redundant or other unintended benefits
or detriments to the Executive or the Corporation which might otherwise result.

 

5.             Change in Control

 

No amendment or termination that would
adversely affect the benefits or protections under the Officer-ICP of any
eligible Executive as of the date of such amendment or termination shall be
effective as to such individual unless no Change in Control occurs within
twelve (12) months of the adoption of such amendment or termination, and any
such attempted amendment or termination adopted within twelve (12) months prior
to a Change in Control shall retroactively be null and void from the date of
adoption as it relates to all such Executives who were eligible for benefits
under the Officer-ICP prior to such adoption.

 

For two (2) years after a Change in
Control, the Officer-ICP and this Statement may not be amended in any manner
that would adversely affect the benefits or protections under the Officer-ICP
of the Executives who are eligible for benefits under the Officer-ICP at the
time of the Change in Control.

 

N.            APPLICABLE LAW

 

It is intended that the decision of the CEO,
as specified in the Officer-ICP statement, will be exclusive and final with
respect to any application or interpretation of Officer-ICP. If any body of law
should be used or applied in determining the meaning or effect of Officer-ICP,
in the interest of consistency this will be deemed an agreement made and
executed in the State of Minnesota and the law of the State of Minnesota will
control to the extent not preempted by federal law.

 

14

 

O.            DEFINITIONS

 

As used in this Statement:

 

1.             “Cash
Compensation”

 

Means all amounts earned, whether or not
currently payable, as wages, salary, bonus or a combination by an Executive,
payable in cash or its equivalent or agreed to be in lieu of cash compensation.
This will not include any stock-based compensation (whether such stock-based
compensation is settled in cash or otherwise), or the value of employee or
executive perquisites or benefits accrued or received pursuant to a plan of the
employer which is uniformly applied to all of the employees of the employer who
are similarly situated or is consistent with established prior practice for the
position occupied by the Executive.

 

2.             “CEO”

 

Means the Chief Executive Officer of Target
Corporation, as then currently designated by its Board of Directors, or as
otherwise expressly provided in the Officer-ICP Statement.

 

3.             “Corporation”

 

Means Target Corporation and each and all of
its business units, including divisions and subsidiaries, unless otherwise
clearly intended by the written context, and any person with whom Target
Corporation would be considered a single employer under Code Sections 414(b) and
414(c).

 

4.             “Directly
Competitive Employment” (or “DCE”)

 

Means personal services to, or for the direct
and intended benefit of, a person, firm or corporation determined by the CEO
and specified in writing to the Executive at or about the time of Notice of
Termination as constituting DCE for Officer-ICP purposes.

 

5.             “Employment
Severance Date”

 

All employment relationships between the
Executive and the Corporation shall cease on the Employment Severance Date.

 

6.             “Executive” or “Officer”
(both of which shall have the same definition)

 

Means an Executive Officer (as defined by the
Securities and Exchange Commission) of the Corporation or an individual employed
as an executive within the Corporation who currently is, or within the
designated Eligibility Period has been designated and categorized as an officer
of the Corporation by the CEO. Unless clearly otherwise intended by the written
context, Executive or 

 

15

 

Officer will include all beneficiaries of and
persons claiming by or through the designated employee or former employee.

 

An Executive or Officer is not eligible for
Officer-ICP unless (1) his or her services are performed within the
continental United States (including Alaska) or Hawaii or (2) his or her
principal base of operations to which he or she frequently returns is within
the continental United States (including Alaska ) or Hawaii.

 

7.             “Notice of
Termination” (or “Notice”)

 

Means an unconditional written or oral
statement of an Executive’s organizational superior that the Executive’s
employment in the Corporation is terminated at the instance of the Corporation.
Notice that an Executive’s employment will end because of achievement of the
age of mandatory retirement under lawful policies of the Corporation will not
be a Notice of Termination for Officer-ICP purposes.

 

8.             “Payments” (or “ICP
Payments”)

 

By the Corporation will include all of those
payments made by or on account of the Corporation under Officer-ICP and will
include all of those made to or for the account of an Executive or a designated
creditor or authorized representative or beneficiary of an Executive or
deceased Executive.

 

9.             “Reassignment”

 

Means the transfer of an Executive to another
position within the Corporation or a reduction on the Executive’s Base
Compensation in Executive’s current position.

 

10.           “Spin-Off”

 

Means a sale of assets or stock or other
disposition as a going business of the Corporation’s ownership or control of a
business unit or other operation previously a part of the Corporation.

 

11.           “Change in
Control”

 

A “Change in Control” shall
be deemed to have occurred if:

 

(a)           50% or more of the directors
of Target shall be persons other than persons

 

(i)            for whose election proxies
shall have been solicited by the Board of Directors of Target or

 

16

 

(ii)           who are then serving as
directors appointed by the Board of Directors of Target to fill vacancies on
the Board of Directors of Target caused by death or resignation (but not by
removal) or to fill newly-created directorships, or

 

(b)           30% or more of the
outstanding voting power of the Voting Stock of Target is acquired or
beneficially owned (as defined in Article IV of the Restated Articles of
Incorporation, as amended, of Target) by any person (as defined in Article IV
of the Restated Articles of Incorporation, as amended, of Target), other than
an entity resulting from a Business Combination in which clauses (x) and (y) of
subparagraph (c) apply, or

 

(c)           the consummation of a merger
or consolidation of Target with or into another entity, a statutory share
exchange, a sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of Target’s assets or a similar
business combination (each, a “Business Combination”), in each case unless,
immediately following such Business Combination, (x) all or substantially
all of the beneficial owners of Target’s Voting Stock immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of
the voting power of the then outstanding shares of voting stock (or comparable
voting equity interests) of the surviving or acquiring entity resulting from
such Business Combination (including such beneficial ownership of an entity
that, as a result of such transaction, owns Target or all or substantially all
of Target’s assets either directly or through one or more subsidiaries), in
substantially the same proportions (as compared to the other beneficial owners
of Target’s Voting Stock immediately prior to such Business Combination) as
their beneficial ownership of Target’s Voting Stock immediately prior to such
Business Combination, and (y) no person (as defined in Article IV of
the Restated Articles of Incorporation, as amended, of Target) beneficially
owns, directly or indirectly, 30% or more of the voting power of the
outstanding voting stock (or comparable equity interests) of the surviving or
acquiring entity (other than a direct or indirect parent entity of the
surviving or acquiring entity, that, after giving effect to the Business
Combination, beneficially owns, directly or indirectly, 100% of the outstanding
voting stock (or comparable equity interests) of the surviving or acquiring
entity), or

 

(d)           approval by the shareholders
of a definitive agreement or plan to liquidate or dissolve Target.

 

For purposes of this Section II.O.11, “Voting
Stock” has the same meaning as defined in Article IV of the Restated
Articles of Incorporation, as amended, of Target.

 

For purposes of this Section II.O.11, “Target”
shall mean Target Corporation, a Minnesota corporation, and any successor
thereof.

