Document:

EX-10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made as of the 27th day of December,
2004, by and between Nevada Security Bank (“Bank”), and Jack Buchold (“Executive”).

RECITALS

WHEREAS, the Bank desires to employ the Executive as its Executive Vice President and Chief
Financial Officer and to avail itself of his skill, knowledge and experience to ensure the
successful management of its business;

WHEREAS, the Executive wishes to be employed by the Bank in the above-mentioned capacity for the
Term hereinafter described;

WHEREAS, by execution of this Agreement the parties desire to specify the terms of the Executive’s
employment with the Bank;

NOW, THEREFORE, in consideration of the covenants and conditions contained herein, it is agreed
that from December 27, 2004 (the “Effective Date”), the following terms and conditions shall apply
to the Executive’s employment:

1. EMPLOYMENT TERM: The Bank hereby employs the Executive and the Executive hereby
accepts employment with the Bank for a period of three (3) years commencing with the Effective Date
of this agreement (the “Term), subject, however, to prior termination of this Agreement as
hereinafter provided. As used in this Agreement, the word “Term” shall refer to the entire period
of employment of the Executive by the Bank hereunder, whether for the period provided hereunder, or
whether terminated earlier as hereinafter provided. The Employment Term shall automatically renew
for subsequent three-year (3) periods, unless at least ninety (90) days prior to the ending of the
Employment Term, either party to the Agreement provides written notice of the party’s intent to
terminate the Agreement.

2. DUTIES OF THE EXECUTIVE:

2.1 Duties: The Executive shall hold the office of Executive Vice President and Chief
Financial Officer of the Bank and will perform the duties normally performed by such officer of a
bank, including the general supervision and operation of the business and affairs of the Bank,
subject to the powers vested in the Board of Directors of the Bank and in the Bank’s shareholders
pursuant to the Bank’s Charter and By-Laws, and by applicable law. During the Term, the Executive
shall perform exclusively the services herein contemplated to be performed by him under this
Agreement faithfully, diligently to the best of his ability, consistent with the highest and best
standards of the banking industry and in compliance with all applicable laws and the Bank’s
Articles of Incorporation and By-Laws.

2.2 Place of Performance: The Executive shall perform said duties throughout the
Bank’s service area and be located at the Bank’s principal executive offices. Except as provided
herein, the duties, positions and business location hereunder may only be changed by written
agreement of the parties.

2.3 Conflict of Interest: Except with prior written consent of the Board of Directors
of the Bank, the Executive shall devote his entire productive professional time, ability and
attention to the business of the Bank during the Term, and the Executive shall not directly or
indirectly render any services of a business, commercial or professional nature to any other
person, firm or corporation, whether for compensation or otherwise, which are in conflict with the
Bank’s interest. Notwithstanding the foregoing, the Executive may make investments of a passive
nature in any business or venture; provided, however, that such business or venture shall not be in
competition, directly or indirectly, in any manner with the Bank.

3. COMPENSATION

3.1 Base Salary: For the Executive’s services hereunder, the Bank shall pay or cause
to be paid, as a base salary to the Executive a minimum of One Hundred Twenty-Five Thousand Dollars
($125,000) per year each year of the Term, prorated for any portion of a year, in which this
Agreement is in effect. The Executive’s salary shall be payable in equal installments in
conformity with the Bank’s normal payroll period. Annual increases shall be made at the sole
discretion of the Chief Executive Officer. The parties understand and agree that pursuant to
applicable federal law the Bank is prohibited from compensating the Executive for any services
rendered to The Bank Holdings and that The Bank Holdings shall reimburse the Bank a portion of the
Executive’s salary for all services rendered to The Bank Holdings by the Executive.

3.2 Bonuses: Such a plan shall be within the complete and sole discretion of the
Board of Directors. The Executive shall be entitled to participate in the Bank’s Executive
Compensation Plan (“Bonus Plan”) which will be developed by the Bank’s Board of Directors. It is
understood that the terms, conditions, eligibility, benefits, provisions and grants from such a
plan shall be within the complete and sole discretion of the Board of Directors.

3.3 Stock Options: Pursuant to “The Bank Holdings Stock Option Plan,” the Executive
shall be granted the option to purchase a minimum of Thirty-Five Thousand (35,000) shares of The
Bank Holdings Common Stock. All of the terms, conditions, vesting rights, qualifications,
eligibility requirements and other provisions of “The Bank Holding Stock Option Plan” are
incorporated into this Agreement by this reference. The Executive acknowledges that he has
received, reviewed and understood the provision of “The Bank Holdings Stock Option Plan.” Any
increase in the number of options granted to the Executive pursuant to this Agreement shall be made
at the sole discretion of the Board of Directors.

4. EXECUTIVE BENEFITS

4.1 Vacation: The Executive will be entitled to five (5) weeks vacation during each
year of the Term, prorated for any portion of a year. The Executive is required to and shall take
at least two (2) weeks of vacation annually (the “Mandatory Vacation”) which shall be taken
consecutively. Should Executive not take the entire five (5) weeks vacation during each year, the
unused vacation shall accrue and be taken the following year. The Executive may accumulate
twenty-five (25) days of vacation in excess of his current year’s entitlement. At the end of the
year, any vacation not used in excess of such twenty-five (25) days shall be paid out to the
Executive in lieu of accrued vacation.

4.2 Automobile Allowance: The Bank shall pay the Executive the sum of Seven Hundred
Fifty Dollars ($750) per month as and for expenses to cover all costs of use, maintenance, repair,
upkeep, fuel, cleaning and operation of his automobile (except mileage costs incurred to travel to
locations outside of the Reno service area) used in the course and scope of his employment.

4.3 Insurance Coverage: The Bank, at the Bank’s expense, shall provide for the
Executive and his dependent family, medical, dental, and vision coverage, and, for the Executive
himself, life, accident, disability and the like insurance benefits equivalent to the maximum
benefits available from time to time under the Bank’s Group Insurance program for an employee of
the Executive’s salary level during the Term. Additionally, the Bank, at its expense, shall
provide the Executive with term life insurance benefits in the amount of not less that Five Hundred
Thousand Dollars ($500,000) with beneficiary to be of the Executive’s choice, provided that the
Executive is rated in the highest category by the Insurance Company. If rated lower, the Bank will
spend the amount it would have spent for the highest rating and purchase the maximum amount of
insurance at the Executive’s lower rating. Said coverage shall be in existence and take effect as
of the Effective Date and shall continue throughout the Term. The Bank shall provide the Executive
with disability insurance providing for monthly disability payments.

4.4 Business Expenses: The Executive shall be entitled to reimbursement by the Bank
for any ordinary and necessary business expenses he incurs in the performance of his duties during
the Term, including, but not limited to, entertainment, dues, and other expenses, meals, travel
expenses, conventions, meetings, seminars and the like which are reasonable for the office of the
Executive.

