Document:

ex10_skeens.htm

  

  

  

 

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

 

Prepared 01-30-06

 

© 2006 Clark Consulting

This document is provided to assist your legal counsel in documenting your specific arrangement. The laws of the various states may differ considerably,  and this specimen is for general information  only. It is not a form to be signed, nor is it to be construed  as legal advice.  Failure to accurately  document your arrangement could result in significant losses, whether   from  claims  of  those  participating  in  the  arrangement, from   the  heirs  and beneficiaries  of participants, or  from  regulatory  agencies such  as  the  Internal Revenue Service, the Department of Labor,  or bank  examiners.   License is hereby granted  to your legal counsel to use these materials in documenting solely your arrangement.

In general, if your  bank is subject  to SEC regulation,  implementation of this or any other executive or   director    compensation    program    may   trigger    rules    requiring    certain disclosures  on Form  8-K  within  four  days of implementing  the  program.  Consult  with your  SEC  attorney, if applicable,  to determine  your  responsibilities  under  the disclosure rules.

 

IMPORTANT  NOTICE ON CODE SECTION  409A COMPLIANCE

Consult with your legal and tax advisors to determine the impact of the new Internal Revenue Code Section 409A to your particular situation.   The Treasury Department on September 291

2005 issued proposed regulations implementing the requirements of Section 409A which apply to  nonqualified  deferred  compensation  arrangements.    The  effective  date  for  the  proposed regulations is January 1, 2007; however, they can be fully relied upon by plan sponsors until the regulations become final.

 

 

  

  

  

 

THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

THE NATIONAL BANK OF BLACKSBURG SALARY CONTINUATION AGREEMENT

THIS  SALARY CONTINUATION AGREEMENT (the  "Agreement")  is  adopted  this 8th day of February, 2006 by and between THE NATIONAL BANK OF BLACKSBURG, a nationally-chartered commercial bank located m Blacksburg, Virginia (the "Bank") and DAVID K. SKEENS (the "Executive").

The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank.  This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.

Article 1

Definitions

Whenever  used  m  this  Agreement, the  following  words  and  phrases  shall  have  the meanings specified:

 

	 	
1.1

	
Beneficiary" means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.

                

	 	
1.2

	
"Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

 

	 	

1.3

	

"Board" means the Board of Directors of the Bank as from time to time constituted.

 

	 	
1.4

	
Change in Control" means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A ofthe Code and regulations thereunder.

 

	
 

	
1.5

	

"Code" means the Internal Revenue Code of 1986, as amended.

 

	 	  

1.6

	
"Disability'' means Executive: (i) is 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 covering employees of the Bank. Medical determination of Disability may be made by

 

       

  

1

  

THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	
 

	

either the Social Security Administration or by the provider of an accident or health piau covering employees of the Banlc   Upon the request of the Piau Administrator, the Executive must submit proof to the Piau Administrator of the Social Security Administration's or the provider's determination.

	
  

	
1.7

	
"Early  Termination" means Separation from Service before Normal Retirement Age except when such Separation from Service occurs: (i) following a Change in Control; or (ii) due to death, Disability, or Termination for Cause.

	 	
1.8 

	
"Effective Date" means January 1, 2006.

	 	
1.9 

	
"Normal Retirement Age" means the Executive attaining age sixty-five (65).

	 	
1.10 

	
"Plan Administrator" means the plan administrator described in Article 6.

	
  

	
1.11

	
"Plan  Year" means each twelve-month period commencing on  January 1,  2006 aud ending on December 31 of each year.   The initial Piau Year shall commence on the Effective Date of this Agreement aud end on the following December 31.

	 	
1.12 

	
"Schedule A" means the schedule attached to this Agreement aud made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.

	
  

	
1.13

	
"Separation from Service" means the termination of the Executive's employment with the Bank for reasons other than death or Disability. Whether a Separation from Service takes place is determined based on the facts aud circumstances surrounding the termination of the Executive's  employment aud whether the Bank aud the Executive intended for the Executive to provide significant services for the Bank following such termination.  A termination of employment will not be considered a Separation from Service if:

	
  

	
(a)      the Executive continues to provide services as an employee of the Bank at au annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or

	
  

	
(b)       the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more  of  the  average  annual remuneration earned  during  the  final  three  full calendar years of employment (or if less, such lesser period).

  

2

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

	
  

	
1.14

	
"Specified Employee" means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank if any stock of the Bank is publicly traded on an established securities market or otherwise.

	 	
1.15 

	
"Termination for Cause" means Separation from Service for:

 

	
  

	
(a)   Gross negligence or gross neglect of duties to the Bank; or

(b)       Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's employment with the Bank; or

	
  

	
(c)       Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive's employment and resulting in a material adverse effect on the Bank.

Article 2

Distributions During Lifetime

	 	
2.1 

	
Normal Retirement Benefit. Upon the Executive reaching Normal Retirement Age while in the active service of the Bank, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article. 

                                                                                                                                                  

	 	
2.1.1 

	
Amount of Benefit. The annual benefit under this Section 2.1 is Thirty Thousand Eight Hundred Seven Dollars ($30,807).

	 	
2.1.2

	
Distribution of  Benefit. 

The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first dayof the month following Normal Retirement Age. The annual benefit shall be distributed to the Executive for the greater of fifteen (15) years, or the Executive's

lifetime.

  

	
  

	
2.2

	
Early Termination Benefit.   Upon Early Termination, the Bank shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

	
  

	
2.2.1

	
Amount of  Benefit.   The annual benefit under this Section 2.2  is the Early Termination Benefit set forth on Schedule A for the Plan Year immediately preceding the date that Separation from Service occurs; provided, however, if the Executive Separates from Service on December 31st of a Plan Year, then the Bank shall distribute the Early Termination Benefit set forth on Schedule A for the Plan Year in which such Separation from Service occurs.

	
  

	
2.2.2

	
Distribution of  Benefit.   The Bank shall distribute the  annual benefit to  the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Normal Retirement Age.   The annual benefit shall be distributed to the Executive for the greater of fifteen (15) years, or the Executive's lifetime.

  

3

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

	
  

	
2.3

	
Disability Benefit.  If the Executive experiences a Disability prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

	
  

	
2.3.1

	
Amount of Benefit.  The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year immediately preceding the date that Separation from Service occurs; provided, however, if the Executive Separates from Service on December 31" of a Plan Year, then the Bank shall distribute the Disability Benefit set forth on Schedule A for the Plan Year in which such Separation from Service occurs.

	
  

	
2.3.2

	
Distribution of  Benefit.   The Bank shall distribute the  annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Normal Retirement Age.   The annual benefit shall be distributed to the Executive for the greater of fifteen (15) years, or the Executive's lifetime.

	 	
2.4 

	
Change in Control Benefit.  Upon a Change in Control followed by Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

  

	
  

	
2.4.1

	
Amount of Benefit.  The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year immediately preceding the date that Separation from Service occurs; provided, however, if the Executive Separates from Service on December 31st of a Plan Year, then the Bank shall distribute the Change in Control Benefit set forth on Schedule A for the Plan Year in which such Separation from Service occurs.

	
  

	
2.4.2

	
Distribution of  Benefit.   The Bank shall distribute the annual benefit to  the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service.   The annual benefit shall be distributed to the Executive for the greater of fifteen (15) years, or the Executive's lifetime.

	
  

	
2.4.3

	
Excess Parachute Payment Gross-up. If any benefit payable under this Agreement would create an excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall pay to the Executive an additional amount (the "Gross­ up") equal to:

	
  

	
the Executive's excise penalty tax amount divided by the sum of (one minus the sum of the penalty tax rate plus the Executive's marginal income tax rate) The Gross-up shall be paid in equal annual payments for the greater of fifteen (15) years or the Executive's lifetime.

 

 

  

4

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

 

	
  

	
2.5

	
Restriction on Timing of Distribution.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service  under such  procedures  as established  by the Bank in accordance  with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution or series of distributions to be made due to a Separation from Service shall commence no earlier that the first day of the seventh month following the Separation from Service.

 

	 	
2.6

	
Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Account Value into the Executive's income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive's vested Account Value, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

	 	
2.7

	

Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

	 	
(a) 

	
may  not  accelerate  the  time  or  schedule  of  any distribution,  except  asprovided in Section 409A of the Code and the regulations thereunder;

 

	 	
(b) 

	
must, for benefits distributable  under Section  2.1, be made not less thantwelve (12) months prior to the Executive's Normal Retirement Age.  

