EXHIBIT 10.1 FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF WARREN EMPLOYEE
STOCK OWNERSHIP PLAN
FORM OF
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WARREN
EMPLOYEE STOCK OWNERSHIP PLAN
EFFECTIVE___________, 199__
FORM OF
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WARREN
EMPLOYEE STOCK OWNERSHIP PLAN
CERTIFICATION
I, Steven R. Lewis, President and Chief Executive Officer of First Federal
Savings and Loan Association of Warren, a federally chartered savings and loan
association (the "Association"), hereby certify that the attached First Federal
Savings and Loan Association of Warren Employee Stock Ownership Plan, effective
________, 199__ was adopted at a duly held meeting of the Board of Directors of
the Association on [DATE].
ATTEST: FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WARREN
________________________ By: _____________________________________
Mary Ann Roberts Steven R. Lewis
Secretary President and Chief Executive Officer
DATE:_____________________________
C O N T E N T S
Section 1. Plan Identity...................................................... 1
-------------
1.1 Name.......................................................... 1
----
1.2 Purpose....................................................... 1
-------
1.3 Effective Date................................................ 1
--------------
1.4 Fiscal Period................................................. 1
-------------
1.5 Single Plan for All Employers................................. 1
-----------------------------
1.6 Interpretation of Provisions.................................. 1
----------------------------
Section 2. Definitions........................................................ 1
-----------
Section 3. Eligibility and Participation...................................... 9
-----------------------------
3.1 Initial Eligibility........................................... 9
-------------------
3.2 Terminated Employees.......................................... 9
---------------------
3.3 Certain Employees Ineligible.................................. 9
-----------------------------
3.4 Participation and Reparticipation............................. 9
---------------------------------
Section 4. Employer Contributions and Credits................................. 10
----------------------------------
4.1 Discretionary Contributions................................... 10
----------------------------
4.2 Contributions for Stock Obligations........................... 10
-----------------------------------
4.3 Definitions Related to Contributions.......................... 11
------------------------------------
4.4 Conditions as to Contributions................................ 11
------------------------------
Section 5. Limitations on Contributions and Allocations....................... 12
--------------------------------------------
5.1 Limitation on Annual Additions................................ 12
------------------------------
5.2 Coordinated Limitation With Other Plans....................... 12
---------------------------------------
5.3 Effect of Limitations......................................... 13
---------------------
5.4 Limitations as to Certain Section 1042 Transactions........... 14
---------------------------------------------------
Section 6. Trust Fund and Its Investment...................................... 16
-----------------------------
6.1 Creation of Trust Fund........................................ 16
----------------------
6.2 Stock Fund and Investment Fund................................ 16
------------------------------
6.3 Acquisition of Stock.......................................... 17
--------------------
6.4 Participants' Option to Diversify............................. 17
---------------------------------
Section 7. Voting Rights and Dividends on Stock............................... 18
------------------------------------
7.1 Voting and Tendering of Stock................................. 18
-----------------------------
7.2 Dividends on Stock............................................ 18
------------------
Section 8. Adjustments to Accounts............................................ 19
-----------------------
8.1 Adjustments for Transactions.................................. 19
----------------------------
8.2 Valuation of Investment Fund.................................. 19
----------------------------
8.3 Adjustments for Investment Experience......................... 19
-------------------------------------
8.4 Adjustments for Capital Changes............................... 19
-------------------------------
9.1 Deferred Vesting in Accounts.................................. 20
----------------------------
9.2 Computation of Vesting Years.................................. 20
----------------------------
9.3 Full Vesting Upon Certain Events.............................. 21
--------------------------------
9.4 Full Vesting Upon Plan Termination............................ 22
----------------------------------
9.5 Forfeiture, Repayment, and Restoration........................ 22
--------------------------------------
9.6 Accounting for Forfeitures.................................... 22
--------------------------
9.7 Vesting and Nonforfeitability................................. 22
-----------------------------
Section 10. Payment of Benefits................................................ 23
-------------------
10.1 Benefits for Participants.................................... 23
-------------------------
10.2 Benefits on a Participant's Death............................ 23
---------------------------------
10.3 Marital Status............................................... 24
--------------
10.4 Delay in Benefit Determination............................... 24
------------------------------
10.5 Accounting for Benefit Payments.............................. 24
-------------------------------
10.6 Options to Receive and Sell Stock............................ 24
---------------------------------
10.7 Restrictions on Disposition of Stock......................... 25
------------------------------------
10.8 Direct Transfer of Eligible Plan Distributions............... 26
----------------------------------------------
Section 11. Rules Governing Benefit Claims and Review of Appeals............... 26
----------------------------------------------------
11.1 Claim for Benefits........................................... 26
------------------
11.2 Notification by Committee.................................... 26
-------------------------
11.3 Claims Review Procedure...................................... 27
-----------------------
Section 12. The Committee and Its Functions.................................... 27
-------------------------------
12.1 Authority of Committee....................................... 27
----------------------
12.2 Identity of Committee........................................ 28
---------------------
12.3 Duties of Committee.......................................... 28
-------------------
12.4 Valuation of Stock........................................... 28
------------------
12.5 Compliance with ERISA........................................ 29
---------------------
12.6 Action by Committee.......................................... 29
-------------------
12.7 Execution of Documents....................................... 29
----------------------
12.8 Adoption of Rules............................................ 29
-----------------
12.9 Responsibilities to Participants............................. 29
--------------------------------
12.10 Alternative Payees in Event of Incapacity.................... 29
-----------------------------------------
12.11 Indemnification by Employers................................. 30
----------------------------
12.12 Nonparticipation by Interested Member........................ 30
-------------------------------------
Section 13. Adoption, Amendment, or Termination of the Plan.................... 30
-----------------------------------------------
13.1 Adoption of Plan by Other Employers.......................... 30
-----------------------------------
13.2 Adoption of Plan by Successor................................ 30
-----------------------------
13.3 Plan Adoption Subject to Qualification....................... 30
--------------------------------------
13.4 Right to Amend or Terminate.................................. 31
---------------------------
Section 14. Miscellaneous Provisions........................................... 31
------------------------
14.1 Plan Creates No Employment Rights............................ 31
---------------------------------
14.2 Nonassignability of Benefits................................. 31
----------------------------
14.3 Limit of Employer Liability.................................. 32
---------------------------
14.4 Treatment of Expenses........................................ 32
---------------------
14.5 Number and Gender............................................ 32
-----------------
14.6 Nondiversion of Assets....................................... 32
----------------------
14.7 Separability of Provisions................................... 32
--------------------------
14.8 Service of Process........................................... 32
------------------
14.9 Governing State Law.......................................... 32
-------------------
14.10 Special Rules for Persons Subject to Section 16(b)
--------------------------------------------------
Requirements................................................. 32
------------
Section 15. Top-Heavy Provisions............................................... 33
--------------------
15.1 Determination of Top-Heavy Status............................ 33
---------------------------------
15.2 Minimum Contributions........................................ 34
---------------------
15.3 Minimum Vesting.............................................. 35
---------------
FORM OF
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WARREN
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
--------------
1.1 Name. The name of this Plan is "First Federal Savings and Loan
----
Association of Warren Employee Stock Ownership Plan."
1.2 Purpose. The purpose of this Plan is to describe the terms and
--------
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is ________, 199__.
---------------
1.4 Fiscal Period. This Plan shall be operated on the basis of a January
--------------
1-December 31 fiscal year for the purposes of keeping the Plan's books and
records and distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a single
------------------------------
plan with respect to all participating Employers for the purpose of crediting
contributions and forfeitures and distributing benefits, determining whether
there has been any termination of Service, and applying the limitations set
forth in Section 5.
1.6 Interpretation of Provisions. The Employers intend this Plan and the
-----------------------------
Trust to be a qualified stock bonus plan under Section 401(a) of the Code and an
employee stock ownership plan within the meaning of Section 407(d)(6) of ERISA
and Section 4975(e)(7) of the Code. The Plan is intended to have its assets
invested primarily in qualifying employer securities of one or more Employers
within the meaning of Section 407(d)(5) of ERISA and Section 4975 (e)(8) of the
Code, and to satisfy any requirement under ERISA or the Code applicable to such
a plan. Accordingly, the Plan and Trust Agreement shall be interpreted and
applied in a manner consistent with this intent and shall be administered at all
times and in all respects in a nondiscriminatory manner.
Section 2. Definitions. The following capitalized words and phrases shall
------------
have the meanings specified when used in this Plan and in the Trust Agreement,
unless the context clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated under
this Plan, as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.