4.5 Club Memberships: The Executive shall be provided paid membership in clubs
approved by the Chief Executive Officer.

4.6 Retirement Benefits:  Retirement age shall be at a minimum Sixty-two (62) years
of age. Upon retirement Bank, at its expense, will provide the Executive and his eligible
dependents the equivalent maximum benefit available through the Bank’s Group Insurance program for
an employee of the Executive’s salary level. This group insurance benefit shall continue until the
Executive is eligible to qualify for governmental healthcare benefits (including, but not limited
to, Medicare benefits). Upon eligibility to qualify for such governmental benefits the Bank’s
obligation to provide the group insurance benefits noted above shall cease and the Bank will, at
its expense, provide the Executive and his eligible dependents additional insurance benefits to
supplement the governmental healthcare benefits for which Executive is eligible to qualify. This
supplemental insurance plan benefits shall include, at a minimum, Medicare supplemental, vision,
dental, and prescription drug benefits.

5. TERMINATION

5.1 Termination for Cause: The Bank may terminate this Agreement at any time by
action of its Board of Directors, without further obligation or liability to the Executive, in the
event that:

5.1.1 The Executive commits an act or acts of malfeasance or misfeasance in his duties; or

5.1.2 The Executive fails to abide by and/or enforce the Bank’s safety and soundness policies;
or

5.1.3 The Executive is convicted of a felony or misdemeanor involving moral turpitude; or
State and/or Federal regulators request or order termination of this Agreement; or

5.1.4 The Executive commits any act, which could cause termination of Coverage under the
Bank’s Blanket Bond as to the Executive, as distinguished from termination of such coverage as to
the Bank as a whole; or

5.1.5 The Executive dies.

5.2 Termination without Cause: In the event the Board of Directors of the Bank
determines that either (i) the continued association of the Executive with the Bank or (ii) the
performance of his duties by the Executive is not in the best interest of the Bank, then the Bank
may terminate this Agreement by action of its Board of Directors. In the event of such termination
without cause, and subject to any limitation of payments to Officers and Directors under applicable
Federal and State law, the Executive shall be paid as and for severance payments and in lieu of any
and all other Compensation, remedy or damages, a lump-sum equal to not less than Twenty-four (24)
months compensation at the then current base salary of the Executive, plus an additional severance
payment of one (1) month of the Executive’s then current base salary for each year of service to
the Bank, plus any accrued but unpaid Bonus Compensation described elsewhere in this Agreement. In
addition, the Bank, at its expense will provide the Executive and his dependent family with
insurance coverage, as described in Paragraph 4.3 above, following the Executive’s termination for
a period of time not less than twelve (12) months plus one (1) additional month for every year of
service provided by the Executive to the Bank. Upon such payment, any and all obligations of the
Bank to the Executive shall have been fully and completely satisfied and the Executive shall be
entitled to no additional compensation, claim, right or benefit hereunder or otherwise.

5.3 Action by Supervisory Authority: If the Bank is closed or taken over by any
banking supervisory authority, such banking authority may immediately terminate this Agreement
without liability or obligation to the Executive.

5.4 Merger or Corporate Dissolution: In the event of any of the following
occurrences, the Executive may terminate this Agreement: (i) a dissolution or liquidation of the
Bank or The Bank Holdings; (ii) a reorganization, merger, or consolidation of the Bank or The Bank
Holdings with one or more corporations, the result of which (A) the Bank or The Bank Holdings is
not the surviving corporation or (B) the Bank or The Bank Holdings becomes a subsidiary of another
corporation (which shall be deemed to have occurred if another corporation shall own, directly or
indirectly, over 25% of the aggregate voting power of all outstanding equity securities of the Bank
or The Bank Holdings); (iii) a sale of substantially all the assets of the Bank or The Bank
Holdings to another corporation; or (iv) a sale of the equity securities of the Bank or The Bank
Holdings representing more than 25% of the aggregate voting power of all outstanding equity
securities of the Bank or The Bank Holdings to any person or entity or any group of persons and/or
entities acting in concert. In the event of such termination, and subject to any limitation of
payments to Officers and Directors under applicable Federal and State law, the Executive shall be
paid, as and for severance payments and in lieu of any and all other compensation remedy or
damages, a lump-sum equal to not less than Twenty-four (24) months compensation at the then current
base salary of the Executive, plus an additional severance payment of one (1) month of the
Executive’s then current base salary for each year of service to the Bank, plus any accrued but
unpaid Bonus Compensation described elsewhere in this Agreement. In addition, the Bank, at its
expense, will provide the Executive and his dependent family with insurance coverage, as described
in Paragraph 4.3 above, following the Executive’s termination for a period of not less than Twelve
(12) months plus one (1) additional month for every year of service provided by the Executive to
the Bank. Upon such payment, any and all obligations of Bank to the Executive shall have been
fully and completely satisfied and the Executive shall be entitled to no additional compensation,
claim, right or benefit hereunder or otherwise. Any stock options shall only be exercised in
accordance with “The Bank Holdings Stock Option Plan” referenced and incorporated in this
Agreement.

5.5 Termination by the Executive:  The Executive may terminate his employment
hereunder at any time upon ninety (90) days written notice to the Bank. In such event, the
Executive shall be entitled to all salary, bonus and other benefits (accrued vacation, etc.), which
have accrued prior to the effective date of termination. Any stock options shall only be exercised
in accordance with “The Bank Holdings Stock Option Plan” referenced and incorporated in this
Agreement.

6. GENERAL PROVISIONS:

6.1 IRS Section 280G. If any portion of the amounts payable to the Executive under
this Agreement as a result of a Merger or Corporate Dissolution defined in Section 5.4 above,
either alone or together with other payments or benefits which are “contingent on change in
ownership or control” would constitute “excess parachute payments” that are subject to the excise
tax imposed by section 4999 (or similar tax and/or assessments) of the Internal Revenue Code of
1986, as amended (Code) then such payments shall either be (i) paid in full, or (ii) reduced to an
amount equal to two hundred ninety-nine percent (299%) of the Executive’s “base amount”, whichever
of the foregoing payments, taking into account the applicable federal, state and local income taxes
and the excise tax imposed by Code section 4999, results in the receipt by the Executive on an
after-tax basis of the greatest amount of benefits. If any such payments under this Agreement are
“excess parachute payments”, Executive shall be responsible for the payment of any excise taxes and
Bank (or its successor) shall be responsible for any loss of deductibility related thereto. If, at
a later date, it is determined that the amount of excise taxes payable by the Executive is greater
than the amount initially so determined, then the Executive shall pay an amount equal to the sum of
such additional excise taxes and any interest, fines and penalties resulting from such
underpayment.

Any determination required under this Section 6.1 shall be made in writing

by the Bank’s independent public accountants immediately prior to a Merger or Corporate Dissolution
(“Accountants”), whose determination shall be conclusive and binding upon the Executive and the
Bank for all purposes. For purposes of making the calculations required by this Section 6.1, the
Accountants may make reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of Code sections 280G and
4999. The Executive and the Bank shall furnish the Accountants with such information and documents
as the Accountants may reasonably request in order to make a determination (or determinations)
under this Section. The Bank shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 6.1.