                                                                                                                            

	 	
(c) 

	
must, for benefits distributable  under Sections 2.1, 2.2, and 2.3 delay thecommencement  of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

 

	 	
(d) 

	
must take effect not less than twelve (12) months after the amendment ismade.

 

Article 3

Distribution at Death

 

	 	
3.1

	
  Death During  Active Service.   If the Executive  dies while in the active service of the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.

 

	 	
3.1.1

	
Amount of Benefit.  The annual benefit under this Section 3.1 is the Death Benefit set forth on Schedule  A for the indicated date which is the same date or most recently precedes the date that the Executive's  death occurs.

	 	
3.1.2 

	
Distribution  of  Benefit.  The  Bank  shall  distribute  the  annual  benefit  to  the

 

 

  

5

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

Beneficiary in twelve (12) equal monthly installments for fifteen (15) years commencing the first day of the month following receipt by the Bank of the Executive's death certificate.

	
  

	
3.2

	
Death  During  Distribution  of  a  Benefit.    If  the  Executive  dies  after  any  benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining monthly installments at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived; provided, however, for benefits payable under Section 2.1, if the Executive has received less than one hundred eighty (180) equal consecutive monthly installments, the Beneficiary shall continue to receive the same amounts and at the same time until the sum of the monthly installments to the Beneficiary and Executive equal one hundred eighty (180).

	
  

	
3.3

	
Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive's death certificate for a total of on hundred eighty (180) equal consecutive monthly installments. 

                                                                                                                                  

 

Article 4

Beneficiaries

 

	 	
4.1 

	
Beneficiary. The  Executives  shall  have  the  right,  at  any  time,  to  designate a Beneficiary(ies) to receive any benefit distributions under this Agreement upon the death of the Executive.  The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.

	
  

	
4.2

	
Beneficiary Designation: Change.   The Executives shall  designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent.  The Executive's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executives shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's  rules  and  procedures, as  in  effect  from  time  to  time.    Upon  the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled.   The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive's death.

	 	
4.3 

	
Acknowledgment.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

  

  

6

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

 

	
  

	
4.4

	
No  Beneficiarv  Designation.     If  the  Executive  dies  without  a  valid  beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive's spouse shall be the designated Beneficiary. Ifthe Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive's estate.

	
  

	
4.5

	
Facility of Distribution.   If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person.  The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit.  Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

Article 5

General Limitations

	
  

	
5.1

	
Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive's employment with the Bank is terminated due to a Termination for Cause.

	
  

	
5.2

	
Suicide or Misstatement.   No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason.

	
  

	
5.3

	
Removal.   Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit fusurance Act.

Article 6

Administration of Agreement

	
  

	
6.1

	
Plan   Administrator  Duties.      This  Agreement  shall  be   administered  by   a  Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint.  The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this

  

  

7

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

Agreement  and (ii) decide or resolve any and all questions including  interpretations  of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not conflict with Section 409A of the Code and regulations thereunder.

	
  

	
6.2

	
Agents.   In the administration  of this Agreement,  the Plan  Administrator  may employ agents and delegate to them such administrative  duties as it sees fit, (including  acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Banlc

	
  

	
6.3

	
Binding Effect  of  Decisions.    The decision  or  action  of  the  Plan  Administrator  with respect  to  any  question   arising  out  of  or  in  connection   with  the  administration, interpretation and application of the Agreement nd the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.

        

	
  6.4 

	
Indenmity of Plan Administrator. The Bank shall indenmif)r and hold harmless themembers of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities  arising  from  any action  or failure  to act with  respect  to  this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

	
  

	
6.5

	
Bank Information.   To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to  the date and circumstances  of  the retirement, Disability,  death, or Separation  from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.

	
  

	
6.6

	
Annual  Statement.  The Plan  Administrator  shall provide  to the Executive,  within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

 

Article 7

Claims And Review Procedures

	
  

	
7.1

	
Claims  Procedure. An Executive or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows: 

 

	 	

7.1.1 

	

Initiation - Written Claim.   The claimant  initiates a claim by submitting  to the Pan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.   The claim must state with particularity the determination desired by the claimant.

 

 

  

8

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	 	
 7.1.2 

	
Timing of Plan Administrator Response.  The Plan Administrator shall respond to such claimant within 90 days after receiving the claim.  If the Plan Administrator determines  that special circumstances  require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifYing the claimant  in writing, prior to the end of the initial  90-day period, that an additional period is required.   The notice of extension  must set forth  the  special  circumstances  and  the date  by which  the Plan  Administrator expects to render its decision.

	
  

	
7.1.3

	
Notice of Decision.  If the Plan Administrator denies part or all of the claim, the Plan Administrator  shall notify the claimant in writing of such denial.   The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

	 	
(a) 

	
The specific reasons for the denial;

 

	 	
 

	
(b)

	
A  reference  to the  specific  provisions  of  the  Agreement  on  which  the denial is based;

 

	 	
(c) 

	
A description of any additional information  or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

 

	 	
(d)

	
An explanation of the Agreement's  review procedures and the time limits applicable to such procedures; and

 

	 	
(e) 

	
A statement of the claimant's  right to bring a civil  action under ERISA Section 502(a) following an adverse benefit determination on review.

	 	
7.2

	
Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall  have  the opportunity  for a full and fair review by the Plan  Administrator of the denial, as follows:

 

	 	
7.2.1 

	
Initiation- Written Request.  To initiate the review, the claimant, within 60 daysafter receiving the Plan Administrator's notice of denial, must file with the Plan Administrator a written request for review.

	 	
7.2.2 

	
Additional Submissions - Information Access.  The claimant shall then have the opportunity   to submit   written  comments,   documents,   recordsandother information  relating to the claim.  The Plan Administrator  shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents,  records  and  other  information  relevant  (as  defined  in  applicable ERISA regulations) to the claimant's  claim for benefits.

 

	 	
7.2.3 

	
Considerations on Review. In considering  the review, the  Plan  Administrator shall take into account all materials and information the claimant submits relating to  the  claim,  without  regard  to  whether  such  information  was  submitted  or considered in the initial benefit determination.

 

  

9

  

THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	 	
7.2.4  

	
Timing of Plan Administrator Response.  The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review.  If the Plan Administrator  determines  that special circumstances  require additional time  for processing  the claim, the Plan  Administrator  can  extend  the response period by an additional 60 days by notifYing the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required.  The notice of extension must set forth the special circumstances  and the date by which the Plan Administrator expects to render its decision.

	
  

	
7.2.5

	
Notice of Decision.  The Plan Administrator shall notify the claimant in writing of its decision  on review.   The Plan Administrator  shall write the notification  in a manner  calculated  to be understood  by the claimant.   The notification  shall set forth:

	 	
(a) 

	
The specific reasons for the denial;

 

	
  

	
(b)

	
A  reference  to  the  specific  provisions  of  the  Agreement  on  which  the denial is based;

 

	 	
(c) 

	
A statement that the claimant is entitled to receive, upon request and freeof charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and

 

	 	
(d) 

	
A statement of the claimant's  right to bring a civil  action under ERISA Section 502(a). 

 

Article 8

Amendments and Termination

 

    

	
8.1

	
Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators ortocomply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

 

	
8.2

	
Plan Termination Generally. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. The benefit shall be the Early Termination benefit as set forth on Schedule A as of the date the Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

 

	
8.3 

	
Plan  Terminations  Under  Section  409A.   Notwithstanding  anything  to the contrary  in Section 8.2, if the Bank terminates this Agreement in the following circumstances:

	 	
(a) 

	
Within thirty (30) days before, or twelve (12) months after a Change in Control,

  

10

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

	 	

provided that  all  distributions  are  made  no  later  than  twelve  (12)  months following such termination of the Agreement and further provided that all the Bank's arrangements  which  are  substantially  similar  to  the  Agreement  are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

	 	
(b) 

	
Upon the Bank's dissolution or with the approval of a bankruptcy court provided that 

the amounts deferred under the Agreement are included in the Executive's gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

	 	
(c) 

	
Upon the Bank's termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;

the Bank may distribute the actuarial equivalent of the present value of the Early Termination benefit, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.