 

17

 

12.           “Salary Grade”

 

The numerical “Salary Grade” that the
Executive is assigned under the Corporation’s salary grading system.

 

13.           “Auditor”

 

The “Auditor” is the independent auditor
selected by a committee of two or more members of the Compensation Committee of
the Board of Directors who are appointed from time to time by the Board and who
are outside, independent Board members.

 

14.           “Specified Employee”

 

“Specified Employee” means an Executive who
as of the date of his or her separation from service, as defined under Code Section 409A,
is a “key employee” (as defined below), and the Corporation has stock that is
traded on an established securities market (within the meaning of Code Section 409A(a)(2)(B)).
The Executive is a “key employee” during the 12-month period beginning on the April 1
immediately following a calendar year, any time during which such Executive was
a key employee as defined in Code Section 416(i) (without regard to
Code Section 416(i)(5)), of the Corporation. An Executive will not be
treated as a Specified Employee if he or she would not be a “specified employee”
as defined under Treasury regulations issued under Code Section 409A.

 

NOTE:        Additional Definitions for
particular purposes are contained in the text.

 

P.             CHANGE IN
CONTROL

 

Other provisions of this Statement to the
contrary notwithstanding, in the event of a Change in Control:

 

1.             If an Executive’s employment
with the Corporation is terminated, whether involuntarily or by the Executive
for “good reason” (as defined in Section II.P.5), within two years
following a Change in Control, an Executive shall be eligible for Officer-ICP
Payments.

 

2.             To the extent the Officer
ICP-Payments are not subject to Code Section 409A (including pursuant to a
short-term deferral exception under Treasury Regulation Section 1.409A-1(b)(4) and
separation pay plan exception under Treasury Regulation Section 1.409A-1(b)(9)),
or such Change in Control qualifies as a “change in control event” under Code Section 409A,
the Officer-ICP Payments shall be made in a lump sum payment within 20 days of
the Executive’s separation of service, as defined under Code Section 409A;
provided that if the Executive is a Specified Employee, the distribution of any
such Officer-ICP Payments subject to Code Section 409A will be made 6
months after the separation of service, as defined under Code Section 409A.  The lump sum amount shall be determined by
discounting the periodic Officer-

 

18

 

ICP Payments by a rate equivalent to the
annual prime rate as published in the Wall Street Journal on the first business
day following the Officer-ICP Payments.

 

3.             To the extent the
Officer-ICP Payments are subject to Code Section 409A, (after considering
any exceptions to Code Section 409A, including the short-term deferral
exception under Treasury Regulation Section 1.409A-1(b)(4) and
separation pay plan exception under Treasury Regulation Section 1.409A-1(b)(9))  and such Change in Control does not qualify
as a change in control event under Code Section 409A, the Officer-ICP
Payments shall be made according to the payment schedule set forth in Section II.D
of this Statement; provided that if the Executive is a Specified Employee, the
distribution of any such Officer-ICP Payments subject to Code Section 409A
will be made 6 months after Executive’s separation from service, as defined
under Code Section 409A.

 

4.             Except for the Release
required by Section II.K of this Statement, all other obligations or
restrictions of Executive under this Statement shall terminate.

 

5.             For purposes of this Section II.P,
“good reason” shall mean any material diminution of the Executive’s position,
authority, duties or responsibilities (including the assignment of duties
materially inconsistent with the Executive’s position or a material increase in
the time Executive is required by the Corporation or its successor to travel),
any reduction in salary or in the Executive’s aggregate bonus and incentive
opportunities, any material reduction in the aggregate value of the Executive’s
employee benefits (including retirement, welfare and fringe benefits), or
relocation to a principal work site that is more than 40 miles from the
Executive’s principal work site immediately prior to the Change in Control.

 

6.             If an Executive’s employment
was terminated prior to a Change in Control, such Executive is receiving or is
entitled to receive Officer-ICP Payments that will continue after the Change in
Control, and the Change in Control qualified as a “change in control event” for
purposes of Code Section 409A, then, subject to the six month delay for
Specified Employees in effect under Section II.D.2, the Officer-ICP
Payments due after such change in control event will be accelerated and paid to
Executive in a lump sum as soon as practicable, but not more than 90 days
following such change in control event. The lump sum under this Section II.P.6
will be calculated in the same manner as the lump sum calculated under Section II.P.2
above.

 

Q.            CERTAIN
REDUCTION OF PAYMENTS BY THE CORPORATION

 

1.             Anything in this Officer-ICP
to the contrary notwithstanding, the provisions of this Section Q shall
apply to an Executive if the Auditor determines that each of a and b below are
applicable.

 

19

 

a.             Payments hereunder,
determined without application of this Section Q, either alone or together
with other payments in the nature of compensation to the Executive which are
contingent on or accelerated by a change in the ownership or effective control
of the Corporation, or in the ownership of a substantial portion of the assets
of the Corporation, or otherwise, would result in any portion of the payments
hereunder being subject to an excise tax on excess parachute payments imposed
under Code Section 4999.

 

b.             The excise tax imposed on
the Executive under Section 4999 of the Code on excess parachute payments,
from whatever source, would result in a lesser net aggregate present value of
payments and distributions to the Executive (after subtraction of the excise
tax) than if payments and distributions to the Executive were reduced to the
maximum amount that could be made without incurring the excise tax.

 

2.             Under this Section Q
the payments under this Officer-ICP shall be reduced (but not below zero) so
that the present value of such payments and distributions shall equal the
Reduced Amount. The “Reduced Amount” (which may be zero) shall be an amount
expressed as the present value of the payments and distributions under this
Officer-ICP that can be made without causing such payments and distributions to
be subject to the excise tax under Section 4999 of the Code. To the extent
necessary, the reductions in the payments and distributions will be applied to
those Officer-ICP payments nearest the Employment Severance Date until the full
amount of the necessary reductions have been applied. The determinations and
reductions under this Section Q shall be made before any eliminations or
reductions, if any, have been made under the Corporation’s Long Term Incentive
Plan.

 

3.             If the Auditor determines
that this Section Q is applicable to an Executive, it shall so advise the
Corporation. The Corporation shall then promptly give the Executive notice to
that effect together with a copy of the detailed calculation supporting such
determination which shall include a statement of the Reduced Amount. Such
notice shall also include a description of which and how much of the payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the payments equals the Reduced Amount.) For purposes of this Section Q,
present value shall be determined in accordance with Section 280G of the
Code. All the foregoing determinations made by the Auditor under this Section Q
shall be made as promptly as practicable after it is determined that parachute
payments will be made to the Executive if an elimination or reduction is not
made. As promptly as practicable following the election hereunder, the
Corporation shall pay to or for the benefit of the Executive such amounts as
are then due to the Executive under this Officer-ICP and shall promptly pay to
or for the benefit of the Executive in the future such amounts as become due to
the Executive under this Officer-ICP.