The terms “contingent on change in ownership or control”, “excess parachute payments” and
“base amount”, are defined in Code section 280G and Treasury Regulations section 1.280G-1. This
Section 6.1 shall apply and be interpreted in accordance with Code section 280G and the Treasury
regulations promulgated thereunder effective January 1, 2004, or the Treasury regulations then in
effect.

6.2 Indemnification: To the extent permitted by law, applicable statutes, the
Articles of Incorporation, the By-Laws and resolutions of the Bank in effect from time to time, the
Bank shall indemnify the Executive against liability or loss arising out of the Executive’s actual
or asserted misfeasance of malfeasance in the performance of the Executive’s duties or out of any
actual or asserted wrongful act against, or by, the Bank including but not limited to judgments,
fines, settlements and expenses incurred in the defense of actions, proceedings and appeals
therefrom. The Bank shall provide Directors and Officers Liability Insurance to indemnify and
insure the Bank and the Executive from and against the aforementioned liabilities. The provisions
of this paragraph shall apply to the estate, executor, administrator, heirs, legatees or devisees
of the Executive.

6.3 Notices: Any notice, request, demand or other communication required or permitted
hereunder shall be deemed to be properly given when personally served in writing, when deposited in
the United States mail, postage prepaid, or when communicated to public telegraph company for
transmittal, addressed to the party at the parties’ last known address contained in the records at
the Bank. Either party may change address by written notice in accordance with this paragraph.

6.4 Benefits of Agreement: This Agreement will inure to the benefits of and be
binding upon its parties and their respective executors, administrators, successors and assigns.

6.5 Applicable Law: This Agreement is to be governed by and construed under the laws
of the State of Nevada.

6.6 Captions and Headings: Captions and headings are used in this Agreement for
convenience only, are not a part of this Agreement between the parties and shall not be used in
construing it.

6.7 Invalid Provision: Should any portion or provision of this Agreement for any
reasons be declared invalid, void, or unenforceable by a court of competent jurisdiction, the
validity and binding effect of all remaining portions or provisions shall not be affected; and the
remainder of this Agreement shall remain in full force and effect as if this Agreement had been
executed with said portion or provision eliminated.

6.8 Entire Agreement: This Agreement contains the entire agreement of the parties and
supersedes all other agreements, either oral or in writing, between the parties hereto with respect
to the employment of the Executive by the Bank. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have been made by any
party or anyone acting on behalf of any party, which are not embodied herein and that no other
agreement, statement or promise not contained in this Agreement shall be valid or binding. This
Agreement may not be modified or amended by oral agreement but only by an agreement in writing
signed by the Bank and the Executive.

6.9 Arbitration: Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach thereof, or the employment relationship between the parties shall be
submitted to final and binding arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be entered into any
court having jurisdiction thereof.

6.10 Attorney’s Fees: If any action, including arbitration, is brought to enforce
this Agreement or to determine the relative rights and obligations for either of its parties, the
prevailing party shall be entitled to reasonable attorney’s fees.

6.11 Receipt of Agreement: Each of the parties hereto acknowledges that he has read
this Agreement and any referenced or incorporated documents in their entirety and does hereby
acknowledge receipt of fully-executed copies thereof. A fully-executed copy of this Agreement
shall be an original for all purposes and is a duplicate original.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the 15th day of
September, 2005.

	 	 	 
	The “Bank”	 	The “Executive”
	Nevada Security Bank	 	Jack Buchold
	Hal Giomi, CEO	 	 
	By: _/s/Hal Giomi     

	 	By:_/s/Jack BucholdEX-10.3

NEVADA SECURITY BANK

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Agreement is made and entered into this 15th day of September, 2005, by and between
Nevada Security Bank, a banking corporation organized under the laws of the State of Nevada (the
“Employer”), and Hal Giomi, an individual (hereinafter referred to as the “Executive”).

RECITALS

WHEREAS, the Executive is an employee of the Employer and is serving as its Chief Executive
Officer;

WHEREAS, the Executive’s experience and knowledge of the affairs of the Employer and the
banking industry are extensive and valuable;

WHEREAS, it is deemed to be in the best interests of the Employer to provide the Executive
with certain supplemental executive benefits in the form of salary continuation after retirement or
certain other events, on the terms and conditions set forth herein, in order to reasonably induce
the Executive to remain in the Employer’s employment; and

WHEREAS, the Executive and the Employer wish to specify in writing the terms and conditions
upon which this additional compensatory incentive will be provided to the Executive.

NOW, THEREFORE, in consideration of the services to be performed in the future, as well as the
mutual promises and covenants contained herein, the Executive and the Employer agree as follows:

AGREEMENT

	 	1.0	 	TERMS AND DEFINITIONS.

1.1 Annual Benefit. The term “Annual Benefit” shall mean the amount equal
to the product of the Executive’s Final Average Annual Compensation times the Benefit Level
Percentage times the Applicable Percentage, which amount shall be reduced to the extent
required: (i) under the other provisions of this Agreement; (ii) by reason of the lawful
order of any regulatory agency or body having jurisdiction over the Employer; and (iii) in
order for the Employer to properly comply with any and all applicable state and federal
laws, including, but not limited to, income, employment and disability income tax laws
(e.g., FICA, FUTA, SDI).

1.2 Applicable Percentage. Unless otherwise defined, The term “Applicable
Percentage” shall mean that percentage listed on Schedule “A” attached hereto which is
adjacent to the number of complete years (with a “year” being the performance of personal
services for or on behalf of the Employer as an employee for a period of 365 days) which
have elapsed starting from the Effective Date of this Agreement and ending on the date
payments are to first begin under the terms of this Agreement. In the event that
Executive’s employment with Employer is terminated other than by reason of disability,
Retirement, Early Retirement or voluntary termination on the part of Executive, Executive
shall be deemed for purposes of determining the number of complete years to have completed a
year of service in its entirety for any partial year of service after the last anniversary
date of the Effective Date during which the Executive’s employment is terminated.

1.3 Benefit Level Percentage. The term “Benefit Level” shall mean 60%.

1.4 Board. The “Board” shall mean the Board of Directors of Nevada Security
Bank.

1.5 Change In Control. A “Change in Control” shall mean the earliest
occurrence of one of the following events:

	 	A.	 	A Change In Ownership of The Bank Holding or the
Employer.

A change in ownership of The Bank Holding (TBH) or the Employer occurs on
the date that any person (or group of persons) acquires ownership of stock
of TBH or the Employer that, together with stock held by such person or
group, constitutes more than fifty percent (50%) of the total fair market
value or total voting power of the stock of TBH or the Employer,
respectively.

	 	B.	 	A Change in Effective Control of TBH or the Employer.

A change in effective control of TBH or the Employer occurs on the date
that:

	 	1.	 	Any person (or group of persons) acquires (or
has acquired during the twelve (12) month period ending on the date of
the most recent acquisition by such person or persons) ownership of
stock of TBH or the Employer possessing thirty-five percent (35%) or
more of the total voting power of the stock of TBH or the Employer,
respectively; or

	 	2.	 	A majority of members of TBH’s or the
Employer’s Board is replaced during any twelve (12) month period by
directors whose appointment or election is not endorsed by a majority
of the members of TBH’s or the Employer’s Board, respectively prior to
the date of the appointment or election.

