TRUST AGREEMENT Establishing the M.D.C. HOLDINGS, INC. 401(K) SAVINGS PLAN TRUST by and between M.D.C. HOLDINGS, INC. and CG Trust Company TABLE OF CONTENTS PAGE ---- Section 1 Establishment of Trust 1 Section 2 General Duties of the Employer; Indemnification 1 Section 3 General Duties of Trustee 2 Section 4 Power and Duties of Trustee with Respect to Trust Fund 3 Section 5 Payment of Taxes 3 Section 6 Disbursement of Trust Funds 4 Section 7 Expenses and Compensation of Trustee 4 Section 8 Expense of the Plan and Trust Fund 4 Section 9 Accounts of Trustee 4 Section 10 Resignation, Removal and Substitution of Trustee 5 Section 11 Amendment and Termination of Trust 5 Section 12 Miscellaneous Provisions 6 Exhibit A Schedule of Trust Assets 8 THIS TRUST AGREEMENT, by and between M.D.C. Holdings, Inc., (hereinafter called the "Employer"), and CG TRUST COMPANY, a trust company organized under the laws of the State of Illinois with its principal office and place of business in the City of Chicago, Illinois (hereinafter called the "Trustee"). WITNESSETH: WHEREAS, the Employer has established or adopted for its eligible employees the M.D.C. Holdings, Inc. 401(k) Savings Plan (hereinafter called the "Plan") and serves as the Plan administrator and named fiduciary; and WHEREAS, the Employer desires the Trustee to hold Plan funds and the Trustee is willing to hold such funds pursuant to the terms of this Trust Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto do hereby mutually declare and agree as follows: Section 1: ESTABLISHMENT OF TRUST. (a) In order to carry out the purposes of the Plan, the Employer hereby creates and establishes a trust to be known as the M.D.C. Holdings, Inc. 401(k) Savings Plan Trust (hereinafter called the "Trust" or "Trust Fund"). The Trustee accepts this Trust and agrees to act as Trustee hereunder, but only on the terms and conditions set forth in this Trust Agreement. Subject to the terms and conditions of this Trust Agreement, all right, title and interest in and to the estate of the Trust Fund shall be vested exclusively in the Trustee. This Trust shall be effective on October 1, 1993 or, if later, the date executed on behalf of the Trustee. (b) The Trust Fund shall include only those assets which the Trustee accepts and which are identified on Exhibit A. Only assets actually received by the Trustee will become part of the Trust Fund. The Employer acknowledges and agrees that it is responsible for effectuating the transfer of any assets held by a prior trustee or custodian to the Trustee. All assets so received, together with the income therefrom and any other increment thereon, shall be held by the Trustee pursuant to the terms of this Trust Agreement without distinction between principal and income and without liability for the payment of interest thereon. Section 2: GENERAL DUTIES OF THE EMPLOYER; INDEMNIFICATION. (a) The Employer shall control and manage the operation of the Plan. The Employer shall be responsible for determining benefit rights under the Plan, instructing the Trustee in the disbursement of benefits, investment management, soliciting stock voting instructions from participants, directing the Trustee in voting proxies and performing those plan administration functions specified in the Plan. (b) The Employer shall act as custodian with respect to promissory notes, mortgages and related documents given in connection with Plan loans, if any, and the Employer shall hold in safekeeping all such promissory notes, mortgages and related documents. 1 (c) The Trustee shall be fully protected and shall incur no liability in acting in reliance upon the instructions or directions of the Employer, or any delegate of the Employer. In addition, the Trustee shall be entitled to rely on directions given by a Plan participant, where the Plan provisions permit such direction. The participant shall be regarded as the delegate of the Employer for purposes of this Agreement and any reference herein to directions or instructions from the Employer shall include directions or instructions from any delegate of the Employer including Plan participants. (d) The Employer shall indemnify and hold harmless the Trustee from and against any and all claims, losses, damages, expenses (including reasonable counsel fees) and liability to which the Trustee may be subject by reason of any act done or omitted to be done, except where the same is finally adjudicated to be due to the gross negligence or willful misconduct of the Trustee. (e) In addition to and in no way in limitation of the indemnification of paragraph (d), the Employer hereby agrees to indemnify and hold harmless the Trustee from and against any