 

4.             As a result of the uncertainty
in the application of Section 280G of the Code at the time of the initial
determination by the Auditor hereunder, it is possible that 

 

20

 

payments under this Officer-ICP will have
been made which should not have been made (“Overpayment”) or that additional
payments which will have not been made could have been made (“Underpayment”),
in each case, consistent with the calculation of the Reduced Amount hereunder.
In the event that the Auditor, based upon the assertion of a deficiency by the
Internal Revenue Service against the Corporation or the Executive which the
Auditor believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay together with
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that no amount shall be payable by the Executive
if and to the extent such payment would not reduce the amount which is subject
to the excise tax under Section 4999 of the Code. In the event that the
Auditor, based upon controlling precedent, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid to or for the benefit of
the Executive together with interest at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Code.

 

5.             In making its determination
under this Section Q, the value of any non-cash benefit shall be determined
by the Auditor in accordance with the principles of Section 280G(d)(3) of
the Code.

 

6.             All determinations made by
the Auditor under this Section Q shall be binding upon the Corporation and
the Executive.

 

21

 

CLAIMS PROCEDURE

for the

Target
Corporation

Officer
Income Continuance Policy Statement

 

When your employment with Target Corporation (the “Company”)
terminates, the Company will tell you whether you are eligible for benefits
from the above-referenced plan and, if so, the amount and timing of the
payments that will be made to you.

 

If you believe that the Company’s determination is incorrect in any
way, you must file a written claim with the Chief Executive Officer of the
Company. The Chief Executive Officer or his or her delegate ordinarily will
respond to the claim within 90 days of the date on which it is received.
However, if special circumstances require an extension of the period of time
for processing a claim, the 90-day period can be extended for an additional 90
days by giving you written notice of the extension and the reason that the
extension is necessary.

 

If the claim for a benefit is approved, you will receive written notice
of the amount of your benefit and the date on which payments will begin. If
your claim is denied in whole or in part, you will be told in writing the
specific reasons for the decision and will receive an explanation of the
procedures for reviewing the decision.

 

If you do not agree with the decision, you can request that the Chief
Executive Officer reconsider his or her decision by filing a written request
for review within 60 days after receiving notice that the claim has been
denied. You or your representative can also present written statements which
explain why you believe that the benefit claimed should be paid and may review
all pertinent plan documents.

 

Generally, the decision will be reviewed within 60 days after the Chief
Executive Officer receives a request for reconsideration. However, if special
circumstances require a delay, the review may take up to 120 days. (If a
decision cannot be made within the 60-day period, you will be notified of this
fact in writing.) You will receive a written notice of the decision which will
explain the reasons for the decision by making specific reference to the Plan
provisions on which the decision is based.

 

These Claims Procedures must be followed before you can file a lawsuit
seeking recovery of any Officer-ICP Payments to which you claim to be entitled.Exhibit 10.6

 

Adams County National Bank

 

Salary Savings Plan

 

03/08

 

 

PLAN HIGHLIGHTS

 

 

Plan Highlights briefly
describes your plan. The rest of this booklet explains in greater detail how
the plan works.

 

We started your plan on
January 1, 1993.

 

Your plan:

 

·                  Lets you defer
a percentage of your pay by making 401(k) elective deferral contributions
under the plan.

 

·                  Matches a
percentage of your 401(k) elective deferral contributions. That’s extra
money for you.

 

·                  Provides that
your account resulting from any money you contribute and our contributions for
you always belongs to you.

 

·                  Gives you tax
deferral on any earnings until you receive them as benefits.

 

·                  Offers several
different ways to receive your benefits. 
You choose the right way for you.

 

If you are already making
401(k) elective deferral contributions, you are on your way to a more
secure future. If you aren’t making 401(k) elective deferral
contributions, there’s still time to start.

 

About This
Booklet

 

This booklet is the summary
plan description. It explains how your plan currently works, when you qualify
for benefits, and other information.

 

The plan is much more
detailed and it governs your benefits.

 

Ask your plan administrator
if you have questions. Part 7 of this booklet lists your plan administrator’s
name and address.

 

GA 4-6969

(GUST)

 

 

TABLE OF CONTENTS

 

 

	
  JOINING THE PLAN

  	
  PART 1

  
	
  ·

  	
  When You Join

  	
   

  
	
  ·

  	
  Signing Up

  	
   

  
	
  ·

  	
  Changes in Your Participation

  	
   

  
	
   

  	
   

  	
   

  
	
  CONTRIBUTIONS TO
  THE PLAN

  	
  PART 2

  
	
  ·

  	
  Your 401(k) Elective
  Deferral Contributions

  	
   

  
	
  ·

  	
  Our Matching Contributions

  	
   

  
	
  ·

  	
  Makeup Contributions

  	
   

  
	
  ·

  	
  Helpful Terms

  	
   

  
	
  ·

  	
  Limits

  	
   

  
	
   

  	
   

  	
   

  
	
  YOUR ACCOUNT: VESTING AND GENERAL INFORMATION

  	
  PART 3

  
	
  ·

  	
  Your Account

  	
   

  
	
  ·

  	
  Investing Your Account

  	
   

  
	
  ·

  	
  Vesting in Your Account

  	
   

  
	
  ·

  	
  You Can Borrow From Your
  Account

  	
   

  
	
   

  	
   

  	
   

  
	
  WHEN THE PLAN PAYS BENEFITS

  	
  PART 4

  
	
  ·

  	
  At Retirement

  	
   

  
	
  ·

  	
  Required Beginning Date

  	
   

  
	
  ·

  	
  Withdrawals From Your
  Account

  	
   

  
	
  ·

  	
  At Termination

  	
   

  
	
  ·

  	
  At Death

  	
   

  
	
  ·

  	
  Tax Considerations

  	
   

  

 

i

 

	
  HOW THE PLAN PAYS BENEFITS 

  	
  PART 5

  
	
  ·

  	
  At Termination or
  Retirement

  	
   

  
	
  ·

  	
  Death Benefits Before
  Benefits Begin

  	
   

  
	
  ·

  	
  Forms to Choose

  	
   

  
	
  ·

  	
  A Spouse’s Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  IMPORTANT INFORMATION FOR YOU

  	
  PART 6

  
	
  ·

  	
  Your Rights

  	
   

  
	
  ·

  	
  Qualified Domestic
  Relations Order (QDRO)

  	
   

  
	
  ·

  	
  The Plan Administrator

  	
   

  
	
  ·

  	
  Processing Distributions
  and Other Transactions

  	
   

  
	
  ·

  	
  Direct Rollovers

  	
   

  
	
  ·

  	
  Rollovers From Other Plans

  	
   

  
	
  ·

  	
  Top-heavy Plans

  	
   

  
	
  ·

  	
  Assigning Your Benefits

  	
   

  
	
  ·

  	
  Your Social Security
  Benefits

  	
   

  
	
  ·

  	
  Claiming Benefits Under
  the Plan

  	
   

  
	
  ·

  	
  Changing or Stopping the
  Plan

  	
   

  
	
  ·

  	
  Our Plan and the Pension
  Benefit Guaranty Corporation (PBGC)

  	
   

  
	
   

  	
   

  	
   

  
	
  FACTS ABOUT THE PLAN

  	
  PART 7

  

 

ii

 

PART 1 JOINING THE PLAN

 

 

When You
Join

 

You join the plan as an
active participant on the January 1, April 1, July 1, or
October 1 on or after you meet these requirements:

 

·                  You are an
employee.