	 	C.	 	A Change in Ownership of a Substantial Portion of TBH’s or
the Employer’s Assets.

A change in the ownership of a substantial portion of TBH’s or the
Employer’s assets occurs on the date that any person (or group of persons)
acquires (or has acquired during the twelve (12) month period ending on the
date of the most recent acquisition by such person or persons) assets from
TBH or the Employer, respectively that have a total gross fair market value
equal to, or more than, forty percent (40%) of the total gross fair market
value of all of the assets of TBH or the Employer, respectively immediately
prior to such acquisition or acquisitions.

For the purpose of this Agreement, transfers of the outstanding voting securities of
TBH or the Employer made on account of deaths or gifts, transfers between family members,
former spouses or transfers to a qualified retirement plan maintained by the TBH or the
Employer shall not be considered in determining whether there has been a Change in Control.

1.6 Code. The “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.7 Committee. The “Committee” means the Governance Committee of the Board of
Directors of Nevada Security Bank.

1.8 Compensation. The term “Compensation” means the base salary and cash
bonuses paid to Executive by Employer that are considered to be “wages” for purposes of
federal income tax withholding and includes any benefits under the supplemental insurance
plan agreement. Compensation shall be calculated before reduction for any amounts deferred
pursuant to any deferral arrangement by which Executive can defer the current receipt of
income. Compensation does not include expense reimbursements or any form of non-cash
compensation or benefits.

1.9 Disability/Disabled. The term “Disability” or “Disabled” shall mean either
that the Executive is (i) unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve (12)
months, or (ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a period of
not less than three (3) months under an accident and health plan sponsored by the Employer.

1.10 Early Retirement. The term “Early Retirement” shall mean the Retirement
of the Executive on a date which occurs after the date Executive reaches age 62 and prior to
the date Executive reaches age 65.

1.11 Effective Date. The term “Effective Date” shall mean September 15,
2005.

1.12 ERISA. The term “ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended.

1.13 Final Average Annual Compensation. Unless otherwise defined, “Final
Average Annual Compensation” means the higher of (i) the average annual Compensation of
Executive during the last 36 full consecutive calendar months of Executive’s employment with
Employer or (ii) the average annual Compensation of Executive during Executive’s employment
with Employer.

1.14 Involuntary Termination. The term “Involuntary Termination” shall mean
the termination of the Executive by the Employer for any reason other than a Change in
Control, Death, Disability or Termination for Cause.

1.15 Retirement. The term “Retirement” or “Retires” shall refer to the date
which the Executive acknowledges in writing to Employer to be the last day the Executive
will provide any significant personal services, whether as an employee, director or
independent consultant or contractor, to Employer or to, for, or on behalf of, any other
business entity conducting, performing or making available to any person or entity banking
or other financial services of any kind. For purposes of this Agreement, the phrase
“significant personal services” shall mean more than 10 hours of personal services rendered
to one or more individuals or entities in any 30 day period.

1.16 Termination for Cause. The term “Termination for Cause” shall mean
termination of employment of the Executive with the Employer by reason of any of the
following:

	 	A.	 	Dishonest or fraudulent conduct by the Executive with respect
to the performance of Executive’s duties with Bank or the Bank’s parent
corporation, TBH;

	 	B.	 	Conduct by the Executive that materially discredits Bank, TBH
or any of TBH’s subsidiaries or is materially detrimental to the reputation of
the Bank, TBH or any of its subsidiaries, including but not limited to
conviction of or a plea of nolo contendere by the Executive of a felony or
crime involving moral turpitude;

	 	C.	 	Executive’s willful misconduct or gross negligence in
performance of Executive’s duties, including but not limited to Executive’s
refusal to comply in any material respect with the legal directives of the
Executive’s immediate supervisor or the Board of Directors, if such misconduct
or negligence has not been remedied or is not being remedied to the Board’s
reasonable satisfaction within thirty (30) days after written notice, including
a detailed description of the misconduct or negligence, has been delivered by
the Board to the Executive;

	 	D.	 	An order or directive from a state or federal banking
regulatory agency requesting or requiring removal of the Executive or a finding
by any such agency that the Executive’s performance threatens the safety or
soundness of Bank, TBH or any of its subsidiaries;

	 	E.	 	Material breach of Executive’s fiduciary duties to Bank if such
breach has not been remedied or is not being remedied to the Board’s reasonable
satisfaction within thirty (30) days after written notice, including a detailed
description of the breach, has been delivered by the Board to the Executive;

	 	F.	 	State and/or Federal banking regulators request or order
termination of this Agreement; or

	 	G.	 	The Executive commits any act which could cause termination of
Coverage under the Bank’s Blanket Bond as to the Executive, as distinguished
from termination of such coverage as to the Bank as a whole.

1.15 Voluntary Termination. The term “Voluntary Termination” shall mean
voluntary resignation of employment by the Executive prior to Early Retirement or prior to
Retirement at or after age 65.

2.0 SCOPE, PURPOSE AND EFFECT.

2.1. Contract of Employment. Although this Agreement is intended to provide
the Executive with an additional incentive to remain in the employ of the Employer, this
Agreement shall not be deemed to constitute a contract of employment between the Executive
and the Employer nor shall any provision of this Agreement restrict or expand the right of
the Employer to terminate the Executive’s employment. This Agreement shall have no impact
or effect upon any separate written Employment Agreement which the Executive may have with
the Employer, it being the parties’ intention and agreement that unless this Agreement is
specifically referenced in said Employment Agreement (or any modification thereto), this
Agreement (and the Employer’s obligations hereunder) shall stand separate and apart and
shall have no effect upon, nor be affected by, the terms and provisions of said Employment
Agreement.

2.2. Fringe Benefit. The benefits provided by this Agreement are granted by
the Employer as a fringe benefit to the Executive and are not a part of any salary reduction
plan or any arrangement deferring a bonus or a salary increase. The Executive has no option
to take any current payments or bonus in lieu of the benefits provided by this Agreement.

3.0 BENEFITS PAYABLE.

3.1 Benefits Upon Retirement. In the event the Executive elects to retire and
Retires from active employment with the Employer on a date after Executive attains age 65,
then the Executive shall be entitled to be paid the Annual Benefit each year for the
remainder of Executive’s life with the Applicable Percentage being based on Executive’s
years of service as of the Executive’s Retirement. The Annual Benefit, shall be paid in
substantially equal monthly installments on the first day of each month, beginning with the
month following the month in which the Executive Retires and continuing until the
Executive’s death. In the event that (i) the Participant is a “Key Employee,” as defined in
Code section 416, and (ii) the Employer is publicly traded at the time of Executive’s
Retirement, the benefit payable under this subsection shall commence on the first day of the
seventh (7th) month following Participant’s termination of Employment. No payments shall be
made to Executive, beneficiary or estate pursuant to this Section 3.1 after Executive’s
death.