Article 9

Miscellaneous

	
  

	
9.1

	
Binding Effect.    This  Agreement shall bind the Executive and the  Bank, and their beneficiaries, survivors, executors, administrators and transferees.

	
  

	
9.2

	
No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive.  It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

	
  

	
9.3

	
Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

	
  

	
9.4

	
Tax Withholding and Reporting.  The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement.  Executive acknowledges that the Bank's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).  Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

  

11

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

 

	
  

	
9.5

	
Applicable Law.  The Agreement and all rights hereunder shall be governed by the laws of the Commonwealth of Virginia, except to the extent preempted by the laws of the United States of America.

	
  

	
9.6

	
Unfunded  Arrangement.   The Executive and the  Beneficiary are  general  unsecured creditors of the Bank for the distribution of benefits under this Agreement.  The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assigrunent, pledge, encumbrance, attachment, or garnishment by creditors.   Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.

	 	
9.7   

	
Reorganization.  The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement.  Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.

	
  

	
9.8

	
Entire Agreement.  This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

	
  

	
9.9

	
Interpretation.   Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

	
  

	
9.10

	
Alternative Action.   In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative acts do not violate Section 409A of the Code.

	
  

	
9.11

	
Headings.  Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

	
  

	
9.12

	

Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has 

never been inserted herein.

  

	
  

	
9.13

	
Notice.   Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

  

12

  

	
THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

	
The National Bank of Blacksburg

	
c/o National Bankshares, Inc.

	
Attn: James G. Rakes

	
P.O. Box 90002

	
Blacksburg, VA 24062-9002

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

	
  

	
9.14

	
Compliance with Section 409A.  This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement.

 

	 	
9.15

	
Rescissions. Any modification to the terms of this Agreement that would inadvertently result in an additional tax liability on the part of the Executive, shall have no effect to theextent the change in the terms of the plan is rescinded by the earlier of a date before the right is exercised (if the change grants a discretionary right) and the last day of the calendar year during which such change occurred.

 

 

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.

 

  

                                                  

 

	 Executive: 	 BANK:
	 	The National Bank of Blacksburg
	 	 
	/s/ David K. Skeens  	/s/ James. G. Rakes 
	David K. Skeens	Title: Chairman, President & CEO

 

           

  

  

13

  

The National Bank of Blacksburg

Salary Continuation Plan - Schedule A

David K. Skeens

	
Birth Date: 10/12/1966

Effective Date: 1/1/2006

Normal Retirement 10/12/2031; Age 65

 

	
Early Termination

	
Disability

	
Change of Control

	
Pre-retirement Death Benefit

	  	
Annual Benefits Payable in Monthly Installments Commencing at Normal Retirement Date For Life

	
Annual Benefits Payable in Monthly Installments Commencing at Normal Retirement Date For Life

	
Annual Benefits Payable in Monthly Installments Commencing at Termination Date For Life

	
Annual Benefits Payable in Monthly Installments Commencing at Death for 15 Years

	
Period Ending

	
Age

	
(1)

	(2)	(3)  	  (4)
	
12/31/2005

	
39

	
$0

	
$0

	
$11,221

	
$30,807

	
12/31/2006

	
40

	
$0

	
$1,186

	
$11,670

	
$30,807

	
12131/2007

	
41

	
$0

	
$2,373

	
$12,137

	
$30,807

	
12/31/2008

	
42

	
$0

	
$3,559

	
$12,622

	
$30,807

	
12/31/2009

	
43

	
$0

	
$4,745

	
$13,127

	
$30,807

	
12/31/2010

	
44

	
$0

	
$5,932

	
$13,652

	
$30,807

	
12/31/2011

	
45

	
$0

	
$7,118

	
$14,198

	
$30,807

	
12/31/2012

	
46

	
$0

	
$8,304

	
$14,766

	
$30,807

	
12/31/2013

	
47

	
$0

	
$9,491

	
$15,357

	
$30,807

	
12/31/2014

	
48

	
$0

	
$10,677

	
$15,971

	
$30,807

	
12/31/2015

	
49

	
$0

	
$11,864

	
$16,610

	
$30,807

	
12/31/2016

	
50

	
$13,050

	
$13,050

	
$17,275

	
$30,807

	
12/31/2017

	
51

	
$14,236

	
$14,236

	
$17,966

	
$30,807

	
12/31/2018

	
52

	
$15,423

	
$15,423

	
$18,684

	
$30,807

	
12/31/2019

	
53

	
$16,609

	
$16,609

	
$19,432

	
$30,807

	
12/31/2020

	
54

	
$17,795

	
$17,795

	
$20,209

	
$30,807

	
12/31/2021

	
55

	
$18,982

	
$18,982

	
$21,017

	
$30,807

	
12/31/2022

	
56

	
$20,168

	
$20,168

	
$21,858

	
$30,807

	
12/31/2023

	
57

	
$21,354

	
$21,354

	
$22,732

	
$30,807

	
12/31/2024

	
58

	
$22,541

	
$22,541

	
$23,641

	
$30,807

	
12/31/2025

	
59

	
$23,727

	
$23,727

	
$24,587

	
$30,807

	
12/31/2026

	
60

	
$24,913

	
$24,913

	
$25,571

	
$30,807

	
12/31/2027

	
61

	
$26,100

	
$26,100

	
$26,593

	
$30,807

	
12/31/2028

	
62

	
$27,286

	
$27,286

	
$27,657

	
$30,807

	
12/31/2029

	
63

	
$28,472

	
$28,472

	
$28,763

	
$30,807

	
12/31/2030

	
64

	
$29,659

	
$29,659

	
$29,914

	
$30,807

	
10/12/2031

	
65

	
$30,807

	
$30,807

	
$30,807

	
$30,807

  

  

  

THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement BENEFICIARY DESIGNATION  FORM

	
[ü]

	
 New Designation

	
[]

	
Change in Designation

I,   ________________________ , designate the following as Beneficiary under the Agreement:

	
Primary

 

	
 

_____%

 

	
Contingent:

 

	
 

_____%

 

 

Notes

	 	
• 

	
Please PRINT CLEARLY or TYPE  the names of the beneficiaries.

	
  

	
•

	
To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

	 	
• 

	
To name your estate as Beneficiary, please write "Estate of [your name]".

	
  

	
•

	
Be aware that none of the contingent  beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand  that Imay  change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death.   Ifurther  understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

	
Name: 

	
______________________   

	
Signature: 

	
______________________    Date:   __________

	
Received

	
 by the Plan Administrator this ____ day of _____________, ________.

	
By: 

	
______________________

	
Title: 

	
______________________

  

  

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

FIRST AMENDMENT TO THE  NATIONAL BANK OF BLACKSBURG SALARY CONTINUATION AGREEMENT DATED FEBRUARY 8, 2006

FOR DAVID K. SKEENS

 

THIS FIRST AMENDMENT  is adopted this 19th day of December, 2007, effective as of January 1, 2006, by and between THE NATIONAL BANK OF BLACKSBURG, a  nationally-chartered   commercial  bank  located  in  Blacksburg,  Virginia  (the  "Bank"),  and DAVID K. SKEENS (the "Executive").

The Bank and the Executive executed the Salary Continuation Agreement on February 8, 2006 effective as of January 1, 2006 (the "Agreement").

The undersigned hereby amend the Agreement for the purpose of bringing the Agreement into compliance  with  Section  409A of  the  Internal Revenue Code.   Therefore, the following changes shall be made:

 

Sections 2.4 and 2.4.3 of the Agreement shall be deleted in its entirety and replaced by                                                                                                                                                "

the following:

	
  

	
2.4

	
Change in Control Benefit.  If a Change in Control occurs, followed within twenty-four (24) months by the Executive's Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

	
  

	
2.4.3

	
Excess Parachute Payment Gross-up.  If any benefit payable under this Agreement would create an excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall pay to the Executive an additional amount (the "Gross-up") equal to:

 

the Executive's excise penalty tax amount divided by the sum of (one minus the sum of the penalty tax rate plus the Executive's marginal income tax rate)

 

The Gross-up shall be paid in the same manner and same time as the benefit which creates the gross-up.