 

·                  You have 6
months of entry service.

 

·                  You are age 20
1/2 or older.

 

This date is your entry
date.

 

Entry
service means the sum of all of your periods of service. A
period of service starts when you start working for us. It ends on the earlier
of the date you stop working (you quit or are discharged) or the date you are
absent from work one year. Any period of time of less than one year when either
you are not working for us, or you are absent from work because of vacation or
some other reason, will count as a period of service.

 

Entry service includes
service with:

 

·      Farmers National Bank of
Newville

 

Signing Up

 

If you are an employee, you
are automatically enrolled to defer 4% of your pay, unless you choose a
different percentage. You may choose to defer a different percentage, including
zero, by completing an elective deferral agreement. Part 2 tells you more
about these contributions.

 

You need to complete a form
naming the person who will receive any death benefit if you die before
retirement. If you name someone other than your spouse and you have been
married at least one year, your spouse must agree to your selection.

 

You must complete a form
telling us how you wish to use the investment options available for your
account (see Part 3).

 

1

 

Changes in
Your Participation

 

You become an inactive
participant on the date you no longer work for us. You stop being a participant
on the date you are not an employee and your account is zero. You rejoin the
plan as an active participant when you work another hour for us.

 

PART 2 CONTRIBUTIONS TO THE PLAN

 

 

Plan contributions create an
account for you. That account holds your money. Contributions share in
investment earnings or losses. You don’t pay taxes on any earnings until
later-when you receive that money.

 

Your 401(k) Elective
Deferral Contributions

 

You are automatically
enrolled to defer 4% of your pay unless you choose a different percentage. Your
elective deferral agreement will be effective on the first day of the pay
period following your entry date. You may choose not to defer or choose a
different percentage by completing an elective deferral agreement.

 

You change or stop your
deferrals by signing an elective deferral agreement. Your agreement must be
signed before it is effective. Your agreement to start or change your deferrals
may only be effective on the first day of the pay period following your entry
date or any following January 1, April 1, July 1, or
October 1. Your agreement to stop your deferrals may be effective on the
first day of a pay period.

 

Your 401(k) elective
deferral contributions are pre-tax elective deferral contributions. These
contributions reduce your total taxable income which reduces your current
taxes. These contributions and any earnings will be taxed later when received
as a benefit.

 

Your 401(k) elective
deferral contributions:

 

·                  Give you an
additional return on your dollars through our matching contributions.

 

·                  Build income for
your retirement years.

 

·                  Reduce your income
taxes, letting you save for the future with dollars you would otherwise pay in
current taxes.

 

2

 

·      May provide
investment earnings that aren’t taxed until you get your benefits.

 

You may make catch-up
contributions in a taxable year if you will be at least age 50 by the end of
that year. Catch-up contributions are 401(k) elective deferral
contributions in excess of any limit on such contributions under the plan. For
2008, the maximum catch-up contribution is $5,000. For years after 2008 the
maximum is subject to change each year for cost of living changes.

 

Social Security tax is based
on your income before you defer. That means your Social Security benefits stay
the same no matter how much you defer.

 

Federal law limits the
amount you can defer under all plans. You can find information about the limits
at the end of Part 2.

 

Our
Matching Contributions

 

Our matching contributions
give you an additional return on the amount you defer. We will make a matching
contribution equal to 100% of your 401(k) elective deferral contributions.
401(k) elective deferrals over 4% of your pay are not matched.

 

Matching contributions are
calculated based on your pay and elective deferrals for the pay period.
Matching contributions are made for all persons who were active participants at
any time during that pay period.

 

Makeup
Contributions

 

You can make up missed
401(k) elective deferral contributions when you return to work for us
after a period of qualified military service as required by law. If you make up
such 401(k) elective deferral contributions, we will make any matching
contributions that apply.

 

Helpful
Terms

 

Pay means your
total pay including your elective contributions to any of our plans. For
purposes of your 401(k) elective deferral contributions and matching
contributions, pay excludes any expense repayments or other allowances, fringe
benefits, moving expenses, deferred compensation and welfare benefits.

 

Elective contributions are
salary reduction amounts contributed by an employer at an employee’s election
to a 401(k) plan, simplified employee pension, cafeteria plan, qualified
transportation fringe benefit plan, or tax sheltered

 

3

 

annuity. Elective
contributions also include amounts deferred under a 457 plan or employee
contributions “picked up” by a governmental employer and treated as employer
contributions.

 

Limits

 

401(k) Elective
Deferral Limits

 

The law limits the amount
you may defer in any tax year. For 2008, the limit under all plans of our type
is $15,500. For years after 2008 the limit is subject to change each year for
cost of living changes. If you are also a participant in a plan of an unrelated
employer, this limit applies to the amount you defer under both plans. The
combined limit for unrelated plans is increased if you will be at least age 50
by the end of the year. For 2008, the increase will be $5,000 for a combined
limit of $20,500. For years after 2008, the increase is subject to change each
year for cost of living changes. If you are over the limit, you should request
one or both plans to pay any excess to you. Only amounts over the limit may be
paid to you, but you may choose whether it is paid from one or both plans. If
you don’t have the excess paid to you, it is taxable to you, but stays in the
plans to be taxed again later when you receive it. Under our plan, you must
tell the plan administrator by March 1 of the following year if you want
any excess paid to you. If excess 401(k) elective deferral contributions
are paid to you, any matching contributions made because of those
401(k) elective deferral contributions will be forfeited.

 

If you are a highly paid
employee, the law may limit your contributions and our matching contributions.
Because of the limit, we will either restrict the amount you can contribute in
the future, or return your contributions over the limit. Your returned 401(k) elective
deferral contributions will be treated as regular taxable income. If
401(k) elective deferral contributions are paid to you, any matching
contributions made because of these 401(k) elective deferral contributions
will be forfeited. Other vested contributions over the limit will be paid to
you. The amount paid to you will include any earnings.

 

Matching contributions which
are forfeited because of these limits reduce our future contributions.

 

Pay Limits

 

The law limits the amount of
pay that may be used to determine contributions each year. The 2008 limit is
$230,000. This limit is subject to change each year for cost of living changes.

 

4

 

415 Limits

 

The law also limits the
amount of contributions that can be made for or by you to the plan in a year to
the lesser of 100% of pay or a dollar limit. This limit applies to all defined
contribution plans of ours and any related employers. The dollar limit for
years beginning after December 31, 2007 is $46,000. This limit is subject
to change each year for cost of living changes.