"Active Participant" means any Employee who has satisfied the eligibility
requirements of Section 3 and who qualifies as an Active Participant for a
particular Plan Year under Section 4.3.
"Association" means First Federal Savings and Loan Association of Warren,
and any entity which succeeds to the business of the Association and adopts this
Plan as its own pursuant to Section 13.2.
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation, or if all the designated
Beneficiaries shall die before the Participant dies or shall die before all
benefits have been paid, the Participant's Beneficiary shall be his surviving
Spouse, if any, or his estate if he is not survived by a Spouse. The Committee
may rely upon the advice of the Participant's executor or administrator as to
the identity of the Participant's Spouse.
"Break in Service" means any five or more consecutive 12-month periods
beginning January 1 in which an Employee has 500 or fewer Hours of Service per
period. Solely for this purpose, an Employee shall be considered employed for
his normal hours of paid employment during a Recognized Absence, unless he does
not resume his Service at the end of the Recognized Absence. Further, if an
Employee is absent for any period (i) by reason of the Employee's pregnancy,
(ii) by reason of the birth of the Employee's child, (iii) by reason of the
placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service, in the first 12-
month period which would otherwise be counted toward a Break in Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of this
Plan in accordance with Section 12.
"Disability" means a condition which renders the Participant totally and
permanently disabled due to sickness or injury, such disability is likely to be
continuous and permanent, and such disability renders the Participant unable to
continue a like gainful occupation. In any event, the Committee's good faith
decision as to whether a Participant's Service has been terminated by Disability
shall be final and conclusive.
"Early Retirement" means retirement on or after a Participant's (i)
attainment of age 60 or the total of a Participant's age, when added to the
Participant's years of service recognized for purposes of vested service under
the Association's defined benefit retirement plan, equals or exceeds 75 years,
and (ii) with regard to Participant's who were employed by the Employer on or
after September 11, 1972, the Participant's completion of ten consecutive years
of vesting service under the Association's defined benefit retirement plan.
"Effective Date" means _____________, 199_.
2
"Employee" means any individual who is or has been employed by the
Association. "Employee" also means an individual employed by a leasing
organization who, pursuant to an agreement between an Employer and the leasing
organization, has performed services for the Employer and any related persons
(within the meaning of Section 414(n)(6) of the Code) on a substantially full-
time basis for more than one year, if such services are of a type historically
performed by employees in the Employer's business field. However, such a
"leased employee" shall not be considered an Employee if (i) he participates in
a money purchase pension plan sponsored by the leasing organization which
provides for immediate participation, immediate full vesting, and an annual
contribution of at least 10 percent of the Employee's Total Compensation, and
(ii) leased employees do not constitute more than 20 percent of the Employer's
total work force (including leased employees, but excluding Highly Paid
Employees and any other employees who have not performed services for the
Employer on a substantially full-time basis for at least one year).
"Employer" means the Association or any affiliate within the purview of
Sections 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Association's
consent pursuant to Section 13.1, and any entity which succeeds to the business
of any Employer and adopts the Plan pursuant to Section 13.2.
"Entry Date" means January 1 and July 1.
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L. 93-
406, as amended).
"Highly Paid Employee" means an Employee who: (A) owned more than five
percent of the outstanding equity interest or the outstanding voting interest in
any Employer during the year or the preceding year, or (B) for the preceding
year (i) had Total Compensation exceeding $80,000 (as adjusted pursuant to
Section 415(d) of the Code), and, (ii) if the Employer elects with respect to a
preceding year, was among the most highly compensated one-fifth of all Employees
for such preceding year. For this purpose:
(a) "Total Compensation" shall include any amount which is excludable
from the Employee's gross income for tax purposes pursuant to Sections 125,
402(e)(3), 402(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated one-fifth
of all Employees" shall be determined by taking into account all
individuals working for all related employer entities described in the
definition of "Service", but excluding any individual who has not completed
six months of Service, who normally works fewer than 17-1/2 hours per week
or in fewer than six months per year, who has not reached age 21, whose
employment is covered by a collective bargaining agreement, or who is a
nonresident alien who receives no earned income from United States sources.
3
(c) A former Employee shall be treated as a highly compensated
employee if such Employee was a highly paid Employee when such Employee
separated from service, or if such Employee was a highly paid Employee at
any time after attaining age 55.
(d) The determination of who is a highly compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group and the compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations thereunder.
"Holding Company" means First Place Financial Corp., the holding company of
First Federal Savings and Loan Association of Warren, and any entity which
succeeds to the business of the Holding Company.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be paid
for services to an Employer is an Hour of Service.
(b) Each hour for which an Employee is directly or indirectly paid or
is entitled to be paid for a period of vacation, holidays, illness,
disability, lay-off, jury duty, temporary military duty, or leave of
absence is an Hour of Service. However, except as otherwise specifically
provided, no more than 501 Hours of Service shall be credited for any
single continuous period in which an Employee performs no duties. Further,
no Hours of Service shall be credited on account of payments made solely
under a plan maintained to comply with worker's compensation, unemployment
compensation, or disability insurance laws, or to reimburse an Employee for
medical expenses.
(c) Each hour for which back pay (ignoring any mitigation of damages)
is either awarded or agreed to by an Employer is an Hour of Service.
However, no more than 501 Hours of Service shall be credited for any single
continuous period during which an Employee would not have performed any
duties.
(d) Hours of Service shall be credited in any one period only under
one of the foregoing paragraphs (a), (b) and (c); an Employee may not get
double credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each Employee in
that class or group shall be credited with 45 Hours of Service for each
weekly pay period in which he has at least one Hour of Service. However,
an Employee shall be credited only for his normal working hours during a
paid absence.
4
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of Service
for which the payment was made. If the period overlaps two or more Plan
Years, the Hours of Service credit shall be allocated in proportion to the
respective portions of the period included in the several Plan Years.
However, in the case of periods of 31 days or less, the Administrator may
apply a uniform policy of crediting the Hours of Service to either the
first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of Labor's
regulations under Title I of ERISA.
"Investment Fund" means that portion of the Trust Fund consisting of assets
other than Stock.
"Matching Employer Contributions" means contributions made by the Employer
pursuant to Section 4.5 to a Participant's Matching Employer Contributions
Account.
"Normal Retirement Age" means a the later of the Participant's 65th
birthday or the fifth anniversary of the Participant's participation in the
Plan.
"Normal Retirement Date" means the first day of the month coincident with
or next following attainment of Normal Retirement Age.
"Participant" means any Employee who is participating in the Plan, or who
has previously participated in the Plan and still has a balance credited to his
Account.
"Plan" means First Federal Savings and Loan Association of Warren Employee
Stock Ownership Plan, as set forth herein, and as amended from time to time.
"Plan Year" means the 12 consecutive month period commencing January 1 and
ending December 31 of each year.
"Recognized Absence" means a period for which --
(a) an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leaves on a
nondiscriminatory basis; or
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
(c) an Employee is on active military duty, but only to the extent
that his employment rights are protected by the Military Selective
Service Act of 1967 (38 U.S.C. sec. 2021).
5
"Service" means an Employee's period(s) of employment or self-employment
with an Employer, excluding for initial eligibility purposes any period in which
the individual was a nonresident alien and did not receive from an Employer any
earned income which constituted income from sources within the United States.
An Employee's Service shall include any service which constitutes service with a
predecessor employer within the meaning of Section 414(a) of the Code. An
Employee's Service shall also include any service with an entity which is not an
Employer, but only either (i) for a period after 1975 in which the other entity
is a member of a controlled group of corporations or is under common control
with other trades and businesses within the meaning of Sections 414(b) or 414(c)
of the Code, and a member of the controlled group or one of the trades and
businesses is an Employer, or (ii) for a period after 1979 in which the other
entity is a member of an affiliated service group within the meaning of Section
414(m) of the Code, and a member of the affiliated service group is an Employer.
"Spouse" means the individual, if any, to whom a Participant is lawfully
married on the date benefit payments to the Participant are to begin, or on the
date of the Participant's death, if earlier.
"Stock" means shares of the voting common stock or preferred stock meeting
the requirements of Section 409(e)(3) of the Code issued by an Employer or an
affiliated corporation.
"Stock Fund" means that portion of the Trust Fund consisting of Stock.
"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which was obtained for the purpose of buying
Stock and which satisfies the requirements set forth in Section 6.3.