claims, losses, damages, expenses (including reasonable counsel fees) and liability to which the Trustee may be subject by reason of any act or omission of any prior, subsequent or existing trustee of the Plan. Section 3: GENERAL DUTIES OF TRUSTEE. (a) The Trustee shall receive, hold, manage, invest and reinvest the Trust Fund pursuant to the provisions of this Section and Section 4 in accordance with the directions of the Employer. The Trustee shall take no action except pursuant to directions received by it from the Employer, and shall have no duty to determine any facts or the propriety of any action taken or omitted by it in good faith pursuant to instructions from such persons. (b) The Trustee shall be responsible only for such assets as are actually received by it as Trustee hereunder. The Trustee shall have no duty or authority to ascertain whether any contributions should be made to it pursuant to the Plan or to bring any action to enforce any obligation to make any such contribution, nor shall it have any responsibility concerning the amount of any contribution or the application of the Plan's contribution formula. (c) The duties and obligations of the Trustee hereunder shall be limited to those expressly imposed upon it by this Trust Agreement notwithstanding any reference herein to the Plan, and no further duties or obligations of the Trustee, such as a duty to value Plan investments, determine the prudence of any Plan investment, or diversify Plan investments, shall be implied. The Trustee shall not be liable in discharging its duties hereunder if it acts in good faith and in accordance with the terms of this Trust Agreement and in accordance with applicable Federal or state laws, rules and regulations. 2 Section 4: POWER AND DUTIES OF TRUSTEE WITH RESPECT TO TRUST FUND. The Trustee shall have the following powers and duties regarding the Trust Fund: (a) To hold title to the assets of the Trust Fund, which may include entering into depository arrangements for the safekeeping of records relevant to the ownership of such assets with any bank or banks as the Trustee may choose. Without limiting the generality of the foregoing, the Employer specifically directs the Trustee to appoint, and the Trustee hereby appoints the Employer to act as custodian with respect to promissory notes, mortgages and related documents given in connection with Plan loans, if any. (b) To invest the assets of the Trust Fund in such investment vehicles as directed by the Employer, including Plan loans made to participants, and annuity or insurance contracts issued by affiliates of the Trustee, in accordance with directions received from the Employer, and to agree to amendments to such annuity or insurance contracts, as directed by the Employer. The Trust Fund may also include qualifying Employer securities as defined by the Employee Retirement Income Security Act of 1974 as amended from time to time. However, in no event shall the Employer direct the Trustee to purchase Employer securities if the fair market value of all qualifying Employer securities exceeds 100% of the fair market value of all Plan assets. The Trustee shall have no duty or responsibility to determine the appropriateness of any plan investment, or to cause such investments to be changed. Notwithstanding any other provision of this Agreement, all notices, proposed contract amendments, rate or fee changes or other communications regarding all group annuity contracts that are assets of the Plan, including any group annuity contract issued by Connecticut General Life Insurance Company, will be sent directly by the issuer of the contract to the Employer or forwarded by the Trustee to the Employer, and the Trustee shall act on behalf of the Plan with respect to any such notice, proposed amendment, change or other communication only in accordance with the written direction of the Employer. Any rights of a contractholder under any such group annuity contract to discontinue, amend or otherwise modify the contract shall be exercised only upon the specific written direction of the Employer to the issuer of the contract or by the Trustee at the Employer's specific written direction. (c) To make transfers among investment vehicles or disbursements from the Trust Fund as directed by the Employer or, if applicable, Plan participants. The Trustee shall be entitled to rely on such direction, and shall have no responsibility to ascertain whether the Plan permits such a transfer or disbursement. (d) To delegate to third parties, including affiliates of the Trustee, any or all of its duties hereunder, including recordkeeping and reporting. Also, the Trustee may utilize the services of