 

Section 2.7 of the Agreement shall be deleted in its entirety and replaced by thefollowing:

 

	 	
2.7 

	
Change  in  Form  or  Timing  of  Distributions. All  changes  in  the  form  or  timing  of

 

  

1

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	
 

	

distributions hereunder must comply with the following requirements.  The changes:

	
  

	
(a)       may  not accelerate  the time or schedule  of  any distribution,  except as provided in Code Section 409A and the regulations thereunder;

	
  

	
(b)       must, for benefits distributable under Sections 2.1, 2.2 and 2.3, be made at least twelve (12) months prior to the first scheduled distribution;

	
  

	
(c)       must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

	
  

	
(d)       must  take effect  not  less than twelve (12)  months after  the election  is made.

 

Section 8.3  of the Agreement shall be deleted in its entirety and replaced by the

following:

	 	
8.3

	
Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.2, if this Agreement terminates in the following circumstances:

	
  

	
(a)        Within thirty (30) days before or twelve (12) months after a Change in Control, provided  that  all  distributions  are  made  no  later  than  twelve  (12)  months following  such  termination  of the Agreement and  further  provided  that all the Bank's arrangements   which  are  substantially   similar   to  the   Agreement  are terminated  so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation  deferred  under the terminated arrangements within twelve (12) months of such terminations;

 

	 	

(b)   Upon the Bank's dissolutionor with the approval of a bankruptcy court, provided that the amounts deferred under the Agreement are included in the Executive's gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

 

	 	

(c)   Upon the Bank's termination of this and all other arrangements that would beaggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Executive participated in such arrangements ("Similar Arrangements"), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

	
  

	
the Bank may distribute the actuarial equivalent of the present value of the Early Termination benefit, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.

 

  

2

  

THE NATIONAL BANK OF BLACKSBURG

Salary Continuation Agreement

IN WITNESS OF THE ABOVE, the Bank and the Executive hereby consent to this

First Amendment.

 

	Executive:  	The National Bank of Blacksburg 
	 	By /s/ James G. Rakes
	/s/ David K. Skeens  	 
	David K. Skeens  	Title: Chairman, President & CEO

 

                                                                     

                                                                                                         

                                                                      

  

  

3

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation  Agreement

SECOND AMENDMENT TO THE NATIONAL BANK OF BLACKSBURG SALARY CONTINUATION AGREEMENT DATED FEBRUARY 8, 2006

FOR DAVID K. SKEENS

THIS SECOND AMENDMENT is adopted this 17th day of December, 2008, effective as  of  January 1,  2006,  by and  between THE  NATIONAL BANK OF  BLACKSBURG, a nationally-chartered commercial bank located in Blacksburg, Virginia (the "Bank"), and DAVID K. SKEENS (the "Executive").

The Bank and the Executive executed the Salary Continuation Agreement on February 8, 2006 effective as of January 1, 2006 (the "Agreement").

The undersigned hereby amend the Agreement for the purpose of bringing the Agreement into compliance with Section 409A of the Internal Revenue Code.   Therefore, the following changes shall be made:

The following sentence is added at the end of Section 1.13 of the Agreement:

In determining whether a Separation from Service has occurred, the term "Bank" shall include its affiliates required to be treated as a service recipient along with the Bank for purposes of Section 409A of the Code.

Sections 2.3 and 2.3.1 of the Agreement shall be deleted in their entirety and replaced by the following:

	
  

	
2.3

	
Disability Benefit.  If the Executive experiences a Disability prior to Normal Retirement Age while in the active service of the Bank, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

	
  

	
2.3.1

	
Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit setforth on Schedule A for the Plan Year immediately preceding the date that the Executive's cessation of service with the Bank occurs due to Disability; provided, however, if the Executive ceases service with the Bank due to Disability on December 31st of a Plan Year, then the Bank shall distribute the Disability Benefit set forth on Schedule A for the Plan Year in which such Separation from Service occurs.

  

Section 2.4.3 of the Agreement shall be deleted in its entirety and replaced by the following:

	 	
2.4.3

	
Excess Parachute Payment. If any benefit payable under this Agreement would create an

 

  

1

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	 	

excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall comply with any applicable restrictions or limitations applicable to the Executivein the Executive's employment or other agreement, if any, with the Bank or any affiliate of the Bank addressing the same.

Section 2.5  of  the  Agreement  shall be  deleted  in  its  entirety  and  replaced by  the following:

	
  

	
2.5

	
Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution or series of distributions to be made due to a Separation from Service shall commence no earlier that the first day of the seventh month following the Separation from Service. No catch-up payment, or interest representing the time value of money, shall be made or due as a result of the six (6) month delay in payment required by this Section 2.5

 

Section 8.3  of  the  Agreement shall  be  deleted  in  its  entirety  and  replaced  by  the following:

	
  

	
8.3

	
Plan Terminations Under Section 409A.   Notwithstanding anything to the contrary in Section 8.2, but subject to the applicable requirements of Section 409A of the Code, if this Agreement terminates in the following circumstances:

	
  

	
(a)       Within thirty (30) days before or twelve (12) months after a Change in Control, provided  that  all  distributions are  made  no  later  than  twelve  (12)  months following such termination of the Agreement and further provided that all the Bank's arrangements  which  are  substantially  similar  to  the  Agreement  are terminated with respect to the participants therein who experienced the Change in Control so the Executive and all such participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such terminations;

	
  

	
(b)       Upon the Bank's dissolution or with the approval of a bankruptcy court, provided that the amounts deferred under the Agreement are included in the Executive's gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial  risk  of  forfeiture;  or  (iii)  the  first  calendar  year  in  which  the distribution is administratively practical; or

	
  

	
(c) Upon the Bank's termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section

 

1.409A-l(c)   if  the  Executive  participated  in  such  arrangements  ("Similar

Arrangements"), provided that (i) the termination and liquidation does not occur

 

  

2

  

	
  

	
THE NATIONAL BANK OF BLACKSBURG Salary Continuation Agreement

	
 

	

proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the actuarial equivalent of the present value of the Early Termination benefit, determined as of the date ofthe termination of the Agreement, to the Executive in a lump sum subject to the above terms.   Actuarial equivalence shall be determined on the basis of the applicable actuarial factors in the National Bankshares, Inc. Retirement Income Plan unless the Bank decides, in good faith, that other actuarial factors are more appropriate.

IN WITNESS OF THE ABOVE, the Bank and the Executive hereby consent to this

Second Amendment.

	Executive: 	The National Bank of Blacksburg 
	 	By /s/ James G. Rakes 
	/s/ David K. Skeens 	 
	David K. Skeens 	Title: Chairman, President & CEO

 

 

 

 

  

3

  

 

 

THIRD AMENDMENT TO THE THE NATIONAL BANK OF BLACKSBURG SALARY CONTINUATION AGREEMENT FOR DAVID K. SKEENS

THIS THIRD AMENDMENT is adopted this 20th day of January, 2012, by and between The National Bank of Blacksburg, (the “Bank”) and David K. Skeens (the “Executive”).

 

The Bank and the Executive entered into a Salary Continuation Agreement dated February 8, 2006 and two subsequent amendments thereto (collectively, the “Agreement”).  The Bank and the Executive now wish to increase the amount of the retirement benefit provided in the Agreement.

 

Now, therefore, the Bank and the Employee amend the Agreement as follows.

 

Section 2.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

 

	
  

	
2.1.1

	
Amount of Benefit.  The annual benefit under this Section 2.1 is Sixty-Five Thousand Nine Hundred Forty Dollars ($65,940).

The Schedule A attached hereto shall replace the Schedule A originally incorporated into the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Third Amendment.