"Total Compensation" means a Participant's wages, salary, overtime,
bonuses, commissions, and any other amounts received for personal services
rendered while in Service from any Employer or an affiliate (within the purview
of Section 414(b), (c), and (m) of the Code), plus his earned income from any
such entity as defined in Section 401(c)(2) of the Code if he is self-employed.
"Total Compensation" shall include (i) severance payments and amounts paid as a
result of termination, (ii) amounts excludable from gross income under Section
911 of the Code, (iii) amounts described in Sections 104(a)(3), 105(a), and
105(h) of the Code to the extent includable in gross income, (iv) amounts
received from an Employer for moving expenses which are not deductible under
Section 217 of the Code, (v) amounts includable in gross income in the year of,
and on account of, the grant of a nonqualified stock option, (vi) amounts
includable in gross income pursuant to Section 83(b) of the Code, and (vii)
amounts includable in gross income under an unfunded nonqualified plan of
deferred compensation, but shall exclude (viii) Employer contributions to or
amounts received from a funded or qualified plan of deferred compensation, (ix)
Employer contributions to a simplified employee pension account to the extent
deductible under Section 219 of the Code, (x) Employer contributions to a
Section 403(b) annuity contract, and (xi) amounts includable in gross income
pursuant to Section 83(a) of the Code, (xii) amounts includable in gross income
upon the exercise of nonqualified stock option or upon the disposition of stock
acquired under any stock option, and (xiii) any other amounts expended by the
Employer on the Participant's behalf which are excludable from his income or
6
which receive special tax benefits. A Participant's Total Compensation shall
exclude any compensation in any limitation year in excess of the limit
currently in effect under Section 401(a)(17) of the Code.
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Association and the
Trustee concerning the Trust Fund. If any assets of the Trust Fund are held in
a co-mingled Trust Fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that co-
mingled Trust Fund. With respect to the allocation of investment responsibility
for the assets of the Trust Fund, the provisions of Section 2 of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons and individuals selected from
time to time by the Association to serve as trustee or co-trustees of the Trust
Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund consisting of
the Plan's holding of Stock which has been acquired in exchange for one or more
Stock Obligations and which has not yet been allocated to the Participant's
Accounts in accordance with Section 4.2.
"Valuation Date" means the last day of the Plan Year and each other date as
of which the Committee shall determine the investment experience of the
Investment Fund and adjust the Participants' Accounts accordingly.
"Valuation Period" means the period following a Valuation Date and ending
with the next Valuation Date.
"Vesting Year" means a unit of Service credited to a Participant pursuant
to Section 9.2 for purposes of determining his vested interest in his Account.
Section 3: Eligibility and Participation
-----------------------------
3.1 Initial Eligibility. An Employee shall enter the Plan as of the Entry
--------------------
Date coinciding with or on the next date an Employee completes an eligibility
computation period with the Employer, during which the Employee completes at
least 1,000 Hours of Service for the Employer and attains age 21.
However, if an Employee is not in active Service with an Employer on the
date he would otherwise first enter the Plan, his entry shall be deferred until
the next day he is in Service.
For purposes of this Plan, a Participant's initial eligibility computation
period shall be the twelve consecutive month period beginning with the day a
Participant first completes an Hour of Service. A Participant's subsequent
7
eligibility computation periods shall be the Plan Year, commencing with the Plan
Year which includes the first anniversary of the day the Participant first
completed an Hour of Service.
3.2 Terminated Employees. No Employee shall have any interest or rights
---------------------
under this Plan if he is never in active Service with an Employer on or after
the Effective Date.
3.3 Certain Employees Ineligible. No Employee shall be eligible to
-----------------------------
participate in the Plan while he is employed by a division or subsidiary of the
Holding Company, other than the Association, unless such division or subsidiary
has, with the approval of the Association, adopted the Plan for its Employees.
Additionally, no Employee shall participate in the Plan while his Service is an
hourly-paid Employee, or is covered by a collective bargaining agreement between
an Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan. No Employee
shall participate in the Plan while he is actually employed by a leasing
organization rather than an Employer.
3.4 Participation and Reparticipation. Subject to the satisfaction of the
----------------------------------
foregoing requirements, an Employee shall participate in the Plan during each
period of his Service from the date on which he first becomes eligible until his
termination. For this purpose, an Employee returning within five years of his
or her termination who previously satisfied the initial eligibility requirements
shall re-enter the Plan as of the date of his return to Service with an
Employer.
Section 4. Employer Contributions and Credits.
-----------------------------------
4.1 Discretionary Contributions. Each Employer shall from time to time
----------------------------
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. An Employer shall have no obligation to contribute any amount
under this Plan except as so determined in its sole discretion. The Employers'
contributions and available forfeitures for a Plan Year shall be credited as of
the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation while a Participant.
4.2 Contributions for Stock Obligations. If the Trustee, upon
------------------------------------
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer shall, subject to the provisions of the Association's
plan of conversion and any regulatory prohibitions, contribute for each Plan
Year an amount sufficient to cover all payments of principal and interest as
they come due under the terms of the Stock Obligation. If there is more than
one Stock Obligation, the Employers shall designate the one to which any
contribution is to be applied. The Employer's obligation to make contributions
under this Section 4.2 shall be reduced to the extent of any investment earnings
realized on such contributions and any dividends paid by the Employers on Stock
held in the Unallocated Stock Account, which earnings and dividends shall be
applied to the Stock Obligation related to that Stock.
8
In each Plan Year in which Employer contributions, earnings on
contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii) the
sum of (i) above, and the remaining principal and interest payments required (or
projected to be required on the basis of the interest rate in effect at the end
of the Plan Year) to satisfy the Stock Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
For these purposes, each Stock Obligation, the Stock purchased with it, and
any dividends on such Stock, shall be considered separately. The Stock released
from the Unallocated Stock Fund in any Plan Year shall be credited as of the
last day of the year to the Accounts of the Active Participants in proportion to
their amounts of Cash Compensation earned while a Participant as follows:
(i) first, subject to the limitations of Section 5.5 hereof, the
number of shares of Stock with a fair market value (valued as of
the time the Matching Employer Contributions are accrued under
the First Federal Savings and Loan Association of Warren 401(k)
Savings Plan equal to the Matching Employer Contribution made on
behalf of an Active Participant shall be credited to the
Participant's Matching Employer Contributions Account; and then
(ii) subject to the limitations of Section 5.5. hereof, the number of
shares of Stock that bears the same ratio as the Active
Participant's Cash Compensation bears to the aggregate Cash
Compensation of all Active Participants for the Plan Year shall
be credited to such Participant's Account.
4.3 Definitions Related to Contributions. For the purposes of this Plan,
-------------------------------------
the following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the eligibility
requirements under Section 3 However, a Participant shall not qualify as an
9
Active Participant unless (i) he is in active Service with an Employer as of the
last day of the Plan Year, or (ii) he is on a Recognized Absence as of that
date, or (iii) his Service terminated during the Plan Year by reason of Normal
Retirement, Early Retirement, Disability or death.
"Cash Compensation" means the Participant's base compensation reportable on
Form W-2. A Participant's Cash Compensation shall exclude any compensation in
excess of the limit currently in effect under Section 401(a)(17) of the Code.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any provision of the Plan to the contrary, the annual
compensation of each employee taken in to account under the Plan shall not
exceed the Omnibus Budget Reconciliation Act of 1993 ("OBRA 1993") annual
compensation limit. The OBRA 1993 annual compensation limit is $150,000, as
adjusted by the Commissioner of the Internal Revenue Service for increases in
the cost-of-living in accordance with Section 401(a)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which compensation is determined (the
"Determination Period") beginning in such calendar year. If a Determination
Period consists of fewer than 12 months, the OBRA 1993 annual compensation
limitation will be multiplied by a fraction, the numerator of which is the
number of months in the Determination Period, and the denominator of which is
12.
4.4 Conditions as to Contributions. Employers' contributions shall in any
-------------------------------
event be subject to the limitation set forth in Section 5. Contributions may be
made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer's contributions in connection with a failure
of the Plan to qualify initially under the Code, any amount contributed by an
Employer due to a good faith mistake of fact, or based upon a good faith but
erroneous determination of its deductibility under Section 404 of the Code,
shall be returned to the Employer within one year after the date on which the
contribution was originally made, or within one year after its nondeductibility
has been finally determined. However, the amount to be returned shall be
reduced to take account of any adverse investment experience within the Trust
Fund in order that the balance credited to each Participant's Account is not
less that it would have been if the contribution had never been made.