outside custodians to hold on the Trustee's behalf any Plan assets invested in securities. (e) To vote securities proxies as directed by the Employer. (f) To review proposed Plan amendment(s) for the sole purpose of determining whether such amendment(s) is consistent with and thus, acceptable, under the terms of this Trust Agreement. All Plan amendment(s) must be mutually agreed to in writing by the Trustee, or a delegate of the Trustee, and the Employer. In the event a proposed Plan amendment(s) is not received by the Trustee or mutually agreed upon by the parties and there is a conflict between such amendment(s) and this Trust Agreement, this Trust Agreement shall 3 prevail. Section 5: PAYMENT OF TAXES. The Trustee shall pay out of the Trust Fund income taxes and other taxes of any and all kinds levied or assessed under existing or future laws against the Trust Fund, or against any person with an interest in the Trust Fund. Section 6: DISBURSEMENT OF TRUST FUNDS. (a) Upon receipt of written direction of the Employer, the Trustee shall make payments from the Trust Fund to such persons or direct Connecticut General Life Insurance Company to make such payments from an annuity contract listed on Exhibit A, in such manner and in such amounts as the Employer shall direct in writing, and amounts paid pursuant to such direction shall no longer constitute a part of the Trust Fund. Notwithstanding the foregoing, the Employer expressly reserves the right to provide direction directly to Connecticut General Life Insurance Company regarding payments of Plan benefits or other disbursements. (b) At no time prior to the satisfaction of all liabilities with respect to participants and beneficiaries under this Trust shall any part of the corpus or income of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of plan participants or beneficiaries. Except as provided in the Plan, the assets of the Trust Fund shall never inure to the benefit of the Employer and shall be held for the exclusive purpose of providing benefits to participants in the Plan and their beneficiaries, and defraying reasonable expenses of administering the Plan. Section 7: EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall be compensated in accordance with the fee schedule provided to the Employer. In addition the Trustee shall be paid its reasonable expenses, including reasonable expenses of counsel and other agents employed by the Trustee, incurred in conjunction with the administration of the Trust Fund. If the Trustee proposes an amended fee schedule and the Employer fails to object thereto within ninety (90) days of its receipt, the amended fee schedule shall be deemed accepted by the Employer. Section 8: EXPENSES OF THE PLAN AND TRUST FUND. The Employer shall pay, or, if not paid by the Employer and the Plan so permits, the Employer shall direct the Trustee to pay from the Trust Fund, the reasonable expenses relating to the Plan and Trust Fund. Such expenses shall include, without limitation, actuarial, investment management, accounting, legal and Trust expenses. Section 9: ACCOUNTS OF THE TRUSTEE. The Trustee has accepted this Trust on the condition that the Employer has entered or is entering into a service agreement with Connecticut General Life Insurance Company whereby Connecticut General Life Insurance Company will provide recordkeeping services for all Plan assets held pursuant to this Trust Agreement. The Trustee shall be required to forward to the Employer, or require Connecticut General Life Insurance Company to forward to the Employer, the recordkeeping reports and related financial information provided by Connecticut General Life Insurance Company, but 4 the Trustee shall not otherwise be required to provide Trust accounts. 5 Section 10: RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE. (a) The Trustee may resign at any time by giving at least 30 days' written notice to the Employer (unless the Employer deems notice of a shorter duration to be adequate). The Employer may remove the Trustee at any time by giving at least 30 days' written notice to the Trustee (unless the Trustee deems notice of a shorter duration to be adequate). (b) The Trustee's service pursuant to this Agreement is conditioned upon the existence of one or more contracts between the Employer or the Plan (or the Trustee on behalf of the Employer or the Plan) and Connecticut General Life Insurance Company providing a funding medium for the Plan and providing for full Plan recordkeeping services. In the event the contract providing a funding medium or providing for recordkeeping services is discontinued or terminated, this Agreement shall be terminated as well with no