 

	Executive: 	The National Bank of Blacksburg 
	 	By /s/ James G. Rakes 
	/s/ David K. Skeens 	 
	David K. Skeens 	Title: Chairman, President & CEO

  

  

  

 

 

The National Bank of Blacksburg

Salary Continuation Plan - Schedule A  (revised as of January 1, 2012)

 

David K. Skeens

 

	
Birth Date: 10/12/1966

Plan Effective Date: 1/1/2012

Normal Retirement 10/12/2031, Age 65

 

 

Normal Retirement Benefit: $65,940

	
Early

Termination

	
 

Disability

	
 

Change of Control

	
Pre-retirement

Death Benefit

	
Annual Benefits Payable in Monthly Installments for life, with 15 years certain;

Commencing at Normal Retirement Age

	
Annual Benefits Payable in Monthly Installments for life, with 15 years certain;

Commencing at Normal Retirement Age

	
Annual Benefits Payable in Monthly Installments for life, with 15 years certain;

Commencing at

Separation of Service

	
Annual Benefits Payable in Monthly Installments for 15 years;

Commencing at

Death

	
Separation of Service on or after:

	
Vesting

	
Dollars

	
(2)

	
(3)

	
(4)

	
January 1, 2012

	
0.00%

	
$0

	
$7,079

	
30,291

	
65,940

	
December 31, 2012

	
0.00%

	
$0

	
$10,047

	
31,503

	
65,940

	
December 31, 2013

	
0.00%

	
$0

	
$13,015

	
32,763

	
65,940

	
December 31, 2014

	
0.00%

	
$0

	
$15,983

	
34,073

	
65,940

	
December 31, 2015

	
0.00%

	
$0

	
$18,950

	
35,436

	
65,940

	
December 31, 2016

	
100.00%

	
$21,918

	
$21,918

	
36,854

	
65,940

	
December 31, 2017

	
100.00%

	
$24,886

	
$24,886

	
38,328

	
65,940

	
December 31, 2018

	
100.00%

	
$27,853

	
$27,853

	
39,861

	
65,940

	
December 31, 2019

	
100.00%

	
$30,821

	
$30,821

	
41,456

	
65,940

	
December 31, 2020

	
100.00%

	
$33,789

	
$33,789

	
43,114

	
65,940

	
December 31, 2021

	
100.00%

	
$36,757

	
$36,757

	
44,838

	
65,940

	
December 31, 2022

	
100.00%

	
$39,724

	
$39,724

	
46,632

	
65,940

	
December 31, 2023

	
100.00%

	
$42,692

	
$42,692

	
48,497

	
65,940

	
December 31, 2024

	
100.00%

	
$45,660

	
$45,660

	
50,437

	
65,940

	
December 31, 2025

	
100.00%

	
$48,628

	
$48,628

	
52,455

	
65,940

	
December 31, 2026

	
100.00%

	
$51,595

	
$51,595

	
54,553

	
65,940

	
December 31, 2027

	
100.00%

	
$54,563

	
$54,563

	
56,735

	
65,940

	
December 31, 2028

	
100.00%

	
$57,531

	
$57,531

	
59,004

	
65,940

	
December 31, 2029

	
100.00%

	
$60,498

	
$60,498

	
61,364

	
65,940

	
December 31, 2030

	
100.00%

	
$63,466

	
$63,466

	
63,819

	
65,940

	
October 12, 2031 (*)

	
100.00%

	
$65,940

	
$65,940

	
65,940

	
65,940

 

(*)  Normal Retirement AgeExhibit 4.1

CHOICE BANK

2006 STOCK INCENTIVE PLAN

1.

PURPOSE

The 2006 Stock Incentive Plan (“Plan”) is intended to promote shareholder value by (a) enabling Choice Bank, Oshkosh, Wisconsin (“Bank”) and its affiliates to attract and retain the best available individuals for positions of substantial responsibility; (b) providing additional incentive to such persons by affording them an equity participation in the Bank; (c) rewarding those directors, executive officers and employees for their contributions to the Bank; and (d) promoting the success of the Bank’s business by aligning the financial interests of directors, executive officers and employees providing personal services to the Bank or its affiliates with long-term shareholder value. 

2.

DEFINITIONS

(A)

“Act” means the Securities Exchange Act of 1934, as amended, or any successor provisions.

(B)

“Affiliate” means (i) any entity that, directly or indirectly, is controlled by the Bank, (ii) an entity in which the Bank has a significant equity interest, (iii) an affiliate of the Bank, as defined in Rule 12b-2 promulgated under the Act, (iv) any Subsidiary and (v) any entity in which the Bank has at least twenty percent (20%) of the combined voting power of the entity’s outstanding voting securities, in each case as designated by the Board of Directors as being a participant employer in the Plan.

(C)

“Bank” means Choice Bank, a Wisconsin state bank, and except as otherwise specified in this Plan in a particular context, any successor thereto, whether by merger, consolidation, purchase of all or substantially all of its assets or otherwise.

(D)

“Board of Directors” means the board of directors of the Bank.

(E)

“Brokered Assisted Exercise” means a special sale and remittance procedure pursuant to which the Participant shall concurrently provide irrevocable written instructions to (a) an administrator-designated brokerage firm to effect the immediate sale of Stock owned by the Participant for at least six months and remit to the Bank, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price plus all applicable federal, state and local income and employment taxes required to be withheld by the Bank, and (b) the Bank to deliver the certificates for the Stock issued upon exercise of the Options directly to the Participant or such brokerage firm in order to complete the sale.

(F)

“Change of Control” means:

(i)

the acquisition by any individual, entity or “group,” within the meaning of  section 13(d)(3) or section 14(d)(2) of the Act (other than the current members of the Board of Directors or any of their descendants, the Bank, or any savings, pension or other benefit plan for the benefit of the employees of the Bank or subsidiaries thereof) (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of voting securities of the Bank where such acquisition causes any such Person to own fifty percent (50%) or more of the combined voting power of the Bank’s then outstanding capital stock then entitled to vote generally in the election of directors;

(ii)

within any twelve-month period, the persons who were directors of the Bank immediately before the beginning of the twelve-month period (the “Incumbent Directors”) shall cease to 

1

constitute at least a majority of the Board of Directors; provided that any individual becoming a director subsequent to the beginning of such twelve-month whose election, or nomination for election by the Bank’s shareholders, was approved by at least two-thirds of the directors then comprising the Incumbent Directors shall be considered as though such individual were an Incumbent Director unless such individual’s initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act);

(iii)

a reorganization, merger, consolidation or other corporate transaction involving the Bank with respect to which the shareholders of the Bank immediately prior to such transaction do not, immediately after the transaction, own more than fifty percent (50%) of the combined voting power of the reorganized, merged or consolidated company’s then outstanding voting securities;

(iv)

the sale, transfer or assignment of all or substantially all of the assets of the Bank to any third party;

(v)

a dissolution or liquidation of the Bank; or

(vi)

any other transactions or series of related transactions occurring which have substantially the same effect as the transactions specified in clauses (i) – (v), as determined by the Board of Directors.

(G)

“Code” means the Internal Revenue Code of 1986, as amended, or any successor provisions.

(H)

“Controlling Participant” means any person who, immediately before an Option is granted to that particular person, directly or indirectly (within the meaning of section 424 of the Code and the regulations promulgated thereunder) possesses more than ten percent (10%) of the total combined voting power of all classes of stock of the Bank or any Subsidiary.  The determination of whether an person is a Controlling Participant shall be made in accordance with sections 422 and 424 of the Code, or any successor provisions, and the regulations promulgated thereunder.

(I)

“Committee” means the committee appointed by the Board of Directors to administer the Plan pursuant to Section .  If the Committee has not been appointed, the Board of Directors in its entirety shall constitute the Committee.  The Board of Directors shall consider the advisability of whether the members of the Committee shall consist solely of two or more member of the Board of Directors who are each “outside directors” as defined in Treas. Reg. section 1.162-27(e)(3) as promulgated by the Internal Revenue Service and “non-employee directors” as defined in Rule 16b-3(b)(3) as promulgated under the Act.  

(J)

“Exercise Price” means the price at which a share of Stock may be purchased by a Participant pursuant to the exercise of an Option, as specified in the respective Stock Option Agreement.

(K)

“Fair Market Value” on any date with respect to the Stock means:

(i)

if the Stock is listed on a national securities exchange, the last reported sale price of a share of the Stock on such exchange or, if no sale occurs on that date, the average of the reported closing bid and asked prices on that date,

(ii)

if the Stock is otherwise publicly traded, the last reported sale price of a share of the Stock under the quotation system under which the sale price is reported or, if no sale occurs on that 

2

date, the average of the reported closing bid and asked prices on that date under the quotation system under which the bid and asked prices are reported,

(iii)

if no such last sales price or average of the reported closing bid and asked prices are available on that date, the last reported sale price of a share of the Stock, or if no sale takes place, the average of the reported closing bid and asked prices as so reported for the immediately preceding business day (a) on the national securities exchange on which the Stock is listed or (b) if the Stock is otherwise publicly traded, under the quotation system under which such data are reported, or 

(iv)

if none of the prices described above is available, the value of a share of the Stock as reasonably determined in good faith by the Committee in a manner that it believes to be in accordance with the Code.