 

Ask your plan administrator
if you want to know more about these limits.

 

PART 3 YOUR ACCOUNT:

VESTING AND GENERAL INFORMATION

 

 

Your
Account

 

Your contributions and our
contributions for you are credited to your account. Your account equals the
current value of these contributions.

 

Investing
Your Account

 

Contributions made to your
account are invested to provide benefits under the plan. We decide which
investment options are available for your account.

 

Many investment options have
charges and restrictions that apply when you remove money or transfer funds.
The dollar amount that can be removed or transferred may be restricted along
with the dates on which such transactions can be made. Your plan administrator
can tell you more about these charges and restrictions and when they will
apply.

 

You decide how to use the
investment options for your contributions and our contributions for you.

 

If you do not make an
investment choice, we will decide how to use the investment options.

 

The plan administrator will
tell you more about the investment options.

 

5

 

 

Vesting in
Your Account

 

The part of your account to
which you always have a right is called your vested account.

 

Under this plan, you are
always 100% vested in your total account.

 

Vesting
service for early retirement age (see Part 4) means the
sum of your periods of service. A period of service begins when you start
working for us. It ends on the earlier of the date you stop working (you quit
or are discharged) or the date you are absent from work one year. Any period of
time of less than one year when either you are not working for us, or you are
absent from work because of vacation or some other reason, will count as a
period of service.

 

Vesting service includes
service with:

 

·      Farmers National Bank of
Newville

 

You Can
Borrow From Your Account

 

Loans are available under
the plan. As rules issued by the Department of Labor emphasize, however,
the plan’s primary purpose is to provide retirement income for you. These
rules help make sure your money is available when you retire.

 

You must be a party-in-interest
who is a participant or beneficiary to receive a loan. The Employee Retirement
Income Security Act of 1974 (ERISA) defines a party-in-interest. Most people
cease to be a party-in-interest when they stop working for us. Loans are made
on a reasonably equal basis under the plan’s loan policy. That means the limits
and rules in the following paragraphs apply in the same way to all such
participants.

 

The loan will be limited to
the amount you may borrow without the loan being treated as a taxable distribution
to you. Generally, the loan may not be more than 50% of your vested account or
$50,000, (reduced by the highest outstanding loan balance, if any, during the
one-year period ending on the day before your new loan is made) if less. The
minimum loan is $1,000. You may be granted one loan during any one-year period.
Only one loan may be outstanding at a time. Your vested account will provide
the security for the loan. You may not use your account as a security for a
loan outside the plan.

 

Call the TeleTouch®
toll-free number (see Part 7) to request a loan.

 

6

 

You’ll be asked for
important credit information and earnings history. This is the type of
information a bank or other lending institution would request. It’s used as a
guide to grant loans and helps assure that borrowers can repay the loan as
required. You must give the loan administrator permission to check on your
credit history. Only participants who are creditworthy will be granted loans.

 

A charge or restriction
might apply for some investment options if you are granted a loan. Talk with
your loan administrator before you request a loan.

 

Because a loan may reduce
benefits payable to the spouse at a later date, if you are married you may need
to have your spouse’s consent to make or revise a loan.

 

The interest rate will be
based on the rates available for similar loans from commercial lending
institutions. The loan administrator periodically examines the rates such
lenders are using. Once a loan is granted, the interest rate on the loan will
not change.

 

When you are granted a loan,
you will need to sign a “promissory note.” A promissory note is your written
promise to repay the loan. The note will contain information about your loan
such as the amount loaned to you, the interest charged, and any processing fees
or late charges. You must assign the security for the loan to the plan when the
loan is granted.

 

As you repay the loan, the
principal and interest are credited to your account. A loan to a participant
does not affect the account of any other participant.

 

Payment due dates and the
length of the repayment period will be set out in the promissory note. Payments
will be due at least quarterly. The repayment period won’t be longer than five years.
Payroll deduction will be used to repay the loan if available. You may repay
the loan before it is due. A processing fee may be charged as set out in the
promissory note for payments which are not made by payroll deduction.

 

If any amount remains unpaid
for more than 90 days after due the loan shall be in default. Upon default the
entire principal balance and interest shall become immediately due and payable.
The amount of the outstanding loan will be treated as a distribution and will
be taxable to you. To recover the amount due, the plan may use any part of your
vested account available for distribution to you.

 

Processing fees, late
charges or extra costs incurred by the plan if you default on a loan will be
charged to your account.

 

7

 

However, no default will
occur if payments are not made while you are actively serving in the military
or for a period up to one year during an approved unpaid leave of absence,
other than military leave. The plan administrator has established guidelines
for making up these past payments after you return to work following such
period of active military service or approved unpaid leave of absence.

 

When you cease to be an
employee and party-in-interest, the balance of any outstanding loan is due.

 

The balance of any
outstanding loan is due if the plan terminates.

 

PART 4 WHEN THE PLAN PAYS BENEFITS

 

 

Your vested account will be
used to provide benefits. If you stop working for us and your vested account is
$5,000 or less, your benefits will be paid to you at that time.

 

At
Retirement

 

Unless you choose otherwise,
benefits will start on your normal retirement date if you are not working for
us and you have a vested account under the plan. You may choose to have
benefits paid on this date even if you are still working for us.

 

You may choose to have your
benefits paid on your early retirement date.

 

If you continue working for
us after your normal retirement date, your benefits start on your late
retirement date, unless you elect otherwise.

 

Normal
retirement date means the first day of the month on or after the
date you reach age 65.

 

Early
retirement date means the first day of any month you choose which is
on or after the later of the date you stop working for us or the date you reach
early retirement age.

 

Your early retirement age is
your age on the later of:

 

·      The date you reach age 55.

 

·      The date you have 6 years of
vesting service (see Part 3).

 

8

 

Late
retirement date means, if you continue working for us after your
normal retirement date, the first day of the month on or after the date you
stop working. You may choose to have your benefits start on the first day of
any month after your normal retirement date and before you stop working. If you
do, that date becomes your late retirement date. It’s possible to have your
benefits begin after your late retirement date. If you think you would like to
delay your benefits, talk to the plan administrator before your late retirement
date.

 

Required
Beginning Date

 

Under the law you must begin
receiving benefits by your required beginning date. Your required beginning
date is the April 1 following the later of the calendar year in which you
reach age 70 1/2 or stop working for us. However, if you are a 5% owner, your
benefits must begin by the April 1 following the calendar year in which
you reach age 70 1/2.

 

Withdrawals
From Your Account

 

You may withdraw all or any
part of your vested account resulting from rollover contributions (see
Part 6). You may make 2 such withdrawals during any one-year period.

 

If you have a financial
hardship, you may be able to withdraw all or any part of your vested account
resulting from:

 

·      401(k) elective deferral
contributions (but none of the income earned on such contributions)

 

Financial
hardship means your need is immediate and heavy. Federal
rules allow hardship withdrawals for these reasons:

 

·                  To pay medical
expenses that would be tax deductible (without regard to whether the expenses
exceed 7.5% of adjusted gross income).