4.5 Matching Employer Contributions. For each Plan Year commencing with
--------------------------------
the ______ Plan Year, the Employer, in its sole discretion, may make a
contribution equal to a percentage of the Employee Basic Contributions made for
the Plan Year on behalf of each Participant under the terms of the First Federal
Savings and Loan Association of Warren 401(k) Savings Plan.
Section 5. Limitations on Contributions and Allocations.
---------------------------------------------
5.1 Limitation on Annual Additions. Notwithstanding the provisions of
-------------------------------
Section 4, the annual addition to a Participant's Accounts under this and
any other defined contribution plans maintained by the Employers or an
affiliate (within the purview of Sections 414(b), (c), and (m) and Section
415(h) of the Code, which affiliate shall be deemed an Employer for this
purpose) shall not exceed for any limitation year an amount equal to the
lesser of --
10
5.1-1 $30,000, or the one-fourth of the dollar limitation currently
in effect under Section 415(b)(1)(A) of the Code; or
5.1-2 25 percent of the Participant's Total Compensation for such
limitation year.
For purposes of this Section 5.1 and the following Section 5.2, the "annual
addition" to a Participant's Accounts means the sum of (i) the Employer
contributions and Employee forfeitures credited to a Participant's Accounts with
respect to a limitation year, plus (ii) the Participant's total voluntary
contributions for that year. The $30,000 and Section 415(b)(1)(A) limitations
referred to shall, for each limitation year, be automatically adjusted to the
new dollar limitations determined by the Commissioner of Internal Revenue for
the calendar year beginning in that limitation year. Notwithstanding the
foregoing, if the special limitations on annual additions described in Section
415(c)(6) of the Code applies, the limitations described in this section shall
be adjusted accordingly. A "limitation year" means each 12 consecutive month
period beginning January 1.
5.2 Coordinated Limitation With Other Plans. For Plan Years commencing
----------------------------------------
prior to December 31, 1999, aside from the limitation prescribed by Section 5.1
with respect to the annual addition to a Participant's Accounts for any single
limitation year, if a Participant has ever participated in one or more defined
benefit plans maintained by an Employer or an affiliate, then the benefits
provided under the defined benefit plan on his account shall be limited on a
cumulative basis so that the sum of his defined contribution plan fraction and
his defined benefit plan fraction does not exceed one. For this purpose:
5.2-1 A Participant's defined contribution plan fraction with respect
to a Plan Year shall be a fraction, (i) the numerator of which is the sum
of the annual additions to his accounts under all defined contribution
plans (whether or not terminated) maintained by the Employer for the
current year and all prior limitation years (including annual additions of
the Participant's nondeductible employee contributions to all defined
benefit plans, whether or not terminated, maintained by an Employer, and
the annual additions attributable to all welfare benefit plans, individual
medical accounts, and simplified employee pensions maintained by the
Employer), and (ii) the denominator of which is the sum of the lesser of
the following amounts -A- and -B- determined for the current limitation
year and each prior limitation year of Service with an Employer: -A- is
1.25 times the dollar limitation determined under Section 415(c)(1)(A) of
the Code, or 1.0 times such dollar limitation if the Plan is top-heavy, and
-B- is 35 percent of the Participant's Total Compensation for such year.
If the Employee was a Participant as of the end of the first limitation
year beginning after December 31, 1986 in one or more defined contribution
plans maintained by an Employer which plan(s) were in existence on May 6,
1986, and if the sum of this fraction and the defined benefit fraction
(described below) would otherwise exceed 1.0 under the terms of this Plan,
the numerator of this fraction will be adjusted. To affect this
adjustment, an amount equal to the product of the excess of the sum of the
fractions over 1.0, multiplied by the denominator of this fraction shall be
11
permanently subtracted from the numerator of this fraction. This
adjustment shall be calculated using the fractions as they would be
computed as of the end of the last limitation year beginning before January
1, 1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the limitation applicable under
Section 415 of the Code for the first limitation year beginning on or after
January 1, 1987.
5.2-2 A Participant's defined benefit plan fraction with respect to a
limitation year shall be a fraction, (i) the numerator of which is his
projected annual benefit payable at normal retirement under the Employers'
defined benefit plans, and (ii) the denominator of which is the lesser of
(a) 1.25 times $90,000, or 1.0 times such dollar limitation if the Plan is
top-heavy, and (b) 1.4 times the Participant's average Total Compensation
during his highest-paid three consecutive limitation years.
Notwithstanding the preceding, for Plan Years commencing after December 31,
1999, this Section 5.2 shall no longer be applicable.
5.3 Effect of Limitations. The Committee shall take whatever action may
----------------------
be necessary from time to time to assure compliance with the limitations set
forth in Sections 5.1 and 5.2. Specifically, the Committee shall see that each
Employer restrict its contributions for any Plan Year to an amount which, taking
into account the amount of available forfeitures, may be completely allocated to
the Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants' compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
held in a suspense account to be allocated in lieu of any Employer contributions
in future years until it is eliminated, and to be returned to the Employer if it
cannot be credited consistent with these limitations before the termination of
the Plan.
5.4 Limitations as to Certain Section 1042 Transactions. Aside from the
----------------------------------------------------
limitations set forth in Section 5.1 and 5.2, if the Plan acquires any Stock in
a transaction as to which a selling shareholder or the estate of a deceased
shareholder is claiming the benefit of Section 1042 of the Code, the Committee
shall see that none of such Stock, and no other assets in lieu of such Stock,
are allocated to the Accounts of certain Participants in order to comply with
Section 409(n) of the Code.
This restriction shall apply at all times to a Participant who owns (taking
into account the attribution rules under Section 318(a) of the Code, without
regard to the exception for employee plan trusts in Section 318(a)(2)(B)(i) more
than 25 percent of any class of stock of a corporation which issued the Stock
acquired by the Plan, or another corporation within the same controlled group,
as defined in Section 409(l)(4) of the Code (any such class of stock hereafter
called a "Related Class"). For this purpose, a Participant who owns more than 25
percent of any Related Class at any time within the one year preceding the
Plan's purchase of the Stock shall be subject to the restriction as to all
12
allocations of the Stock, but any other Participant shall be subject to the
restriction only as to allocations which occur at a time when he owns more than
25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder claiming
the benefit of Section 1042 and any other Participant who is related to such a
shareholder within the meaning of Section 267(b) of the Code, during the period
beginning on the date on which the Plan purchases the Stock and ending 10 years
after the later of (i) the date of such purchase, and (ii) the date of the
allocation under Section 4.2 attributable to the final payment on whatever Stock
Obligations were incurred with the purchase.
This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under the
Plan for the benefit of all such descendants do not exceed five percent of the
Stock acquired from the shareholder.
5.5 Limitations as to Certain Participants. Aside from the limitations
---------------------------------------
set forth in Section 5.1 and 5.2, in no event shall more than one third of the
Employer contributions to the Plan (including Matching Employer Contributions)
be allocated to the Accounts of highly compensated Participants (within the
meaning of Section 414(q) of the Code). The Committee shall take whatever
action may be necessary from time to time to assure compliance with the
limitations set forth in this Section 5.5. Specifically, the Committee shall,
beginning with the Participants whose Cash Compensation amounts are in excess
of the limit under Section 401(a)(17) of the Code, reduce the amount of Cash
Compensation of such highly compensated Participants on a pro-rata basis per
individual that would otherwise be taken into account for purposes of allocating
benefits under Section 4.2 of this Plan. If, in order to satisfy this Section
5.5, such Participants' Cash Compensation amount per individual must be reduced
to an amount that is lower than the Cash Compensation amount of the next most
highly compensated Participant (the "breakpoint amount"), then, for purposes of
allocating benefits under Section 4.2 of the Plan, the Cash Compensation amounts
of all Participants shall be reduced to an amount not to exceed such breakpoint
amount.
5.6 Nondiscrimination Test for Matching Employer Contributions.
-----------------------------------------------------------
Notwithstanding anything herein to the contrary the Plan shall meet the
nondiscrimination test of Section 401(m) of the Code (described in Section 5.6-1
and applicable regulations) for each Plan Year. In order to meet the
nondiscrimination test, any or all of the following steps may be taken:
(a) At any time during the Plan Year, the Committee may limit the
amount of Matching Employer Contributions that may be made on
behalf of Highly Compensated Employees;
(b) The Committee may reduce the Matching Employer Contributions made
for the Plan Year to the extent necessary to meet the
requirements of Section 401(m) of Code, in the manner described
in Section 5.7;
13
(c) The Committee may recommend to the Board that the Employer make an
additional Matching Employer Contribution to the Plan for the benefit
of Participants who are not Highly Compensated Employees. This
additional allocation may be made based on Participants' Total
Compensation; and
(d) The Committee may take any other steps that the Committee deems
appropriate.