In determining the Fair Market Value of a share of Stock in connection with the issuance of an ISO, the Fair Market Value shall be determined without regard to any restriction, other than a restriction that, by its terms, will never lapse.

(L)

“ISO” means an Option (or portion thereof) intended to qualify as an “incentive stock option” within the meaning of section 422 of the Code, or any successor provision.

(M)

“NQSO” means an Option (or portion thereof) that is not intended to, or does not, qualify as an “incentive stock option” within the meaning of section 422 of the Code, or any successor provision.

(N)

“Option” means the right of a Participant to purchase shares of Stock in accordance with the terms of this Plan and the Stock Option Agreement between such Participant and the Bank.

(O)

“Parent” means a parent corporation, if any, with respect to the Bank, as defined in section 424(e) of the Code and regulations promulgated or rulings issued thereunder.

(P)

“Participant” means any person to whom an Option has been granted pursuant to this Plan and who is a party to a Stock Option Agreement.

(Q)

“Stock” means the common stock of the Bank, par value $1.00 per share.

(R)

“Stock Option Agreement” means an agreement by and between a Participant and the Bank setting forth the specific terms and conditions which Stock may be purchased by such Participant pursuant to the exercise of an Option.  Such Stock Option Agreement shall be subject to the provisions of this Plan (which shall be incorporated by reference therein) and shall contain such provisions as the Board of Directors, in its sole discretion, may authorize.

(S)

“Subsidiary” means a subsidiary corporation of the Bank, as defined in Section 424(f) of the Code and regulations promulgated or rulings issued thereunder.

(T)

“Termination Date” means the date on which the Participant ceased to be an employee of the Bank or any Affiliate; provided however, that with respect to an ISO, it means the date on which the Participant ceased to be an employee of the Bank or any Parent or Subsidiary.

3.

SHARES AVAILABLE UNDER THE PLAN

(A)

Shares Subject to the Plan.  Subject to adjustment in accordance with the provisions of this Section , the total number of shares of Stock as to which Options may be granted shall be 360,000  

3

shares, all of which may be awardable as ISOs.  Stock issued under the Plan may be either authorized but unissued shares or shares that have been reacquired by the Bank.  Any shares issued by the Bank in connection with the assumption or substitution of outstanding grants from any acquired corporation shall not reduce the shares of Stock available for Options under the Plan.

(B)

Forfeited Awards.  In the event that any outstanding Option under the Plan for any reason expires unexercised, is forfeited or is terminated prior to the end of the period during which Options may be issued under the Plan, the shares of Stock allocable to the unexercised portion of such Option that has expired, been forfeited or been terminated shall become available for future issuance under the Plan.  

(C)

Shares Used to Pay Exercise Price and Taxes.  Shares of Stock delivered to the Bank to pay the Exercise Price of any Option or to satisfy the Participant’s income tax withholding obligation shall become available for future issuance under the Plan.

(D)

Adjustments on Changes in Stock.  In the event of any change in the outstanding shares of Stock by reason of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, reverse stock split, spinoff, combination or exchange of shares or other corporate change, the Committee, in its sole discretion, may make such substitution or adjustment, if any, as it deems to be equitable or appropriate, as to: (i) the maximum number of shares of Stock that may be issued under the Plan as set forth in Section ; (ii) the number or kind of shares subject to an Option; (iii) subject to the limitation contained in Section , the Exercise Price applicable to an Option; (iv) any measure of performance that relates to an Option in order to reflect such change in the Stock and/or (v) any other affected terms of any Option; provided however, that no adjustment shall occur with respect to an ISO unless: (y) the excess of the aggregate Fair Market Value of the shares of Stock subject to the ISO immediately after any such adjustment over the aggregate Exercise Price of such shares is not more than the excess of the aggregate Fair Market Value of all shares subject to the ISO immediately prior to such adjustment over the Exercise Price of all shares subject to the ISO; and (z) the new or adjusted ISO does not grant the Participant additional benefits that the Participant did not previously have.

4.

ADMINISTRATION

(A)

Procedure.  The Plan shall be administered, construed and interpreted by the Committee, as such Committee is from time to time constituted, or any successor committee the Board of Directors may designate to administer the Plan.  The Committee may delegate any of its powers and duties to appropriate officer(s) of the Bank in accordance with guidelines established by the Committee from time to time.

(B)

Powers of the Committee.  Subject to the other provisions of the Plan, the Committee shall have all powers vested in it by the terms of the Plan as set forth herein, such powers to include exclusive authority (except as may be delegated as permitted herein): (i) to select those persons to be granted Options under the Plan; (ii) to determine the type, size and terms of the Option to be granted to each individual selected; (iii) to modify the terms of any Option that has been granted; (iv) to determine the time when Options will be granted; (v) to establish performance objectives; (vi) to determine the Fair Market Value of the Stock under Section ; (vii) to interpret the Plan and decide any questions and settle all controversies or disputes that may arise in connection with the Plan; (viii) to adopt, amend and rescind rules and regulations relating to the Plan; (ix) to prescribe the form or forms of instruments evidencing Options and any other instruments required under the Plan and to change such forms, in its sole and absolute discretion, from time to time; (x) to accelerate or defer (with the consent of the Participant) the vesting period or exercise date of any Option; (xi) to authorize any person to execute on behalf of the Bank any instrument required to effectuate the grant of an Option previously granted by the Committee; and (xii) to make all other determinations and perform all other acts necessary or advisable 

4

for the administration of the Plan. The Committee (or its delegate as permitted herein) may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Option in the manner and to the extent that it shall deem desirable to carry the Plan or any Option into effect.

(C)

Effect of Decision of the Committee and Board of Directors.  All decisions, determinations, actions and interpretations of the Committee (or its delegate as permitted herein) or the Board of Directors (or its delegate as permitted herein) in the administration of the Plan shall lie with the Committee and the Board of Directors, respectively, within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned; provided that the Committee or the Board of Directors, as applicable, may, in its sole and absolute discretion, overrule an action, decision, determination or interpretation of a person to whom it has delegated authority.

(D)

Liability of Board of Directors or the Committee.  No member of the Board of Directors or Committee or any officer of the Bank shall be liable for anything done or omitted to be done by him, by any other member of the Board of Directors or Committee or any officer of the Bank in connection with the performance of duties under the Plan, except for his own willful misconduct or as expressly provided by statute.  The members of the Board of Directors and Committee and officers of the Bank shall be entitled to indemnification in connection with the performance of their respective duties under the Plan to the extent provided in the articles of incorporation or bylaws of the Bank or otherwise by law.

5.

ELIGIBILITY

Consistent with the purposes of the Plan, the Committee shall have the power (except as may be delegated as permitted herein) to select the employees and other individuals performing services for the Bank and its Affiliates who may participate in the Plan and be granted Options under the Plan.  No person who is not an employee of the Bank or a Parent or a Subsidiary shall be eligible to receive an ISO award under the Plan.  For purposes of this Plan, the term “employee” means an individual employed by the Bank or a Subsidiary whose income from those entities is subject to Federal Income Contributions Act (“FICA”) withholding.  

6.

TERMS AND CONDITIONS APPLICABLE TO OPTIONS UNDER THE PLAN

Options granted pursuant to the Plan shall be evidenced by Stock Option Agreements in such form as the Board of Directors shall, from time to time, approve, which agreements shall in substance include or incorporate, comply with and be subject to the following terms and conditions (except as necessary to conform to the requirements of law, including the laws of the jurisdiction where the Participant resides):

(A)

Medium and Time of Payment.  The Exercise Price shall be paid in full at the time the Option is exercised.  The Exercise Price shall be payable either in (i) United States dollars in cash or by check, bank draft, money order or wire transfer of good funds payable to the Bank; (ii) upon conditions established by the Committee, by delivery of shares of Stock owned by the Participant for at least six (6) months prior to the date of exercise; or (iii) by a combination of (i) and (ii); provided, however, that clauses (ii) and (iii) shall not become operable until the third anniversary of the date that the Bank opens for business.  A Brokered Assisted Exercise shall be deemed to be an exercise for cash under clause (i) of the preceding sentence.