3.2 Benefits Upon Early Retirement Date. If the Executive elects to retire
from active employment and retires on a date after Executive attains age 62 and prior to age
65, then the Executive shall be entitled to be paid the Annual Benefit each year for the
remainder of Executive’s life with the Applicable Percentage being based on Executive’s
years of service as of the date of Executive’s Retirement less the product of 6% times the
number of full and partial years that remain before Executive attains age 65. For example,
if the Executive were to retire at age 62 and 7 months and had 7 years of service completed,
the Executive’s Applicable Percentage would be 70% less 18% or 52%. The Annual Benefit,
shall be paid in substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Executive elects Early Retirement
and Retires and continuing until the Executive’s death. In the event that (i) the
Participant is a “Key Employee,” as defined in Code section 416, and (ii) the Employer is
publicly traded at the time of Executive’s Early Retirement, the benefit payable under this
subsection shall commence on the first day of the seventh (7th) month following
Participant’s termination of Employment. No payments shall be made to Executive, beneficiary
or estate pursuant to this Section 3.2 after Executive’s death.

1

3.3 Benefit Payments in the Event of Disability. In the event the Executive
becomes Disabled while actively employed by the Employer at any time after the effective
date of this Agreement, but prior to Retirement, the Executive shall be paid the Annual
Benefit each year for the remainder of Executive’s life in substantially equal monthly
installments on the first day of each month, beginning with the month following the month in
which the Executive becomes Disabled and continuing until the Executive’s death. For
purposes of this Section 3.3, the Annual Benefit shall be determined with the with the Final
Average Annual Compensation being equal to greater of (i) the average annual Compensation of
Executive during the last 36 full consecutive calendar months of Executive’s employment with
Employer or (ii) the average annual Compensation of Executive during Executive’s employment
with Employer. No payments shall be made to Executive, beneficiary or estate pursuant to
this Section 3.3 after Executive’s death.

3.4 Benefits Payable Upon a Change in Control. In the event of a Change in
Control then the Executive shall be entitled to be paid the Annual Benefit (determined with
the Applicable Percentage being equal to 100% and the Final Average Annual Compensation
being equal to Executive’s average annual Compensation for the 36 full consecutive calendar
months immediately prior to the effective date of the Change in Control) each year for the
remainder of Executive’s life or 20 years whichever is less, on a monthly basis beginning on
the first day of each month, beginning with the month following the Change in Control and
continuing to the earlier of Executive’s death or 20 years. In the event of Executive’s
death prior to receiving the full benefit payable under this Section 3.4, the Executive’s
legal representative shall be paid the remaining Annual Benefit as if the Executive had
survived to the date of the final payment provided for by this Section 3.4. If Executive is
entitled to receive benefits pursuant to this Section 3.4, Executive shall not be entitled
to payment of benefits under any other section of this Agreement.

3.5 Termination Without Cause. In the event the Executive’s employment is
terminated, then the amounts payable pursuant to this Agreement shall be as follows:

(a) If Termination Occurs Prior to Executive’s Having 3 Full Years of
Service with Employer: If the Executive’s Employment is terminated by
the Employer prior to Executive having 3 full years of service with
Employer, then the Executive and Employer agree that no payments shall be
made to Executive pursuant to this Agreement.

(b) If Termination Occurs After the Executive Has 3 or more Full Years
of Service: If the Executive’s Employment is terminated by the Employer
on or after the Executive completes 3 or more full years of service with the
Employer and such termination of Executive was not Termination for Cause,
death, disability, a Change in Control or Retirement, then the Employer and
Executive agree that Executive shall receive the Annual Benefit each year
for the remainder of Executive’s life beginning with the month following the
month in which the Executive attains 65 years of age, or the earlier
effective date elected by the Executive, which alternate date satisfies the
requirements relating to Early Retirement. In the event that the Executive
elects to begin receiving payments at a date which satisfies the
requirements relating to Early Retirement, then the Annual Benefit shall be
reduced by the product of 6% times the Benefit Level Percentage for each
full and partial years that remain between the earlier effective date
elected and the date Executive attains age 65.

3.6 Voluntary Termination by the Executive. In the event the Executive’s
employment is pursuant to Executive’s Voluntary Termination before Early Retirement or
Retirement, then the amounts payable pursuant to this Agreement shall be as follows:

(a) If Termination Occurs Prior to the Executive’s Having 10 Years of
Service with Employer: In the event the Executive’s employment is
pursuant to Executive’s Voluntary Termination and Executive has less than 10
full years of service with Employer, then Executive and Employer agree that
no benefits are to be paid by the Employer to Employee pursuant to this
Agreement.

(b) If Termination Occurs After Having 10 or More Years of Service with
Employer: In the event the Executive’s employment is pursuant to
Executive’s Voluntary Termination and Executive has 10 or more full years of
service with Employer, then Executive and Employer agree that Employer shall
pay the Executive the Annual Benefit (with the Applicable Percentage being
equal to 100% and the Final Average Annual Compensation being equal to
Executive’s average annual Compensation for the 36 full consecutive calendar
months immediately prior to Executive’s Voluntary Termination) each year for
the remainder of Executive’s life on a monthly basis beginning on the first
day of each month, beginning with the month following the month in which the
Executive attains age 65, or the earlier effective date elected by the
Executive, which alternate date satisfies the requirements relating to Early
Retirement. In the event that the Executive elects to begin receiving
payments at a date which satisfies the requirements relating to Early
Retirement, then the Annual Benefit shall be reduced by the product of 6%
times the Benefit Level Percentage for each full and partial years that
remain between the earlier effective date elected and the date Executive
attains age 65.

3.7 Termination for Cause. If the termination of Executive’s employment is
Termination for Cause, Executive and Employer agree that Executive shall not be paid any
benefits pursuant to this Agreement.

3.8 Death Prior to Retirement. Except as provided for in Section 3.4 Benefits
Payable Upon a Change in Control, in the event Executive dies prior to Retirement, Executive
and Employer agree that no payments shall be made pursuant to this Agreement.

4.0 ADMINISTRATION

4.1 Right To Determine Funding Methods. The Employer reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by what method,
if any, to provide for the payment of the amounts which may be payable to the Executive or
the Executive’s beneficiaries under the terms of this Agreement. In the event that the
Employer elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and beneficial
interests of any such policy of life insurance or annuity. The Employer further reserves
the right, in its sole and absolute discretion, to terminate any such policy, and any other
device used to fund its obligations under this Agreement, at any time, in whole or in part.
Consistent with Paragraph 9 below, neither the Executive nor the Executive’s beneficiaries
shall have any right, title or interest in or to any funding source or amount utilized by
the Employer pursuant to this Agreement, and any such funding source or amount shall not
constitute security for the performance of the Employer’s obligations pursuant to this
Agreement. In connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request and which may
be reasonably necessary to facilitate any funding for this Agreement including, without
limitation, the Employer’s acquisition of any policy of insurance or annuity. Furthermore,
a refusal by the Executive to consent to, participate in and undergo any such medical
examinations or tests shall result in the immediate termination of this Agreement and the
immediate forfeiture by the Executive and the Executive’s beneficiaries of any and all
rights to payment hereunder.