5.6-1 For Plan Years beginning after to December 31, 1996, the
nondiscrimination requirements of Section 401(m) of the Code require that,
in each Plan Year, the Contribution Percentage (defined below) of the
eligible Highly Compensated Employees for such Plan Year does not exceed
the greater of:
(a) The Contribution Percentage of all other eligible Employees for
the preceding Plan Year multiplied by 1.25; or
(b) The lesser of the Contribution Percentage of all other eligible
Employees for the preceding Plan Year multiplied by 2, or the
Contribution Percentage of all other eligible Employees for the
preceding Plan Year plus 2 percentage points.
The Committee may elect to calculate the Contribution Percentages
using the Plan Year rather than the preceding Plan Year, provided however
that if the Committee so elects, the election may only be changed as
provided by the Secretary of the Treasury.
5.6-2 The Contribution Percentage for a group of Employees is the
average of the ratios, calculated separately for each Employee in the
group, of the amount of Matching Employer Contributions that are credited
under the Plan on behalf of each Employee for the Plan Year, to the
Employee's Compensation for the Plan Year. Use of the alternative
limitation shall be subject to the provisions of Treasury Regulation (S)
1.401(m)-2 regarding the multiple use of the alternative deferral tests set
forth in Sections 401(k) and 401(m) of the Code.
5.6-3 Notwithstanding the foregoing, if the test described in Section
56-1 is not satisfied for a Plan Year, the Committee may use any other test
permitted under Section 401(m) of the Code to determine whether the Plan
meets the nondiscrimination requirements of Section 401(m) of the Code.
Section 6. Trust Fund and Its Investment.
------------------------------
6.1 Creation of Trust Fund. All amounts received under the Plan from an
-----------------------
Employer and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Association and the Trustee.
14
The benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Association, any other Employer, its board of
directors or trustees, its stockholders, its officers, its employees, the
Committee, and the Trustee shall be liable for payment of any benefit under this
Plan except from the Trust Fund.
6.2 Stock Fund and Investment Fund. The Trust Fund held by the Trustee
-------------------------------
shall be divided into the Stock Fund, consisting entirely of Stock, and the
Investment Fund, consisting of all assets of the Trust other than Stock. The
Trustee shall have no investment responsibility for the Stock Fund, but shall
accept any Employer contributions made in the form of Stock, and shall acquire,
sell, exchange, distribute, and otherwise deal with and dispose of Stock in
accordance with the instructions of the Committee.
6.3 Acquisition of Stock. From time to time the Committee may, in its
---------------------
sole discretion, direct the Trustee to acquire Stock from the issuing Employer
or from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for
such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may
direct the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
"Stock Obligation". Any Stock Obligation shall be subject to the following
conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a
reasonable rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior
Stock Obligation which is being repaid with the proceeds of the current
Stock Obligation. No other assets of the Plan and Trust may be used as
collateral for a Stock Obligation, and no creditor under a Stock Obligation
shall have any right or recourse to any Plan and Trust assets other than
Stock remaining subject to a collateral pledge.
6.3-3 Any pledge of Stock to secure a Stock Obligation must provide
for the release of pledged Stock in connection with payments on the Stock
Obligations in the ratio prescribed in Section 4.2.
6.3-4 Repayments of principal and interest on any Stock Obligation
generally shall be made by the Trustee from cash contributions designated
for such payments, from earnings on such contributions, and from cash
dividends received on Stock held in the Unallocated Stock Fund.
6.4 Participants' Option to Diversify. The Committee shall provide for a
----------------------------------
procedure under which each Participant may, during the first five years of a
certain six-year period, elect to have up to 25 percent of the value of his
Account committed to alternative investment options within the Investment Fund.
15
For the sixth year in this period, the Participant may elect to have up to 50
percent of the value of his Account committed to other investments. The six-
year period shall begin with the Plan Year following the first Plan Year in
which the Participant has both reached aged 55 and completed 10 years of
participation in the Plan; a Participant's election to diversify his Account
must be made within the 90-day period immediately following the last day of each
of the six Plan Years. The Committee shall see that the Investment Fund includes
a sufficient number of investment options to comply with Section 401(a)(28)(B)
of the Code. The Trustee shall comply with any investment directions received
from Participants in accordance with the procedures adopted from time to time by
the Committee under this Section 6.4.
Section 7. Voting Rights and Dividends on Stock.
-------------------------------------
7.1 Voting and Tendering of Stock. The Trustee generally shall vote all
------------------------------
shares of Stock held under the Plan. However, if any Employer has registration-
type class of securities within the meaning of Section 409(e)(4) of the Code, or
if a matter submitted to the holders of the Stock involves a merger,
consolidation, recapitalization, reclassification, liquidation, dissolution, or
sale of substantially all assets of an entity, then (i) the shares of Stock
which have been allocated to Participants' Accounts shall be voted by the
Trustee in accordance with the Participants' written instructions, and (ii) the
Trustee shall vote any shares of Stock which have been allocated to
Participants' Accounts but for which no written instructions have been received
and any unallocated Stock in a manner calculated to most accurately reflect the
instructions it has received from Participants regarding the allocated Stock.
In the event no shares of Stock have been allocated to Participants' Accounts at
the time Stock is to be voted, each Participant shall be deemed to have one
share of Stock allocated to his or her account for the sole purpose of providing
the Trustee with voting instructions. Notwithstanding any provision hereunder
to the contrary, all shares of Stock which have been allocated to Participants'
Accounts and for which the Trustee has received no written instructions and all
unallocated shares of Stock must be voted by the Trustee in a manner determined
by the Trustee to be solely in the interest of the Participants and
Beneficiaries. Whenever such voting rights are to be exercised, the Employers,
the Committee, and the Trustee shall see that all Participants and Beneficiaries
are provided with the same notices and other materials as are provided to other
holders of the Stock, and are provided with adequate opportunity to deliver
their instructions to the Trustee regarding the voting of Stock allocated to
their Accounts. The instructions of the Participants with respect to the voting
of allocated shares hereunder shall be confidential.
7.1-1 In the event of a tender offer, Stock shall be tendered by the
Trustee in the same manner as set forth above with respect to the voting of
Stock. Notwithstanding any provision hereunder to the contrary, Stock must
be tendered by the Trustee in a manner determined by the Trustee to be
solely in the interest of the Participants and Beneficiaries.
7.2 Dividends on Stock. Dividends on Stock which are received by the
-------------------
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant's Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
16
been paid. Dividends on Stock credited to Participants' Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Company paying the dividends, either (i) be credited to the Accounts in
accordance with Section 8.3 and invested as part of the Investment Fund, (ii) be
distributed immediately to the Participants in proportion with the Participants'
Account balance; (iii) be distributed to the Participants within 90 days of the
close of the Plan Year in which paid in proportion with the Participants'
Account balance; or (iv) be used to repay principal and interest on the Stock
Obligation used to acquire Stock on which the dividends were paid. Dividends on
Stock held in the Unallocated Stock Fund which are received by the Trustee in
the form of cash shall be applied as soon as practicable to payments of
principal and interest under the Stock Obligation incurred with the purchase of
the Stock.
Section 8. Adjustments to Accounts.
------------------------
8.1 Adjustments for Transactions. An Employer contribution pursuant to
-----------------------------
Section 4.1 shall be credited to the Participants' Accounts as of the last day
of the Plan Year for which it is contributed. Stock released from the
Unallocated Stock Fund upon the Trust's repayment of a Stock Obligation pursuant
to Section 4.2 shall be credited to the Participants' Accounts as of the last
day of the Plan Year in which the repayment occurred. Any excess amounts
remaining from the use of, or the use of the proceeds of, a sale of Stock from
the Unallocated Stock Fund to repay a Stock Obligation shall be allocated as of
the last day of the Plan Year in which the repayment occurred among the
Participants' Accounts as earnings, in proportion to the opening balance in each
Account and shall not be deemed annual additions within the meaning of Section
415(c)(2) of the Code. Any benefit which is paid to a Participant or
Beneficiary pursuant to Section 10 shall be charged to the Participant's Account
as of the first day of the Valuation Period in which it is paid. Any forfeiture
or restoration shall be charged or credited to the Participant's Account as of
the first day of the Valuation Period in which the forfeiture or restoration
occurs pursuant to Section 9.6.