(B)

Number of Shares. The total number of shares to which each Option pertains shall be designated in the Stock Option Agreement at the time of grant.

5

(C)

Designation of Option.  Each Option shall be designated in the Stock Option Agreement as either an ISO or a NQSO and, in the absence of such designation, shall be deemed to be a NQSO.  In the event that a person is granted concurrently an ISO and a NSQO, such Options shall be evidenced by separate Stock Option Agreements.  However, notwithstanding such designations, to the extent that (i) the aggregate Fair Market Value (determined as of the time of grant) of the Stock with respect to which Options designated as ISOs are exercisable for the first time by any employee during any calendar year (under all plans of the Bank and any Subsidiary) exceeds $100,000, or (ii) an ISO does not meet any other requirement to be an “incentive stock option” within the meaning of section 422 of the Code, such Options, or portions thereof, shall be treated as NQSOs.  For purposes of this section, Options shall be taken into account in the order in which they were granted.

(D)

Exercise Price.  The Exercise Price per share of Stock under an Option shall be determined by the Committee in its sole discretion; provided however that the Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value on the date that such Option is granted and, in the case of an ISO granted to a Controlling Participant, the Exercise Price shall be not less than one hundred ten percent (110%) of the Fair Market Value on the date that such Option is granted.

(E)

Option Term.  The term of an Option shall be fixed by the Committee, in its sole discretion, in each Stock Option Agreement; provided however that for any Option to qualify as an ISO, the Option shall expire not more than ten years from the date the Option is granted and, in the case of a Controlling Participant, not more than five years from the date the Option is granted; provided, further, that no option issued prior to the third anniversary of the date that the Bank opens for business shall expire more than ten years from the date the Option is granted.  

(F)

Exercise of Options.  Subject to the provisions of this Plan and the applicable Stock Option Agreement, an Option may be exercised at any time during the term of the Option.  An Option shall be deemed exercised when (i) written notice of such exercise, in the form prescribed by the Committee, has been received by the Bank in accordance with the terms of the Option by the person entitled to exercise the Option and (ii) full payment for the Stock with respect to which the Option is exercised has been received by the Bank in accordance with Section  and the Stock Option Agreement.  The written notice shall include the number of shares to be exercised by the Participant.  Except as otherwise expressly provided in writing by the Board of Directors, an Option may not be exercised for a fractional share of Stock.    

(G)

Stock Certificates.  Promptly upon exercise of an Option, the Bank shall issue (or cause to be issued) certificates evidencing the shares of Stock acquired as a result of the exercise of the Option.  In the event that the exercise of an Option is treated in part as the exercise of an ISO and in part as the exercise of a NQSO pursuant to Section  hereof, the Bank shall issue a certificate evidencing the shares of Stock treated as acquired upon the exercise of an ISO and a separate certificate evidencing the shares of Stock treated as acquired upon the exercise of a NQSO, and shall identify each such certificate accordingly in its stock transfer records.

All certificates for shares of Stock delivered under the Plan pursuant to any Option shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission (as the same may be applied by the Federal Deposit Insurance Corporation), any stock exchange upon which the Stock is then listed, and any applicable federal or state securities laws or regulations, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6

(H)

Date of Exercise.  The Committee may, in its sole discretion, provide that an Option may not be exercised in whole or in part for any period or periods of time specified by the Committee; provided however, that any Options granted under the Plan during the first three years of the Bank’s existence must vest over a minimum of three years.  Except as may be so provided, any Option may be exercised in whole at any time, or in part from time to time, during its term.  In the case of an Option not immediately exercisable in full, the Committee may at any time accelerate the time at which all or any part of the Option may be exercised.

(I)

Termination of Service.  The Committee may determine, at the time of grant, for each Option the extent to which the Participant (or his legal representative) shall have the right to exercise the Option following termination of such Participant’s service to the Bank, any Subsidiary or any Affiliate.  Such provisions may reflect distinctions based on the reasons for the termination of service and any other relevant factors that the Committee may determine.  In the absence of such standards, any Option granted to an employee pursuant to the Plan that has not vested prior to the Termination Date shall expire immediately upon the Termination Date, and any Option granted to an employee pursuant to the Plan that has vested prior to the Termination Date shall expire three (3) months following the Termination Date; provided however that if the cessation of Participant’s service is due to his death or disability (as defined in section 22(e)(3) of the Code), such Option shall expire one year from the Termination Date.

(J)

Transferability.  Except as otherwise permitted by the Committee, Options shall be nontransferable other than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant (or in the event of his disability (as defined in section 22(e)(3) of the Code), by his guardian or legal representative) and after his death, only by the Participant’s legal representatives, heirs, legatees, or distributees.  

(K)

No Rights as a Participant.  No person shall, with respect to any Option, be deemed to have become a Participant, or to have any rights with respect to such Option, unless and until such person shall have executed a Stock Option Agreement or other instrument evidencing the Option and delivered a copy thereof to the Bank, and otherwise complied with the then applicable terms and conditions. 

(L)

No Rights as a Shareholder.  Notwithstanding the exercise of an Option, a Participant shall have no rights as a shareholder with respect to shares covered by an Option until the date the certificates evidencing the shares of Stock are issued (as evidenced by the appropriate entry on the books of the Bank or of a duly authorized transfer agent of the Bank).  No adjustment will be made for dividends or other rights the record date for which is prior to the date of issuance.  Upon issuance of the certificates evidencing the shares of Stock acquired upon exercise of an Option, such shares of Stock shall be deemed to be transferred for purposes of section 421 of the Code and the regulations promulgated thereunder.

(M)

Tax Withholding.  As a condition to the exercise of any Option, the Bank shall have the right to require that the Participant exercising the Option (or the recipient of any shares of Stock) remit to the Bank an amount calculated by the Bank to be sufficient to satisfy applicable federal, state, foreign or local withholding tax requirements (or make other arrangements satisfactory to the Bank with regard to such taxes) prior to the delivery of any certificate evidencing shares of Stock.  If permitted by the Bank, either at the time of the grant of the Option or in connection with its exercise, the Participant may satisfy applicable withholding tax requirements by delivering a number of whole shares of Stock owned by the Participant for at least six (6) months prior to the date of exercise and having a Fair Market Value (determined on the date that the amount of tax to be withheld is to be fixed) at least equal to the aggregate amount required to be withheld; provided however, that this sentence shall not become operable until the third anniversary of the date that the Bank opens for business.

7

In the case of an ISO, the Committee may require as a condition of exercise that the Participant exercising the Option agree to inform the Bank promptly of any disposition (within the meaning of section 424(c) of the Code and the regulations thereunder) of Stock received upon exercise.

(N)

Change of Control.  Notwithstanding any provision of this Plan or any Stock Option Agreement to the contrary, unless the Committee shall determine otherwise at the time of grant with respect to a particular Option, all Options outstanding as of the date of a Change of Control or an agreement to effect a Change of Control, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided however, that this sentence shall not become operable until the third anniversary of the date that the Bank opens for business and, prior to that time, acceleration upon a Change of Control shall be determined solely by the terms of the Stock Option Agreement.  The determination as to whether a Change in Control or an agreement to effect a Change of Control has occurred shall be made by the Committee and shall be conclusive and binding.

(O)

Additional Restrictions and Conditions.  The Committee may impose such other restrictions and conditions (in addition to those required by the provisions of this Plan) on any Option granted hereunder and may waive any such additional restrictions and conditions, so long as (i) any such additional restrictions and conditions are consistent with the terms of this Plan and (ii) such waiver does not waive any restriction or condition required by the provisions of this Plan.

(P)

Repricing.  The Committee shall not, without the further approval of the Board of Directors, (i) authorize the amendment of any outstanding Option to reduce the Exercise Price of such Option or (ii) grant a replacement Option upon the surrender and cancellation of a previously granted Option for the purpose of reducing the Exercise Price of such Option.  Nothing contained in this section shall affect the right of the Board of Directors or the Committee to make the adjustment permitted under Section .

7.

AMENDMENT AND TERMINATION OF THE PLAN

The Committee may amend, alter, suspend, or terminate the Plan or any portion hereof at any time; provided that no such amendment, alteration, suspension or termination shall be made without the approval of the shareholders of the Bank if such approval is necessary to qualify for or comply with any tax or regulatory requirement for which or with which the Board of Directors deems it necessary or desirable to qualify or comply.  No amendment, suspension or termination of the Plan shall adversely affect the right of any Participant with respect to any Option theretofore granted, as determined by the Committee, without such Participant’s written consent.