4.2 Claims Procedure. Any person claiming a benefit, requesting an
interpretation or ruling under this Agreement, or requesting information under the Agreement
shall present the request in writing to the Committee (or Board, if the Employer has no
Committee) which shall respond in writing as soon as practicable.

If the claim or request is denied, the written notice of denial should state:

(a) The reason for denial, with specific reference to the provisions in the
Agreement on which the denial is based.

(b) A description of any additional material or information required and an
explanation of why it is necessary.

(c) An explanation of the claim review procedure.

Any person whose claim or request is denied or who has not received a response within
30 days may request a review by notice given in writing to the Committee (or Board, if the
Employer has no Committee). The claim or request shall be reviewed by the Committee (or
Board, if the Employer has no Committee) who may, but shall not be required to, grant the
claimant a hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.

The decision on review shall normally be made within 60 days. If an extension of time
is required for a hearing or other special circumstances, the claimant shall be notified and
the time limit shall be 120 days. The decision shall be in writing and shall state the
reason and the relevant provisions in the Agreement. All decisions on review shall be final
and bind all parties concerned.

	 	5.0	 	OTHER TERMS

5.1 Status of an Unsecured General Creditor. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive nor the Executive’s legal
representative shall have any legal or equitable rights, interests or claims in or to any
specific property or assets of the Employer; (ii) none of the Employer’s assets shall be
held in or under any trust for the benefit of the Executive or the Executive’s legal
representative or held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer’s assets shall be and remain the
general unpledged and unrestricted assets of the Employer; (iv) the Employer’s obligation
under this Agreement shall be that of an unfunded and unsecured promise by the Employer to
pay money in the future; and (v) the Executive and the Executive’s legal representative
shall be unsecured general creditors with respect to any benefits which may be payable under
the terms of this Agreement.

5.2. Covenant Not to Interfere. The Executive agrees not to take any action
which would prevent the Employer from collecting the proceeds of any life insurance policy
which the Employer may happen to own at the time of the Executive’s death and of which the
Executive is the insured and the Employer is the sole or part beneficiary.

5.3 Unfunded Plan. This Agreement is intended to provide benefits pursuant to
an unfunded plan maintained primarily to provide deferred compensation benefits for a select
group of “management or highly compensated employees” within the meaning of Sections 201,
301, and 401 of the Employee Retirement Income Security act of 1974, as amended (“ERISA”),
and therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I ERISA.
Accordingly, the Agreement shall terminate and no further benefits shall be paid hereunder
in the event it is determined by a court of competent jurisdiction or by an opinion of
counsel that the Agreement constitutes an employee pension benefit plan within the meaning
of Section 3(2) of ERISA which is not so exempt.

2

5.4 Nonassignability. Neither the Executive nor Executive’s legal
representative under this Agreement shall have any power or right to transfer, assign,
hypothecate, modify or otherwise encumber any part or all of the amounts payable hereunder,
nor, prior to payment in accordance with the terms of this Agreement, shall any portion of
such amounts be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Executive, the Executive’s spouse, or any
designated beneficiary; or (ii) transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. Any such attempted assignment or transfer shall be void and shall
terminate this Agreement, and the Employer shall thereupon have no further liability
hereunder.

5.5 Governing Law. The laws of the State of Nevada, other than those laws
denominated choice of law rules, and, where applicable, the rules and regulations of: (i)
the Nevada Division of Financial Institutions; (ii) the Board of Governors of Federal
Reserve System; (iii) the Federal Deposit Insurance Corporation; or (iv) any other
regulatory agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this Agreement.

5.6 Validity. If any provision of this Agreement shall be held illegal or
invalid for any reason, the remaining provisions shall nevertheless continue in full force
and effect without being impaired or invalidated in any way.

5.7 Notice. Any notice required or permitted of either the Executive or the
Employer under this Agreement shall be deemed to have been duly given, if by personal
delivery, upon the date received by the party or its authorized representative; if by
facsimile, upon transmission to a telephone number previously provided by the party to whom
the facsimile is transmitted as reflected in the records of the party transmitting the
facsimile and upon reasonable confirmation of such transmission; and if by mail, on the
third day after mailing via U.S. first class mail, registered or certified, postage prepaid
and return receipt requested, and addressed to the party at the address given below for the
receipt of notices, or such changed address as may be requested in writing by a party.

	 	 	 	 	 
	If to the Employer or Committee:
	 	Nevada Security Bank

	 
	 	9990 Double R Boulevard
	 
	 	Reno, NV  89521

	 
	 	Attn:  Human Resources Director

	If to the Executive:
	 	Hal Giomi

	 
	 	Address on File

5.8 Successors. The provisions of this Agreement shall bind and inure to the
benefit of the Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise acquire all or substantially all of the business and
assets of the Employer, and successors of any such corporation or other business entity.
Accordingly, the Employer shall not merge or consolidate into or with another corporation,
or reorganize or sell substantially all of its assets to another corporation, firm or
person, unless and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon the
occurrence of such event, the term “Employer” as used in this Agreement shall be deemed to
refer to such surviving or successor firm, person, entity or corporation.

5.9 Attorneys’ Fees. In the event of any litigation concerning any
controversy, claim or dispute arising out of or relating to benefits due under this
Executive Supplemental Compensation Agreement, each party shall pay his or her own
attorneys’ arbitration fees incurred and the prevailing party shall be entitled to recover
from the other party reasonable expenses, attorneys’ fees and costs incurred in the
enforcement or collection of any judgment or award rendered. The “prevailing party” means
any party (one party or both parties, as the case may be) determined by the court to be
entitled to money payments from the other, not necessarily the party in whose favor a
judgment is rendered.

5.10 IRS Section 280G. If any portion of the amounts payable to the Executive
under this Plan, either alone or together with other payments or benefits, which are
contingent on a Change of Control would constitute “excess parachute payments” that are
subject to the excise tax imposed by Code section 4999 (or similar tax and/or assessments),
then such payments shall either be (i) paid in full, or (ii) reduced to an amount equal to
two hundred ninety-nine percent (299%) of the Executive’s “base amount”, whichever of the
foregoing payments, taking into account the applicable federal, state and local income taxes
and the excise tax imposed by Code section 4999, results in the receipt by the Executive on
an after-tax basis of the greatest amount of benefits. If any such payments under this Plan
are “excess parachute payments”, Executive shall be responsible for the payment of any
excise taxes and Employer (or its successor) shall be responsible for any loss of
deductibility related thereto. If, at a later date, it is determined that the amount of
excise taxes payable by the Executive is greater than the amount initially so determined,
then the Executive shall pay an amount equal to the sum of such additional excise taxes and
any interest, fines and penalties resulting from such underpayment.

Any determination required under this Section 5.10 shall be made in writing by the
Employer’s independent public accountants immediately prior to a Change of Control
(“Accountants”), whose determination shall be conclusive and binding upon the Executive and
the Employer for all purposes. For purposes of making the calculations required by this
Section 5.10, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations concerning the
application of Code sections 280G and 4999. The Executive and the Employer shall furnish the
Accountants with such information and documents as the Accountants may reasonably request in
order to make a determination (or determinations) under this Section. The Employer shall
bear all costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.10.