 

·                  To purchase
your primary home, stop your eviction from your primary home, or stop
foreclosure on such home.

 

·                  To pay tuition,
related educational fees, and room and board expenses, for the next 12 months
of post secondary education for you, your spouse, your children, or your
dependents (as defined in the plan).

 

·                  To pay funeral
or burial expenses for your parents, your spouse, your children, or dependents
(as defined in the plan).

 

9

 

·                  To pay expenses
to repair damage to your primary home that would be tax deductible (without
regard to whether the expenses exceed 10% of adjusted gross income).

 

You may have a withdrawal
for financial hardship only if you have received all other withdrawals or loans
available to you under our plan(s). You may not withdraw more than the amount
of your immediate and heavy financial need. The amount of the withdrawal may
include the amount of taxes that will result from the withdrawal. After the
withdrawal, you may not make 401(k) elective deferrals or other
contributions to our plan(s) for 6 months.

 

Your request for withdrawal
must be in writing on a form provided by the plan administrator. You must
complete and return it before the date of withdrawal.

 

Federal law may require you
to have your spouse’s consent.

 

A charge or restriction
might apply for some investment options if you make a withdrawal. Talk with
your plan administrator before you complete the form.

 

At
Termination

 

If you stop working for us
before you are eligible to retire, you may choose to have all or any part of your
vested account paid to you at any time.

 

You may leave your account
under the plan if your vested account is more than $5,000. It will continue to
participate in the plan investments and provide benefits when you retire or
die.

 

At Death

 

If you die before benefits
start, your vested account will be paid to your spouse or beneficiary under one
or more of the forms available under the plan (see Part 5).

 

If you die after you start
receiving benefits, death benefits will be paid according to the form you chose.
Not all forms have death benefits.

 

10

 

Tax
Considerations

 

Benefits you receive are
normally subject to income taxes. You may be able to postpone or reduce the
taxes that would otherwise be due. In addition, benefits you receive before age
59 1/2 may be subject to a 10% penalty tax.

 

Each person’s tax situation
differs. Your financial advisor can help you decide the best way for you to
receive benefits.

 

PART 5 HOW THE PLAN PAYS BENEFITS

 

 

You make an important choice
when you decide how to receive your benefit. Things to consider include the
money you will need every month, any death benefits you want to provide, and
your tax situation.

 

If your vested account is
more than $5,000, you may choose to have your vested account paid under any of
the optional forms available under the plan. Your plan administrator or tax
advisor can help you make your choice. You may also call Principal Financial
Group® at this toll-free number for answers to your benefit questions:
1-800-547-7754.

 

The amount of the payments
will depend on the amount of your vested account and the optional form chosen.
If the optional form pays you a monthly income for life, the amount of the
payments will depend on your age. If the option also provides a monthly income
for the life of someone who survives you, the amount of the payments will also
depend on the age of your survivor.

 

At
Termination or Retirement

 

If your vested account is
$5,000 or less, your vested account will be paid to you in a single sum.
Federal law requires the plan to automatically roll your vested account to an
IRA in a direct rollover (see Part 6) if:

 

·                  your vested
account is more than $1,000

 

·                  you have not
reached age 65

 

·                  you do not
elect to have your vested account paid to you in a single sum or rolled to
another retirement plan or an IRA of your choice in a direct rollover

 

For more information
regarding the designated IRA for automatic rollovers, see Part 7.

 

11

 

If your vested account is
more than $5,000, you may choose from the forms of benefit described in Forms
to Choose below. You may need your spouse’s consent to choose a form of
benefit. See A Spouse’s Rights below. You may change or cancel your choice at any
time before benefits start.

 

If you don’t choose a form
or your spouse revokes consent (if consent is needed), your benefits are paid
as follows:

 

·                  If you are
married, benefits are paid to you monthly for life.  After your death 50% of your monthly income
is paid to your spouse for as long as your spouse lives.  If both you and your spouse die before the
total amount paid equals the amount used to purchase the annuity, payments
continue to your beneficiary until the total amount paid equals the purchase
price.

 

·                  If you are
single, benefits are paid to you monthly for life.  If you die before the total amount paid
equals the amount used to purchase the annuity, payments continue to your
beneficiary until the total amount paid equals the purchase price.

 

Death Benefits
Before Benefits Begin

 

You may name a beneficiary
at any time. You may need your spouse’s consent to choose someone other than
your spouse as your beneficiary. See A Spouse’s Rights below. You may change
your beneficiary at any time.

 

If your vested account is
$5,000 or less, your vested account will be paid to your beneficiary in a
single sum.

 

If your vested account is
more than $5,000 and your beneficiary is your spouse, your spouse can choose an
optional form of death benefit. Otherwise, you may choose an optional form of
death benefit for a beneficiary. If you don’t choose, that beneficiary may
choose an optional form. Generally, a beneficiary can elect a single sum or any
of the annuity options that are available to you at retirement other than a
monthly income that continues for the life of a survivor upon death. Any choice
of the form of payment by your spouse or beneficiary must be made before
benefits begin.

 

If an optional form of death
benefit is not chosen, death benefits are paid as follows:

 

·                  If you are
married and your spouse is your beneficiary and you have been married for the
full year before your death, death benefits are paid to your spouse monthly for
as long as your spouse lives.  If your
spouse dies before

 

12

 

the
total amount paid equals the amount used to purchase the annuity, payments
continue to your spouse’s beneficiary until the total amount paid equals the
purchase price.

 

Your
spouse may choose when benefits start. 
Benefits must start by the later of the end of the next calendar year or
the end of the calendar year following the calendar year you would have reached
age 70 1/2.

 

·                  If you are
married and your spouse is not your beneficiary or you have not been married
for the full year before your death, death benefits are paid to your
beneficiary in a single sum.

 

·                  If you are
single, death benefits are paid to your beneficiary in a single sum.

 

Because of Federal
rules regarding when death benefits must begin and how death benefits can
be paid, your beneficiary should contact the plan administrator to determine
what options are available and when elections must be made.

 

Forms to Choose

 

The plan offers the
following optional forms of benefit:

 

Annuity Options

 

·                  A monthly
income to you for life.  No benefits are
payable after your death.

 

·                  A monthly
income to you for life.  If you die
before the end of a certain number of years (you may choose 5, 10 or 15 years),
payments continue to your beneficiary until that period ends.

 

·                  A monthly
income to you for life.  If you die
before the total amount paid equals the amount used to purchase the annuity,
payments continue to your beneficiary until the total amount paid equals the
purchase price.

 

·                  A monthly
income to you for life.  You choose a
percentage (50%, 66 2/3%, or 100%) of your monthly income to continue for the
lifetime of a survivor you name.  If both
you and your survivor die before the total amount paid equals the amount used
to purchase the annuity, payments continue to a beneficiary until the total
amount paid equals the purchase price.