Unless earlier terminated, the Plan shall remain in effect until all shares issuable under the Plan have been purchased or acquired in accordance with the Plan.  In no event may any Options be granted under the Plan more than ten (10) years after the earlier of the date on which the Plan is adopted or the date on which the Plan is approved by the shareholders of the Bank.  Such termination by lapse of time shall not effect the validity or terms of any Option then outstanding or the ability of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Option or to waive any conditions or rights under any such Option for so long as the Option is outstanding.

8.

LEGALITY OF GRANT

The granting of Options under this Plan and the issuance or transfer of Options and shares of Stock pursuant hereto are subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or government agency (including, without limitation, no-action positions of the Securities and Exchange Commission) which may, in the opinion of counsel for the Bank, be 

8

necessary or advisable in connection therewith. Without limiting the generality of the foregoing, no Options may be granted under this Plan and no Options or shares shall be issued by the Bank unless and until in any such case all legal requirements applicable to the issuance or payment have, in the opinion of counsel for the Bank, been complied with.  In connection with any Option or Stock issuance or transfer, the person acquiring the shares or the Option shall, if requested by the Bank, give assurance satisfactory to counsel to the Bank with respect to such matters as the Bank may deem desirable to assure compliance with all applicable legal requirements.

9.

NO EMPLOYMENT/SERVICE RIGHTS

Nothing in this Plan or any Stock Option Agreement shall confer upon any person the right to participate in the benefits of the Plan or to be granted an Option, and there shall be no obligation to provide uniformity of treatment in connection with the administration of this Plan.  The terms and conditions of Options or Stock Option Agreements need not be the same with respect to each Participant.

Nothing in this Plan or any Stock Option Agreement shall be construed as constituting a commitment, guarantee, agreement or understanding of any kind or nature that the Bank or any Affiliate shall continue to employ, retain or engage any individual (whether or not a Participant).  Neither this Plan nor any Stock Option Agreement executed in accordance with this Plan shall affect in any way the right of the Bank or any Affiliate to terminate the employment or engagement of any individual (whether or not a Participant) at any time and for any reason whatsoever and to remove any individual (whether or not a Participant) from any position with the Bank or any Affiliate.  No change of a Participant’s duties with the Bank or any Affiliate shall result in a modification of any rights of such Participant under this Plan or any Stock Option Agreement executed by such Participant. 

10.

EFFECTIVE DATE

This Plan shall become effective upon its approval by the Board of Directors; provided however that no grant of an Option under this Plan shall qualify as an ISO unless, within one year of the date the Plan becomes effective, the Plan is approved by the affirmative vote of a majority of the shareholders of the Bank present, in person or by proxy, at a meeting of the shareholders of the Bank.  The Committee may grant ISOs subject to the condition that this Plan shall have been approved by the shareholders of the Bank as provided herein.  

11.

RESERVATION OF SHARES

The Bank, during the term of this Plan, shall at all times reserve and keep available such number of shares of Stock as shall be sufficient to satisfy the requirements of the Plan.

12.

MINIMUM CAPITAL REQUIREMENTS

Notwithstanding any provision of this Plan or any Stock Option Agreement to the contrary, all Options granted under the Plan shall expire, to the extent not exercised, within 45 days following the receipt of notice from the Bank’s primary federal regulator (“Regulator”) that (i) the Bank has not maintained its minimum capital requirements (as determined by the Regulator); and (ii) the Regulator is requiring termination or forfeiture of options.  Upon receipt of such notice from the Regulator, the Bank shall promptly notify each Participant that all Options issued under this Plan have become fully exercisable and vested to the full extent of the grant and that the Participant must exercise the Option(s) granted to him prior to the end of the 45-day period or such earlier period as may be specified by the Regulator or forfeit such Option.  In case of forfeiture, no Participant shall have a cause of action, of any kind or nature, with respect to the forfeiture against the Bank or any Affiliate.  Neither the Bank nor any 

9

Affiliate shall be liable to any Participant due to the failure or inability of the Bank or any Affiliate to provide adequate notice to the Participant.

13.

ADMINISTRATION OF PLAN

Notwithstanding any other provision herein to the contrary, this Plan shall be administered in accordance with the provisions of the Federal Deposit Insurance Corporation’s Statement of Policy on Applications for Deposit Insurance as such policy relates to stock benefit plans.

14.

GENERAL

(A)

Burden and Benefit.  The terms and provisions of this Plan and the Options issued hereunder shall be binding upon, and shall inure to the benefit of, the Bank and each Participant and any permitted successors and assigns.

(B)

Interpretation.  When a reference is made in this Plan to a Section, such reference will be to a Section of this Plan unless otherwise indicated.  The headings contained in this Plan are for convenience of reference only and will not affect in any way the meaning or interpretation of this Plan or any Option.  Whenever the words “include,” “includes” or “including” are used in this Plan, they will be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Plan will refer to this Plan as a whole and not to any particular provision in this Plan.  Each use herein of the masculine, neuter or feminine gender will be deemed to include the other genders.  Each use herein of the plural will include the singular and vice versa, in each case as the context requires or as is otherwise appropriate.  The word “or” is used in the inclusive sense.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a person are also to its permitted successors or assigns.  No provision of this Plan is to be construed to require, directly or indirectly, any person to take any action, or omit to take any action, which action or omission would violate applicable law (whether statutory or common law), rule or regulation.

(C)

Costs and Expenses.  All costs and expenses with respect to the adoption, implementation and administration of this Plan shall be borne by the Bank; provided however that, except as otherwise specifically provided in this Plan or the applicable Stock Option Agreement between the Bank and a Participant, the Bank shall not be obligated to pay any costs or expenses (including legal fees) incurred by any Participant in connection with any Stock Option Agreement, this Plan or any Option or Stock held by any Participant.

(D)

Unfunded Status of Plan.  The Plan is intended to constitute an “unfunded” plan for long-term incentive compensation.  Neither the Plan nor any Option shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Bank or any Affiliate and a Participant or any other person.  Nothing contained herein shall be construed to give any Participant any rights with respect to any Option, unexercised or exercised, or any other matters under this Plan that are greater than those of a general unsecured creditor of the Bank.

(E)

Governing Law.  The validity, construction and effect of the Plan, any rules and regulations relating to the Plan and any Option granted hereunder shall be determined in accordance with the laws of the State of Wisconsin, without reference to the laws that might otherwise govern under applicable principles of conflicts of law. 

10

(F)

Severability.  If any term or other provision of this Plan or any Stock Option Agreement is held to be illegal, invalid or unenforceable by any rule of law or public policy, such term or provision shall be fully severable and this Plan or the Stock Option Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were not a part hereof, and all other conditions and provisions shall remain in full force and effect.  Upon such determination that any term or other provision is invalid, illegal or unenforceable, there shall be added automatically as a part of this Plan or the Stock Option Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and still be legal, valid and enforceable.  If any provision of this Plan or any Stock Option Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

(G)

Certain Conflicts.  In the event of an irreconcilable conflict between the terms of the Plan and any Stock Option Agreement, the terms of the Plan shall prevail.

(H)

Notices.  Any notice or other communication required or permitted to be made hereunder or by reason of the provisions of this Plan or any Stock Option Agreement shall be in writing, duly signed by the party giving such notice or communication and shall be deemed to have been properly delivered if delivered personally or by a recognized overnight courier service, or sent by first-class certified or registered mail, postage prepaid, as follows (or at such other address for a party as shall be specified by like notice): (i) if given to the Bank, at its principal place of business, and (ii) if to a Participant, as provided in his Stock Option Agreement.  Any notice properly given hereunder shall be effective on the date on which it is actually received by the party to whom it was addressed.  

IN WITNESS WHEREOF, the Bank, acting by and through its duly authorized officer, has executed this Plan on this the 24th day of July, 2006.

CHOICE BANK,

a Wisconsin state bank

By:                                                                                

       Rodney R. Oilschlager, Chairman of the Board

By:                                                                                  

       Arend A. Stam, Corporate Governance Committee

11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00198-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00198-of-00352.parquet"}]]