The terms “excess parachute payments” and “base amount”, are defined in Code section
280G and Treasury regulations section 1.280G-1. This Section 5.10 shall apply and be
interpreted in accordance with Code section 280G and the Treasury regulations promulgated
thereunder effective January 1, 2004, or the Treasury regulations then in effect.

5.11 Opportunity to Consult with Independent Counsel. The Executive
acknowledges that he or she has been afforded the opportunity to consult with independent
counsel of his or her choosing regarding both the benefits granted to him or her under the
terms of this Agreement and the terms and conditions which may affect the Executive’s right
to these benefits. The Executive further acknowledges that he or she has read, understands
and consents to all of the terms and conditions of this Agreement, and that he or she enters
into this Agreement with a full understanding of its terms and conditions.

3

IN WITNESS WHEREOF, the Employer and the Executive have executed this Agreement on the date first
above-written in the City of Reno, Nevada.

THIS IS A “TOP HAT PLAN” AS DESCRIBED IN SECTION 201(2) OF ERISA. IT IS MAINTAINED BY THE
EMPLOYER PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION FOR A SELECT GROUP OF
MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES, KNOWN AS THE “TOP HAT GROUP.” THE PLAN IS EXEMPT FROM
MOST OF ERISA’S REQUIREMENTS AND PROTECTIONS. THE BOARD CONSIDERS YOU TO BE A MEMBER OF THE TOP
HAT GROUP AND THEREFORE ELIGIBLE TO PARTICIPATE IN THE PLAN. BY SIGNING THIS AGREEMENT, YOU
ACKNOWLEDGE THAT (I) IT IS YOUR INTENT TO PARTICIPATE IN A TOP HAT PLAN AS A MEMBER OF THE TOP HAT
GROUP, (II) YOU HAVE REVIEWED SCHEDULE B, SUMMARIZING THE LIMITATIONS OF PARTICIPATING IN A TOP HAT
PLAN, (III) YOU UNDERSTAND AND ACCEPT THE LIMITED RIGHTS AND BENEFITS OF PARTICIPATION IN A TOP HAT
PLAN.

IF YOU BELIEVE THAT YOU ARE NOT A MEMBER OF THE TOP HAT GROUP, OR ARE OTHERWISE UNWILLING TO ACCEPT
THE LIMITS OF PARTICIPATING IN A TOP HAT PLAN, YOU MAY DECIDE NOT TO PARTICIPATE IN THE PLAN BY
ELECTING NOT TO SIGN THIS DOCUMENT.

IF YOU HAVE ANY QUESTIONS ABOUT THIS PLAN OR THE CONSEQUENCES OF PARTICIPATING IN A TOP HAT PLAN,
YOU ARE HEREBY ADVISED TO CONSULT WITH AN INDEPENDENT LEGAL COUNSEL OF YOUR CHOICE.

THE UNDERSIGNED ACKNOWLEDGES THAT HE OR SHE HAS BEEN PROVIDED AN EXPLANATION OF THE LIMITED TERMS
AND BENEFITS OF A TOP HAT PLAN AND HAS BEEN PROVIDED THE OPPORTUNITY AND ACCEPTS THE TERMS OF
PARTICIPATION.

	 	 	 
	THE EMPLOYER:

	 	THE EXECUTIVE:
	NEVADA SECURITY BANK

A Nevada banking corporation

	 	

	 
	 	 
	/s/ Ed Allison

     

	 	/s/ Hal Giomi

     
	 

	 	 
	Chairman of the Board

	 	

4

SCHEDULE A

	 	 	 	 	 
	Years of Service Completed
	 	Applicable Percentage

	1
	 	 	10	%
	2
	 	 	20	%
	3
	 	 	30	%
	4
	 	 	40	%
	5
	 	 	50	%
	6
	 	 	60	%
	7
	 	 	70	%
	8
	 	 	80	%
	9
	 	 	90	%
	10 or more
	 	 	100	%

5

SCHEDULE B

CLASSIFICATION AS A TOP HAT PLAN

In order to be considered a top hat plan, a plan must be (i) unfunded, and (ii) maintained
“primarily for the purpose of providing deferred compensation to a select group of management or
highly compensated employees.”1 If a plan fails to meet either of these requirements,
all of ERISA’s provisions apply.2

	 	A.	 	Unfunded Plan.

A top hat plan is considered unfunded if benefits are payable from the general assets of the
employer (no fund is established) and the participants have no greater right to employer
assets than a general unsecured creditor of the employer. Conversely, a plan will generally
be considered funded (for ERISA and tax purposes) if the assets are segregated or set apart
so that the assets are identified as a source for the payment of benefits. The existence of
life insurance contracts, or the option to use them as a funding vehicle to pay benefits
does not result in a plan being considered funded.3

	 	B.	 	Select Group Of Management Or Highly Compensated Employees.

Neither ERISA nor the applicable Department of Labor (DOL) regulations define the term
“select group of management or highly compensated employees” (Select Group).4
The legislative history suggests that the Select Group includes only those employees who
have sufficient individual bargaining power to ensure that their rights to benefits under a
plan are adequately protected. DOL Opinion Letter 90-14A (1990 Opinion) stated:

It is the view of the Department that in providing relief for top hat plans from the
broad remedial provisions of ERISA, Congress recognized that certain individuals, by
virtue of their position or compensation level, have the ability to affect or
substantially influence, through negotiation or otherwise, the design and operation
of their deferred compensation plan, taking into consideration any risks attendant
thereto, and, therefore, would not need the substantive rights and protections of
Title I [of ERISA].

The DOL offers little additional meaningful guidance to assist in identifying which
employees are members of a Select Group. By focusing on an individual’s “ability to affect
or substantially influence, through negotiation or otherwise, the design and operation of
their deferred compensation plan,” its 1990 Opinion utilizes a functional definition of a
Select Group.

In addition, a top hat plan must be maintained “primarily” for the purpose of providing
deferred compensation to a Select Group.5 In the 1990 Opinion, the DOL stated
that “primarily” refers to the type of benefits provided by the top hat plan and not to the
type of participants.6  Therefore, the DOL is likely to take the position that
if the employer permits even one employee who is not a member of a Select Group to
participate in a top hat plan, the plan fails to meet the definition of the top hat
exemption to the ERISA coverage requirements.

Consequences Of Being An ERISA Pension Plan

If the top hat plan exemption is forfeited due to the inclusion of an employee who is not a member
of a Select Group, a plan will be considered an ERISA covered pension plan,7 and the
following consequences will result:

	 	A.	 	Reporting And Disclosure Rules Apply.

Participants are entitled to a summary plan description (SPD) and a summary annual report.
The failure to provide an SPD upon an employee’s request can result in the payment of a
penalty to the employee of up to $100 per day. Perhaps more significantly, an annual report
(Form 5500) must be filed for each applicable year. Failure to do so can result in the
imposition of a fine of up to $1,125 per day per delinquent report unless reasonable cause
for not filing can be demonstrated.8

	 	B.	 	Certain Vesting Rules Apply.

Employees are entitled to vest in their benefits no later than the completion of their
seventh year of service. This vesting schedule may be faster than that set forth in the
plan. Rules must be followed for determining what constitutes a year of service for vesting
purposes.