further notice from either party to the other as of the date of discontinuance or termination of the contract providing a funding medium or providing for recordkeeping services. (c) Any successor trustee hereunder may be either a corporation authorized and empowered to exercise trust powers or may be one or more individuals. (d) Upon the appointment of a successor trustee, the resigning or removed Trustee shall execute, acknowledge and deliver all documents and written instruments necessary to transfer and deliver the Trust Fund and all rights and privileges therein to the successor trustee. Upon the appointment of a successor trustee, the resigning and removed Trustee shall be discharged from further accountability for the Trust Fund, and shall be under no further duty, obligation or responsibility for the disposition by such successor trustee of the Trust Fund or any part thereof. Section 11: AMENDMENT AND TERMINATION OF TRUST. (a) The Employer and the Trustee may mutually agree at any time to amend this Trust Agreement and the Trust created hereby to any extent deemed advisable. No amendment to this Trust Agreement shall be effective unless mutually agreed to in writing by the Employer and the Trustee; provided, however, that Trustee's fee schedule may be amended as provided in Section 7. (b) The Employer may at any time revoke this Trust Agreement and terminate the Trust hereby created. Such revocation and termination shall become effective upon receipt by the Trustee or its delegate of a written instrument of such revocation and termination executed by the Employer. Upon such termination, disposition of the assets of the Trust Fund shall be governed by the terms of the Plan; provided, however, that the Trustee shall not distribute any portion of the Trust Fund after such termination unless the Employer first obtains a determination from the Internal Revenue Service that such termination will not affect adversely the qualified status of the Plan and, if required, approval of the Pension Benefit Guaranty Corporation of such termination and distribution of assets. In lieu of an Internal Revenue Service determination, assets of the Trust Fund may be distributed if the Employer agrees in writing with the Trustee to indemnify the Trust Fund for any taxes or other penalties which may be assessed against it as a result of such termination or agrees to provide a bond to secure payment of any such taxes or penalties. 6 Section 12: MISCELLANEOUS PROVISIONS. (a) Trust Agreement and the Trust hereby created shall be governed, construed, administered and regulated in all respects under the law of the United States and the State of Illinois. (b) The titles of the Sections in this Trust Agreement are for convenience of reference only and in case of any conflict, the text of this instrument, rather than such titles, shall control. (c) In case any provisions of this Trust Agreement shall be held illegal or invalid for any reason, their illegality or invalidity shall not affect the remaining parts of this Trust Agreement, and this Trust Agreement shall be construed and enforced as if the illegal and invalid provisions had never been a part of the Trust Agreement. (d) This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed an original. The counterparts shall constitute one and the same instrument and may be sufficiently evidenced by any one counterpart. (e) This Trust Agreement shall be binding upon the respective successors and assigns of the Employer and the Trustee. (f) Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. (g) Communications to the Trustee shall be sent to the Trustee's principal offices or such addresss as the Trustee may specify in writing. No communication shall be binding upon the Trustee until it is received by the Trustee or its delegate. Communications to the Employer shall be sent to the Employer's principal offices or such address as the Employer may specify in writing. 7 IN WITNESS WHEREOF, this Trust Agreement has been executed on the dates indicated below. The persons executing this Trust Agreement represent that they are duly authorized to do so. Attest: Employer By - ------------------------------------- ------------------------------------ Its Date ---------------------------------- Attest: CG TRUST COMPANY By - ------------------------------------- ------------------------------------ Its Date ---------------------------------- 8 DCTRUST.AGR 9 EXHIBIT A SCHEDULE OF TRUST ASSETS 1. Group Annuity contract GA-36104, issued by Connecticut General Life Insurance Company. 2. Promissory notes given in connection with loans to Plan participants and beneficiaries. 3. M.D.C. Holdings, Inc. Common Stock. 10