 

13

 

·                  A monthly
income paid to you for a fixed period of time (not less than 60 months). If you
die before the end of the fixed period, payments continue to your beneficiary
until that period ends.

 

·                  A series of
flexible income payments to you until your vested account equals zero.  You choose the amount (not less than
$1,000  annually) and how often you wish
to receive this amount in a calendar year. 
You can choose to receive payments on an annual, semiannual, quarterly,
or monthly basis.  You may also request
extra payments each calendar year.  A
minimum payment applies for years beginning with the year in which you reach
age 70 1/2.  Additional fees and charges
may apply to your flexible income payments.

 

After
benefits begin, you may choose to have the balance of your vested account paid
to you under one of the other options.

 

Other Options

 

·      A single sum payment.

 

A charge or restriction
might apply for some investment options if you take all or any part of your
account in a single sum. Talk with your plan administrator before making this choice.

 

A Spouse’s
Rights

 

Benefit Payments

 

Federal law may require you
to have your spouse’s consent to start benefits before the date you reach age
65. No consent is needed if your benefits are to be paid to you monthly for
life with 50% of your monthly income paid to your spouse after your death.

 

Federal law may require you
to have your spouse’s consent to any form of benefit which does not pay a
monthly income to you for life with 50% of your monthly income paid to your
spouse after your death. Your spouse has the right to limit consent to a
specific optional form of benefit or to limit consent to a specific beneficiary
for any form which pays a death benefit. Your spouse can waive one or both of
these rights.

 

Your spouse may revoke
consent at any time before benefits begin. A spouse’s consent is not valid for
a former or a future spouse of yours.

 

14

 

Beneficiary

 

If you have been married for
a full year, your spouse must consent to any beneficiary you name for death
benefits which are payable if you die before your benefit payments start. Any
consent given by your spouse before the first day of the plan year (see
Part 7) in which you reach age 35 will not be valid after the first day of
that year. A new consent must be obtained. If you stop working before this
date, however, any consent given by your spouse after you stop working will
remain valid for benefits from contributions made before you stopped working.

 

Your spouse’s consent may
let you make future changes without his or her consent. If it does not, you
will need a new consent to make a new choice. You do not need your spouse’s
consent to cancel a choice.

 

Your spouse may revoke
consent at any time before your death. A spouse’s consent is not valid for a
former or a future spouse of yours.

 

PART 6 IMPORTANT INFORMATION FOR YOU

 

 

Your Rights

 

As a participant in the plan
you have certain rights and protections under the Employee Retirement Income
Security Act of 1974 (ERISA). As a plan participant you are entitled to:

 

Receive
Information About Your Plan and Benefits

 

·                  You can examine
all plan documents, without charge, at your plan administrator’s office and at
other specified locations, such as worksites. This includes insurance contracts
and a copy of the latest annual report (Form 5500 series) filed by the
plan with the U. S.  Department of Labor
and available at the Public Disclosure Room of the Employee Benefits Security
Administration.

 

·                  You can get
copies of all plan documents and other plan information upon written request to
your plan administrator.  Your
administrator may make a reasonable charge for the copies.

 

·                  You will get a
summary of the plan’s annual financial report.

 

15

 

·                  You will get a
statement of your account values and what part of these values would be yours
if you stop working under the plan at least once each calendar year
quarter.  If you don’t have a right to
these values, the statement will tell you how many more years you have to work
to get a right to all or a part of these values.  The plan must provide the statement free of
charge.

 

Prudent
Actions by Plan Fiduciaries

 

In addition to creating
rights for plan participants, ERISA defines the duties of the people who
operate the plan. These people are called “fiduciaries,” from the Latin word
meaning “trust” or “confidence”. Fiduciaries must perform their duties
prudently and in the interest of plan participants and beneficiaries.

 

You can’t be fired or
discriminated against to prevent you from obtaining a benefit or exercising
your rights guaranteed under ERISA.

 

Enforce
Your Rights

 

If all or a part of your
claim to a benefit is denied or ignored, you have a right to know why this was
done, to get copies of documents relating to the decision without charge, and
to appeal any denial, all within certain time schedules.

 

Under ERISA you can take
certain steps to enforce the rights described above. For example, if you
request a copy of plan documents or the latest annual report from the plan you
must get them within 30 days. However, if you haven’t received the materials
after about 20 days, it might be a good idea to check with your plan
administrator to see if there are problems in giving you the materials you
requested. Then, if you haven’t received them within 30 days of your request,
you can file suit in Federal court. The court can require your plan
administrator to provide the materials and pay you up to $110 for each day of
delay until you get the materials, unless they weren’t sent because of reasons
beyond your plan administrator’s control. Or, if all or a part of your claim
for benefits is denied or ignored, you may file suit in a state or Federal
court or you can ask the U.S. Department of Labor for help. In addition, if you
disagree with the plan’s decision or lack thereof concerning the qualified
status of a domestic relations order, you may file suit in Federal court. If
you think plan fiduciaries are misusing the plan’s money, or you feel you are
being discriminated against for exercising your rights, you can get assistance
from the U.S. Department of Labor or file suit in Federal court. Any time you
sue, the court will decide who should pay court costs and legal fees. If you
win, the court may order the person you’ve sued to pay these costs and fees. If
you lose, you may have to pay these costs and fees.

 

16

 

 

Assistance
with Your Questions

 

If you have any questions
about the plan, contact your plan administrator. If you have any questions
about this statement or about your rights under ERISA, or if you need help in
getting documents from the plan administrator, contact the nearest office of
the Employee Benefits Security Administration, U.S. Department of Labor, listed
in your telephone directory or the division of Technical Assistance and
Inquiries, Employee Benefits Security Administration, U.S. Department of Labor,
200 Constitution Avenue N.W., Washington D.C. 20210. You may also get certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefits Security Administration.

 

Qualified
Domestic Relations Order (QDRO)

 

A domestic relations order
is a judgement, decree, or order that provides child support, alimony payments,
or marital property rights. A domestic relations order may give all or part of
your plan benefits to an alternate payee if it is determined to be a qualified
domestic relations order (QDRO). An alternate payee is your spouse, former
spouse, child or dependent. In order to be a QDRO, the domestic relations order
must include certain information and meet certain other requirements.

 

The plan administrator is
required to set up detailed procedures for determining if a domestic relations
order is a QDRO. You and the alternate payee may get a copy of these
procedures, without charge, from the plan administrator.

 

The Plan
Administrator

 

The plan administrator has
the full power to decide what the plan provisions mean; to answer all questions
about the plan, including those about eligibility and benefits; and to
supervise the administration of the plan. The plan administrator’s decisions
are final.

 

Processing
Distributions and Other Transactions

 

Distributions, investment
directions, trades, and similar transactions shall be completed as soon as
administratively possible once the information needed to complete such
transaction has been received from you or whoever is providing the information.
The time it takes to complete a transaction is not guaranteed by the plan, plan
administrator, trustee, insurer, or us.