8.2 Valuation of Investment Fund. As of each Valuation Date, the Trustee
-----------------------------
shall prepare a balance sheet of the Investment Fund, recording each asset
(including any contribution receivable from an Employer) and liability at its
fair market value. Any liability with respect to short positions or options and
any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer. The determination of gain or loss shall be consistent with the
balance sheets of the Investment Fund for the current and preceding Valuation
Dates.
8.3 Adjustments for Investment Experience. Any net gain or loss of the
--------------------------------------
Investment Fund during a Valuation Period, as determined pursuant to Section
8.2, shall be allocated as of the last day of the Valuation Period among the
Participants' Accounts in proportion to the opening balance in each Account, as
17
adjusted for benefit payments and forfeitures during the Valuation Period,
without regard to whatever Stock may be credited to an Account.
8.4 Adjustments for Capital Changes. In the event of any change in the
-------------------------------
outstanding shares of Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares, or other similar corporate change, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the bank issuing the Stock, the Committee shall adjust the number of shares of
Stock allocated to the Participants' Accounts to prevent dilution or enlargement
of such Accounts.
Section 9. Vesting of Participants' Interests.
-----------------------------------
9.1 Deferred Vesting in Accounts. A Participant's vested interest in his
-----------------------------
Account shall be based on his Vesting Years in accordance with the following
table, subject to the balance of this Section 9:
Vesting Percentage of
Years Interest Vested
------- ---------------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
9.2 Computation of Vesting Years. For purposes of this Plan, a "Vesting
-----------------------------
Year" means each 12-month period beginning with his initial Service with the
Employer. However, a Participant's Vesting Years shall be computed subject to
the following conditions and qualifications:
(a) A Participant's vested interest in his Account accumulated before
a Break in Service shall be determined without regard to any Service
after the Break. Notwithstanding the foregoing, in the event a
Participant has an eligibility computation period (as defined in
Section 3.1 of the Plan) during which he performs 500 or fewer Hours
of Service (a "one year Break in Service"), and then returns to
Service prior to having a Break in Service, his Service performed both
before and after his break in employment shall be taken into account
in determining his Vesting Years. Generally, if a Participant has a
Break in Service before his interest in his Account has become vested
to some extent, he shall lose credit for any Vesting Year before the
Break in Service. However, if a Participant separates from Service
before his interest in his Account has become vested to some extent,
and returns to Service after a Break in Service, the Participant's
18
Vesting Years both prior to and after the Break in Service will count
as Vesting Years for his Account accumulated after the Break if the
number of the Participant's consecutive one year breaks in Service is
less than the number of years of Service prior to the Break in
Service.
(b) Unless otherwise specifically excluded, a Participant's Vesting
Years shall include any period of active military duty to the extent
required by the Military Selective Service Act of 1967 (38 U.S.C.
Section 2021).
9.3 Full Vesting Upon Certain Events. Notwithstanding Section 9.1, a
---------------------------------
Participant's interest in his Account shall fully vest on the Participant's
Normal Retirement Date, provided the Participant is in Service on or after that
date. The Participant's interest shall also fully vest in the event that his
Service is terminated by Early Retirement, Disability or by death or upon the
occurrence of a Change in Control of the Association or the Holding Company.
For purposes of this Section 9.3, a Change in Control of the Association or
the Holding Company shall mean an event of a nature that: (i) would be required
to be reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Association or the Company within the meaning of the Home Owners'
Loan Act of 1933, as amended ("HOLA") and the Rules and Regulations promulgated
by the Office of Thrift Supervision ("OTS") (or its predecessor agency) as in
effect on the date hereof (provided, that in applying the definition of change
in control as set forth under such rules and regulations the Board shall
substitute its judgment for that of the OTS); (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (A) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Association or the
Holding Company representing 20% or more of the Association's or the Holding
Company's outstanding securities except for any securities of the Association
purchased by the Holding Company in connection with the conversion of the
Association to the stock form and any securities purchased by any tax qualified
employee benefit plan of the Association; or (B) individuals who constitute the
Board of Directors on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Holding Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (B), considered as though he were a member
of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Association or the Holding
Company or similar transaction occurs in which the Association or Holding
Company is not the resulting entity; or (D) solicitations of shareholders of the
Holding Company, by someone other than the current management of the Holding
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Association or similar transaction with
one or more corporations as a result of which the outstanding shares of the
19
class of securities then subject to the plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Association or
the Holding Company shall be distributed; or (E) a tender offer is made for 20%
or more of the voting securities of the Association or the Holding Company.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
-----------------------------------
Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or upon the permanent and complete
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each Participant who is in Service shall fully vest
with respect to that part of the Plan which is terminated.
9.5 Forfeiture, Repayment, and Restoration. If a Participant's Service
---------------------------------------
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited if he either (i) receives a distribution
of his entire vested benefit, or (ii) has a Break in Service. If a Participant
who has received his entire vested interest returns to Service before he has a
Break in Service, he may repay to the Trustee an amount equal to the
distribution. The Participant may repay such amount at any time within five
years after he has returned to Service. The amount shall be credited to his
Account as of the last day of the Plan Year in which it is repaid; an additional
amount equal to the portion of his Account which was previously forfeited shall
be restored to his Account at the same time from other Employees' forfeitures
and, if such forfeitures are insufficient, from a special contribution by his
Employer for that year. In the case of a terminated Participant who does not
receive a distribution of his entire vested interest and whose Service resumes
after a Break in Service, any undistributed balance from his prior participation
which was not forfeited shall be maintained as a fully vested subaccount with
his Account. If a portion of a Participant's Account is forfeited, assets other
that Stock must be forfeited before any Stock may be forfeited. In the case of
a Participant who has incurred a Break in Service and then returns to Service,
all years of Service after the Break in Service will be disregarded for the
purpose of vesting his Account accrued before the Break in Service, but both
pre-Break and post-Break Service will count for the purpose of vesting the
Participant's Account that accrues after the Break in Service. If a
Participant's Service terminates prior to his Account having become vested, such
Participant shall be deemed to have received a distribution of his entire vested
interest as of the Valuation Date next following his termination of Service.
9.6 Accounting for Forfeitures. A forfeiture shall be charged to the
---------------------------
Participant's Account as of the first day of the first Valuation Period in which
the forfeiture becomes certain pursuant to Section 9.5. Except as otherwise
provided in that Section, a forfeiture shall be added to the contributions of
the terminated Participant's Employer which are to be credited to other
Participants pursuant to Section 4.1 as of the last day of the Plan Year in
which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his
------------------------------
Account which has become vested shall be nonforfeitable for any reason.
20
Section 10. Payment of Benefits.
--------------------
10.1 Benefits for Participants. A Participant whose Service ends for
--------------------------
any reason shall receive the vested portion of his Account in a single payment
on a date selected by the Committee. That date shall be on or before the 60th
day after the end of the Plan Year in which his Service ends. Notwithstanding
the foregoing, if the balance credited to his Account exceeds $3,500, his
benefits shall not be paid before the latest of his 65th birthday or the tenth
anniversary of the year in which he commenced participation in the Plan, unless
he elects an early payment date in a written election filed with the Committee.
A Participant may modify such an election at any time, provided any new benefit
payment date is at least 30 days after a modified election is delivered to the
Committee. Such an election is not valid unless it is made after the Participant
has received the required notice under Section 1.411(a)-11(c) of the Income Tax
Regulations that provides a general description of the material features of a
lump sum distribution and the Participant's right to defer receipt of his
benefit. The Notice shall be provided no less than 30 days and no more than 90
days before the first day on which all events have occurred which entitle the
Participant to such benefit. Written consent of the Participant to the
distribution generally may not be made within 30 days of the date the
Participant receives the notice and shall not be made more than 90 days from the
date the Participant receives the notice. However, a distribution may be made
less than 30 days after the notice provided under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, if:
(a) the Committee clearly informs the Participant that he has a right
to period of at least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution (and if
applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects
a distribution.
In all events, a Participant's benefits shall be paid by April 1st of the
calendar year in which he reaches age 71-1/2. A Participant's benefits from
that portion of his Account committed to the Investment Fund shall be calculated
on the basis of the most recent Valuation Date before the day of payment.