	 	C.	 	Spousal And Survivor Rights Apply.

A married participant’s spouse has survivor rights that cannot be taken away without the
spouse’s consent. Without such consent, if an employee dies and the employer pays the death
benefits to a beneficiary other than the employee’s spouse, the spouse has a claim against
the Bank and the Bank may be forced to pay the necessary additional amounts to provide the
required benefits to the spouse.

	 	D.	 	Trust Requirement Applies.

The benefits must be funded through a trust administered by trustees who are fiduciaries
under ERISA. However, if the benefits are actually funded in a trust and the plan is not a
tax qualified plan (which it most likely would not be), the employees will be taxed on the
contributions to the trust as the employees vest in these amounts.9 If the Bank
cannot pay the benefits when due because the plan was not funded as required by ERISA,
personal liability of the Bank’s officers who failed to follow ERISA could arise.

	 	E.	 	Applicable Top Hat Case Law.

In Duggan v. Hobbs, the Ninth Circuit, which includes California, endorsed the
functional test (as explained in the 1990 Opinion) to ascertain whether an employee is a
member of a Select Group.10 Duggan had negotiated a severance agreement which
was to provide monthly payments for life. The employer made payments until it became
financially unstable and discontinued payments approximately 9 years later. Duggan sued.
The district court held that the arrangement was a top hat plan, and that the owner was not
personally liable to Duggan as a fiduciary of the plan. Duggan appealed. The Ninth Circuit
considered whether the arrangement constituted a top hat plan. In determining whether Duggan
was a member of a Select Group,11 the Ninth Circuit considered several factors.
First, it compared the percentage of employees covered by the top hat plan to other cases.
As the only employee of 23 covered by the arrangement, less than 5% of the employer’s work
force participated in the top hat plan.

Based solely on the numerical test, as applied in other jurisdictions, Duggan would be a
member of a Select Group. The Ninth Circuit continued, however, noting that in order to
satisfy the Select Group requirement, further analysis was necessary and it directly cited
the functional test stated in the 1990 Opinion.12 Because Duggan exerted
influence over the negotiation, design and operation of the arrangement (either directly or
through his attorney), Duggan qualified as a member of a Select Group and the arrangement
was a top hat plan.

The most recent case addressing top hat plan status in detail is Demery v. Extebank,
a Second Circuit decision.13 Extebank sponsored a nonqualified plan, which
permitted its executives to defer compensation. Upon reaching normal retirement age,
Extebank’s plan paid a benefit equal to compensation deferred plus interest at the rate of
20%, compounded annually. If a participant left before reaching retirement age, however,
the plan paid interest at 10%. Extebank subsequently merged with another bank and the
executives terminated employment. The executives brought an action for benefits under
ERISA. The district court granted summary judgment for Extebank, holding that the plan in
question was a top hat plan, and thus exempt from certain provisions of ERISA (see Footnote
1).

The Executives appealed, arguing that it was not a top hat plan because: (i) too many of
Extebank’s employees were eligible to participate, (ii) non-highly compensated employees
(earning approximately $30,000 per year) were eligible to participate, and (iii) the plan
was funded. The Second Circuit held that the plan, which was available to approximately 15%
of its management and highly compensated employees, was a top hat plan. Their decision was
based on the fact that all plan participants were (i) selected officers of the bank, (ii) in
management positions, and (iii) highly compensated (when compared to Extebank’s
total work force). Although the Second Circuit acknowledged the importance of a
participant’s ability to negotiate the terms of the plan in determining whether a
participant is a member of a Select Group, the record was silent on this point and little
evidence of negotiating power was shown. The Second Circuit also found that the term
“primarily” suggested that a plan intended for a Select Group would not lose its top hat
status if a small number of the participants were not part of a Select Group.

Determining Who Is A Member Of Bank’s Top Hat Group.

In comparing the two decisions, the factual similarities between Extebank and the Bank are
not easily dismissed. The more lenient standard announced in Extebank, however, conflicts
with Duggan. It is likely that a greater number of employees would be eligible to
participate in the Bank’s top hat plans by analyzing the facts under Extebank rather than
under the Duggan standard. It is possible, however, that a court in this Circuit might
distinguish Duggan and agree with Extebank. If the Bank believes that the
Extebank standard is the appropriate one to apply, it must acknowledge (i) the fact that
Extebank is not the law in California, (ii) the increased possibility of a negative
resolution of this issue through litigation, and (iii) the potential consequences associated with a
negative resolution. The Ninth Circuit, however, has not considered Extebank and it is
presently not the law in California. Therefore, in determining which employees of the Bank are
members of a Select Group, you should rely on the definition as stated in Duggan.

RECEIVED AND ACKNOWLEDGED BY:

	 	 	 	 	 
	/s/Hal Giomi

	 	DATE:
	 	9/15/2005

	 

	 	 	 	 

1The Bank’s nonqualified plans provide for a
deferral of compensation.

2 ERISA section 201(2). A non-top hat ERISA
covered plan is subject to Parts 1 through 5 of Subtitle B of Title I of ERISA,
reporting and disclosure, participation and vesting, funding, fiduciary
responsibility and administration and enforcement.

3 Belsky v. First National Life Insurance
Company, 818 F.2d 661 (8th Cir. 1987).

4This reference to “highly compensated employee”
should not be confused with the tax law’s definition of the term contained in
I.R.C. 414(q), the definition of highly compensated employee for purposes of
the coverage and amount nondiscrimination rules.

5 ERISA section 201(2).

6 ERISA Opinion Letter 90-14A (May 8, 1990).

7 An ERISA pension plan is defined as “[A]ny
plan, fund, or program which was heretofore or is hereafter established or
maintained by an employer or by an employee organization, or by both, to the
extent that by its express terms or as a result of surrounding circumstances
such plan, fund, or program: (i) provides retirement income to employees, or
(ii) results in the deferral of income by employees for periods extending to
the termination of covered employment regardless of the mean of calculating the
benefits under the plan or the means of distributing benefits from the plan.”
ERISA section 3(2).

8 Penalties under ERISA section 502(c) and Code
section 6652(e) for failure to file Forms 5500 would also apply.

9 Plan participants would be taxed in advance of
distribution. Amounts deferred by participants pursuant to valid state law
contracts would remain deferred at the same time, however, those amounts will
be includible in income currently requiring participants to raise capital to
pay taxes from other sources. See I.R.C. 402(b), 83(a),

10 Duggan v. Hobbs, 99 F.3d 307, 312-13
(9th Cir. 1996).

11Duggan did not challenge the district court’s
conclusion that he was highly compensated.

12"[T]he top hat provision was intended to apply
to employees, who by virtue of their position or compensation level, have the
ability to affect or substantially influence, through negotiation or otherwise,
the design and operation of their deferred compensation plan....”
Duggan, at 312, citing ERISA Opinion Letter 90-14A (May 8, 1990).

13 Demery v. Extebank, 216 F.3d 283 (2d
Cir. 2000).

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]