 

17

 

We, the plan administrator,
or the trustee reserve the right not to value an investment option on any given
valuation date for any reason deemed appropriate by us, the plan administrator,
or the trustee.

 

Factors such as failure of
systems or computer programs, failure of transmission of data, forces that
can’t be controlled or anticipated, failure of a service provider to timely
receive values or prices, and corrections of errors will be used to determine
how soon it is possible to complete a transaction. While it is anticipated that
most transactions will be completed in a short period of time, in no event will
the time needed to process a transaction be deemed to be less than 14 days. The
processing date of a transaction shall be binding for all purposes under the
plan and considered the applicable valuation date for any transaction.

 

Direct
Rollovers

 

Certain benefits which are
payable to you may be paid directly to another retirement plan or IRA. Your
plan administrator will give you more specific information about this option
when it applies.

 

Rollovers
From Other Plans

 

Under certain circumstances,
you may rollover an amount from another plan to this plan. The amount comes
from contributions made because of your past participation in that other plan.
This is a rollover contribution and it becomes a part of your vested account.

 

The rollover contribution
may come from:

 

·                  other qualified
plans (including after-tax employee contributions and excluding Roth elective
deferral contributions)

 

·                  tax sheltered
annuity plans (including after-tax employee contributions and excluding Roth
elective deferral contributions)

 

·                  governmental
457 plans

 

·                  traditional
IRAs if the amounts would be included in gross income

 

Rollover contributions must
meet Federal rules so ask your plan administrator if you are interested in
knowing more about them. You decide how to use the investment options for your
rollover contributions.

 

18

 

Top-heavy
Plans

 

We test our plan once a year
to see if it is top-heavy. It would be top-heavy if the account values for key
employees exceed 60% of the account values for all employees. Certain
distributions are counted as an account value.

 

In general, a key employee
is an officer or owner. Not all officers or owners are key employees. Factors
taken into account are the number of officers or owners and their amount of pay
or percentage of ownership.

 

For any year in which a plan
is top-heavy, there are minimum requirements for contributions and vesting.

 

Your plan administrator can
tell you if our plan is top-heavy and if the minimums apply.

 

Assigning
Your Benefits

 

Benefits under the plan
cannot be assigned, transferred, or pledged to someone else. The plan does make
the following exceptions:

 

·                  qualified
domestic relations orders such as alimony payments or marital property rights
to a spouse or former spouse.

 

·                  any offset to
your benefit per a judgement, order, decree, or settlement agreement because of
a conviction of a crime against the plan or a violation of ERISA.

 

Your Social
Security Benefits

 

Your benefits from this plan
are in addition to your benefits from Social Security. You should make your
application for Social Security (and Medicare) benefits 3 months before you
wish Social Security payments to begin.

 

Claiming
Benefits Under the Plan

 

Apply for benefits to your
plan administrator. You’ll need to complete all necessary forms and supply
needed information, such as the address where you will get your checks.

 

Your claim will be reviewed
and a decision made within 90 days. In some cases the decision may be delayed
for an additional 90 days. If so, you will be notified in writing.

 

19

 

If you make a claim and all
or part of it is refused, you’ll be notified in writing. You’ll be told:

 

·                  why your claim
was refused,

 

·                  the specific
provisions of the plan governing the decision,

 

·                  what additional
information is needed, if any, and

 

·                  what steps you
should take to have your claim reviewed.

 

You have 60 days after you
receive written notice your claim is refused to make a written appeal to your
plan administrator. You or your representative may also review plan documents
and submit issues and comments in writing.

 

A decision will be made on
your appeal within 60 days. In some cases the decision may be delayed for an
additional 60 days. If so, you will be notified in writing.

 

You will be notified in
writing if your appeal is refused and given exact reasons for the decision.

 

Changing or
Stopping the Plan

 

The plan can be changed at
any time. We will notify you of any changes that affect your benefits.

 

Benefits you have earned as
of the date the plan is changed may not be reduced except as required by law.
If the plan is changed, the plan administrator can tell you which benefits and
forms of payment are preserved for you.

 

An earlier version of the
plan may continue to apply in certain situations. For example, participants who
stop working for us have their eligibility for benefits determined under the
version in effect when they stopped working.

 

The plan can be terminated
(stopped). If the plan is terminated, your account will be 100% vested and
nonforfeitable. Your account will be held under the plan and continue to be
credited with investment earnings until it is used to provide benefits according
to the terms of the plan.

 

20

 

Our Plan
and the Pension Benefit Guaranty Corporation (PBGC)

 

Because our plan is a
defined contribution plan, we keep individual accounts for all participants.
The Employee Retirement Income Security Act of 1974 (ERISA) excludes plans like
this one from insurance provided through the PBGC.

 

PART 7 FACTS ABOUT THE PLAN

 

 

Plan
Sponsor and Identification Number

 

Adams County National Bank

PO Box 3129 

Gettysburg, PA 17325-0129

 

EIN: 23-0581360

 

Plan Name
and Plan Number

 

Adams County National Bank
Salary Savings Plan

 

PN: 002

 

Type of
Plan

 

DEFINED CONTRIBUTION 401(K) PROFIT
SHARING PLAN

ERISA 404(c) COMPLIANT

 

Plan
Administrator

 

Adams County National Bank

PO Box 3129

Gettysburg, PA 17325-0129

 

TELEPHONE: (717) 339-5081

 

Type of
Administration

 

TRUSTEE

 

21

 

Loan
Administrator

 

Sandra A. Deaner

 

Plan Year

 

January 1 through December 31

 

Designated
IRA for Automatic Rollovers

 

The IRA designated for
automatic rollovers is an interest-bearing savings account. Fees and expenses
will be paid by you. For more information about the designated IRA and related
fees, contact the plan administrator. The plan administrator’s name, address,
and telephone number are listed above.

 

Funding
Medium(s)

 

A group annuity contract
with:

Principal Life Insurance
Company

711 High Street

Des Moines, IA 50392-0001

 

Trustee(s) of
the Plan

 

Thomas A Ritter

President

Adams County National Bank

PO Box 3129

Gettysburg, PA 17325-0129

 

Sandra A Deaner

Senior Vice President/HR

Adams County National Bank

PO Box 3129

Gettysburg, PA 17325-0129

 

Lynda L Glass

Executive Vice President &
Chief Operating Officer

Adams County National Bank

PO Box 3129

Gettysburg, PA 17325-0129

 

22

 

Agent for
Legal Process of the Plan

 

President

Adams County National Bank

PO Box 3129

Gettysburg, PA 17325-0129

 

Service of legal process may
also be made on your plan administrator or a plan trustee.

 

Additional
Information

 

For more information about
Principal Financial Group® or your plan, you may access the Principal website
at www.principal.com or call TeleTouch® at 1-800-547-7754. TeleTouch is a
special service from Principal Financial Group.

 

23

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