For Plan Years beginning after December 31, 1996, with respect to all
Participants other than those who are 5% owners within the meaning of Section
416 of the Code, such Participant's benefits shall be paid by April 1st of the
later of (i) the calendar year in which he reaches age 71-1/2, or (ii) the
calendar year in which he retires. With respect to all Participants who are 5%
owners within the meaning of Section 416 of the Code, such Participants benefits
shall be paid by April 1st of the calendar year in which he reaches age 71-1/2.
10.2 Benefits on a Participant's Death. If a Participant dies before
----------------------------------
his benefits are paid pursuant to Section 10.1, the balance credited to his
Account shall be paid to his Beneficiary in a single distribution on or before
the 60th day after the end of the Plan Year in which he died. The benefits from
that portion of the Account committed to the Investment Fund shall be calculated
on the basis of the most recent Valuation Date before the date of payment.
21
If a married Participant dies before his benefit payments begin, then
unless he has specifically elected otherwise the Committee shall cause the
balance in his Account to be paid to his Spouse. No election by a married
Participant of a different Beneficiary shall be valid unless the election is
accompanied by the Spouse's written consent, which (i) must acknowledge the
effect of the election, (ii) must explicitly provide either that the designated
Beneficiary may not subsequently be changed by the Participant without the
Spouse's further consent, or that it may be changed without such consent, and
(iii) must be witnessed by the Committee, its representative, or a notary
public. This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.
10.3 Marital Status. The Committee shall from time to time take
---------------
whatever steps it deems appropriate to keep informed of each Participant's
marital status. Each Employer shall provide the Committee with the most
reliable information in the Employer's possession regarding its Participants'
marital status, and the Committee may, in its discretion, require a notarized
affidavit from any Participant as to his marital status. The Committee, the
Plan, the Trustee, and the Employers shall be fully protected and discharged
from any liability to the extent of any benefit payments made as a result of the
Committee's good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.
10.4 Delay in Benefit Determination. If the Committee is unable to
-------------------------------
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days after they can first be
determined, with whatever makeup payments may be appropriate in view of the
delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be
--------------------------------
charged to the Participant's Account as of the first day of the Valuation Period
in which the payment is made.
10.6 Options to Receive and Sell Stock. Unless ownership of virtually
----------------------------------
all Stock is restricted to active Employees and qualified retirement plans for
the benefit of Employees pursuant to the certificates of incorporation or by-
laws of the Employers issuing Stock, a terminated Participant or the Beneficiary
of a deceased Participant may instruct the Committee to distribute the
Participant's entire vested interest in his Account in the form of Stock. In
that event, the Committee shall apply the Participant's vested interest in the
Investment Fund to purchase sufficient Stock from the Stock Fund or from any
owner of stock to make the required distribution. In all other cases, the
Participant's vested interest in the Stock Fund shall be distributed in shares
of Stock, and his vested interest in the Investment Fund shall be distributed in
cash.
Any Participant who receives Stock pursuant to Section 10.1, and any person
who has received Stock from the Plan or from such a Participant by reason of the
Participant's death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section 402(c)
of the Code, shall have the right to require the Employer which issued the Stock
to purchase the Stock for its current fair market value (hereinafter referred to
as the "put right"). The put right shall be exercisable by written notice to
22
the Committee during the first 60 days after the Stock is distributed by the
Plan, and, if not exercised in that period, during the first 60 days in the
following Plan Year after the Committee has communicated to the Participant its
determination as to the Stock's current fair market value. However, the put
right shall not apply to the extent that the Stock, at the time the put right
would otherwise be exercisable, may be sold on an established market in
accordance with federal and state securities laws and regulations. If the put
right is exercised, the Trustee may, if so directed by the Committee in its sole
discretion, assume the Employer's rights and obligations with respect to
purchasing the Stock.
The Employer or the Trustee, as the case may be, may elect to pay for the
Stock in equal periodic installments, not less frequently than annually, over a
period not longer than five years from the 30th day after the put right is
exercised, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered to
the seller with normal terms as to acceleration upon any uncured default.
Nothing contained herein shall be deemed to obligate any Employer to
register any Stock under any federal or state securities law or to create or
maintain a public market to facilitate the transfer or disposition of any Stock.
The put right described herein may only be exercised by a person described in
the second preceding paragraph, and may not be transferred with any Stock to any
other person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right be nonterminable. The put right for Stock acquired
through a Stock Obligation shall continue with respect to such Stock after the
Stock Obligation is repaid or the Plan ceases to be an employee stock ownership
plan. Except as provided above, in accordance with the provisions of Sections
54.4975-7(b)(4) of the Treasury Regulations, no Stock acquired with the proceeds
of a Stock Obligation may be subject to any put, call or other option or buy-
sell or similar arrangement while held by and when distributed from the Plan,
whether the Plan is then an employee stock ownership plan.
10.7 Restrictions on Disposition of Stock. Except in the case of
-------------------------------------
Stock which is traded on an established market, a Participant who receives Stock
pursuant to Section 10.1, and any person who has received Stock from the Plan or
from such a Participant by reason of the Participant's death or incompetency, by
reason of divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(c) of the Code, shall, prior to any sale
or other transfer of the Stock to any other person, first offer the Stock to the
issuing Employer and to the Plan at its current fair market value. This
restriction shall apply to any transfer, whether voluntary, involuntary, or by
operation of law, and whether for consideration or gratuitous. Either the
Employer or the Trustee may accept the offer within 14 days after it is
delivered. Any Stock distributed by the Plan shall bear a conspicuous legend
describing the right of first refusal under this Section 10.7, as well as any
other restrictions upon the transfer of the Stock imposed by federal and state
securities laws and regulations.
10.8 Direct Transfer of Eligible Plan Distributions. A Participant or
----------------------------------------------
Beneficiary may direct that an "eligible rollover distribution" (as defined
below) included in such payment be paid directly to an "eligible retirement
plan" (as defined below).
23
To effect such a direct transfer, the Participant or Beneficiary must
notify the Committee that a direct transfer is desired and provide to the
Committee the eligible retirement plan to which the payment is to be made. Such
notice shall be made in such form and at such time as the Committee may
prescribe. Upon receipt of such notice, the Committee shall direct the Trustee
to make a trustee-to-trustee transfer of the eligible rollover distribution to
the eligible retirement plan so specified.
For purposes of this Section 10.8, an "eligible rollover distribution"
shall have the meaning set forth in Section 402(c)(4) of the Code and any
regulations promulgated thereunder. To the extent such meaning is not
inconsistent with the above references, an eligible rollover distribution shall
mean any distribution of all or any portion of the Participant's Account, except
that such term shall not include any distribution which is one of a series of
substantially equal periodic payments (not less frequently than annually) made
(i) for the life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and a designated Beneficiary, or
(ii) for a period of ten years or more. Further, the term "eligible rollover
distribution shall not include any distribution required to be made under
Section 401(a)(9) of the Code.
For purposes of this Section 10.8, an "eligible retirement plan" shall have
the meaning set forth in Section 402(c)(8) of the Code and any regulations
promulgated thereunder. To the extent such meaning is not inconsistent with the
above references, an eligible retirement plan shall mean: (i) an individual
retirement account described in Section 408(a) of the Code; (ii) an individual
retirement annuity described in Section 408(b) of the Code (other than an
endowment contract), (iii) a qualified trust described in Section 401(a) of the
Code and exempt under Section 501(a) of the Code, and (iv) an annuity plan
described in Section 403(a) of the Code.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
-----------------------------------------------------
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies
-------------------
for the payment of benefits shall file a claim for his benefits with the
Committee on a form provided by the Committee. The claim, including any election
of an alternative benefit form, shall be filed at least 30 days before the date
on which the benefits are to begin. If a Participant or Beneficiary fails to
file a claim by the 30th day before the date on which benefits become payable,
he shall be presumed to have filed a claim for payment for the Participant's
benefits in the standard form prescribed by Sections 10.1 or 10.2
11.2 Notification by Committee. Within 90 days after receiving a
--------------------------
claim for benefits (or within 180 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary within 90 days after receiving the claim for
benefits), the Committee shall notify the Participant or Beneficiary whether the
claim has been approved or denied. If the Committee denies a claim in any
respect, the Committee shall set forth in a written notice to the Participant or
Beneficiary:
(i) each specific reason for the denial;
24
(ii) specific references to the pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information which
could be submitted by the Participant or Beneficiary to support
his claim, with an explanation of the relevance of such
information; and
(iv) an explanation of the claims review procedures set forth in
Section 11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
-----------------------
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination.
In connection with his appeal the Participant or Beneficiary or his
representative may inspect or purchase copies of pertinent documents and records
to the extent not inconsistent with other Participants' and Beneficiaries'
rights of privacy. Within 60 days after receiving a notice of appeal from a
prior determination (or within 120 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary and his representative within 60 days after receiving
the notice of appeal), the Committee shall furnish to the Participant or
Beneficiary and his representative, if any, a written statement of the
Committee's final decision with respect to his claim, including the reasons for
such decision and the particular Plan provisions upon which it is based.
Section 12. The Committee and Its Functions.
--------------------------------
12.1 Authority of Committee. The Committee shall be the "plan
-----------------------
administrator" within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically (i) allocated to the Association, the Employers, or the Trustee
under the Plan and Trust Agreement, (ii) delegated in writing to other persons
by the Association, the Employers, the Committee, or the Trustee, or (iii)
allocated to other parties by operation of law. The Committee shall have
exclusive responsibility regarding decisions concerning the payment of benefits
under the Plan. The Committee shall have full investment responsibility with
respect to the Investment Fund except to the extent, if any, specifically
provided in the Trust Agreement. In the discharge of its duties, the Committee
may employ accountants, actuaries, legal counsel, and other agents (who also may
be employed by an Employer or the Trustee in the same or some other capacity)
and may pay their reasonable expenses and compensation.
12.2 Identity of Committee. The Committee shall consist of three or
----------------------
more individuals selected by the Association. Any individual, including a
director, trustee, shareholder, officer, or Employee of an Employer, shall be
eligible to serve as a member of the Committee. The Association shall have the
power to remove any individual serving on the Committee at any time without
cause upon 10 days written notice, and any individual may resign from the
25
Committee at any time upon 10 days written notice to the Association. The
Association shall notify the Trustee of any change in membership of the
Committee.
12.3 Duties of Committee. The Committee shall keep whatever records
--------------------
may be necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Association. The Committee shall furnish to
the Trustee whatever information may be necessary to properly administer the
Trust. The Committee shall see to the filing with the appropriate government
agencies of all reports and returns required of the plan Committee under ERISA
and other laws.
Further, the Committee shall have exclusive responsibility and authority
with respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Association's long-term intention that the
Plan, as an employee stock ownership plan, be invested primarily in Stock.
Subject to the direction of the Committee with respect to Stock Obligations
pursuant to the provision of Section 4.2, and subject to the provisions of
Sections 6.4 and 10.6 as to Participants' rights under certain circumstances to
have their Accounts invested in Stock or in assets other than Stock, the
Committee shall determine in its sole discretion the extent to which assets of
the Trust shall be used to repay Stock Obligations, to purchase Stock, or to
invest in other assets to be selected by the Committee or an investment manager.
No provision of the Plan relating to the allocation or vesting of any interests
in the Stock Fund or the Investment Fund shall restrict the Committee from
changing any holdings of the Trust, whether the changes involve an increase or a
decrease in the Stock or other assets credited to Participants' Accounts. In
determining the proper extent of the Trust's investment in Stock, the Committee
shall be authorized to employ investment counsel, legal counsel, appraisers, and
other agents to pay their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not
-------------------
established by reported trading on a generally recognized public market, the
Committee shall have the exclusive authority and responsibility to determine its
value for all purposes under the Plan. Such value shall be determined as of
each Valuation Date, and on any other date as of which the Plan purchases or
sells such Stock. The Committee shall use generally accepted methods of valuing
stock of similar corporations for purposes of arm's length business and
investment transactions, and in this connection the Committee shall obtain, and
shall be protected in relying upon, the valuation of such Stock as determined by
an independent appraiser experienced in preparing valuations of similar
businesses.
12.5 Compliance with ERISA. The Committee shall perform all acts
----------------------
necessary to comply with ERISA. Each individual member or employee of the
Committee shall discharge his duties in good faith and in accordance with the
applicable requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be
--------------------
governed by the affirmative vote of a number of members which is a majority of
the total number of members currently appointed, including vacancies. The
26
members of the Committee may meet informally and may take any action without
meeting as a group.
12.7 Execution of Documents. Any instrument executed by the Committee
-----------------------
shall be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and
------------------
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine
---------------------------------
which Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may decide in its sole discretion to
permit modifications of elections and to defer or accelerate benefits to the
extent consistent with applicable law and the best interests of the individuals
concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee
------------------------------------------
finds at any time that an individual qualifying for benefits under this Plan is
a minor or is incompetent, the Committee may direct the benefits to be paid, in
the case of a minor, to his parents, his legal guardian, a custodian for him
under the Uniform Transfers to Minors Act, or the person having actual custody
of him, or, in the case of an incompetent, to his Spouse, his legal guardian, or
the person having actual custody of him, the payments to be used for the
individual's benefit. The Committee and the Trustee shall not be obligated to
inquire as to the actual use of the funds by the person receiving them under
this Section 12.10, and any such payment shall completely discharge the
obligations of the Plan, the Trustee, the Committee, and the Employers to the
extent of the payment.
12.11 Indemnification by Employers. Except as separately agreed in
-----------------------------
writing, the Committee, and any member or employee of the Committee, shall be
indemnified and held harmless by the Employers, jointly and severally, to the
fullest extent permitted by law against any and all costs, damages, expenses,
and liabilities reasonably incurred by or imposed upon it or him in connection
with any claim made against it or him or in which it or he may be involved by
reason of its or his being, or having been, the Committee, or a member or
employee of the Committee, to the extent such amounts are not paid by insurance.
12.12 Nonparticipation by Interested Member. Any member of the
--------------------------------------
Committee who also is a Participant in the Plan shall take no part in any
determination specifically relating to his own participation or benefits, unless
his abstention would leave the Committee incapable of acting on the matter.
27
Section 13. Adoption, Amendment, or Termination of the Plan.
------------------------------------------------
13.1 Adoption of Plan by Other Employers. With the consent of the
------------------------------------
Association, any entity may become a participating Employer under the Plan by
(i) taking such action as shall be necessary to adopt the Plan, (ii) becoming a
party to the Trust Agreement establishing the Trust Fund, and (iii) executing
and delivering such instruments and taking such other action as may be necessary
or desirable to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer
------------------------------
shall be reorganized by way of merger, consolidation, transfer of assets or
otherwise, so that an entity other than an Employer shall succeed to all or
substantially all of the Employer's business, the successor entity may be
substituted for the Employer under the Plan by adopting the Plan and becoming a
party to the Trust Agreement. Contributions by the Employer shall be
automatically suspended from the effective date of any such reorganization until
the date upon which the substitution of the successor entity for the Employer
under the Plan becomes effective. If, within 90 days following the effective
date of any such reorganization, the successor entity shall not have elected to
become a party to the Plan, or if the Employer shall adopt a plan of complete
liquidation other than in connection with a reorganization, the Plan shall be
automatically terminated with respect to Employees of the Employer as of the
close of business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a plan
of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any
---------------------------------------
other provision of the Plan, the adoption of the Plan and the execution of the
Trust Agreement are conditioned upon their being determined initially by the
Internal Revenue Service to meet the qualification requirements of Section
401(a) of the Code, so that the Employers may deduct currently for federal
income tax purposes their contributions to the Trust and so that the
Participants may exclude the contributions from their gross income and recognize
income only when they receive benefits. In the event that this Plan is held by
the Internal Revenue Service not to qualify initially under Section 401(a), the
Plan, may be amended retroactively to the earliest date permitted by U.S.
Treasury Regulations in order to secure qualification under Section 401(a). If
this Plan is held by the Internal Revenue Service not to qualify initially under
Section 401(a) either as originally adopted or as amended, each Employer's
contributions to the Trust under this Plan (including any earnings thereon)
shall be returned to it and this Plan shall be terminated. In the event that
this Plan is amended after its initial qualification and the Plan as amended is
held by the Internal Revenue Service not to qualify under Section 401(a), the
amendment may be modified retroactively to the earliest date permitted by U.S.
Treasury Regulations in order to secure approval of the amendment under Section
401(a).
13.4 Right to Amend or Terminate. The Association intends to continue
----------------------------
this Plan as a permanent program. However, each participating Employer
separately reserves the right to suspend, supersede, or terminate the Plan at
28
any time and for any reason, as it applies to that Employer's Employees, and the
Association reserves the right to amend, suspend, supersede, merge, consolidate,
or terminate the Plan at any time and for any reason, as it applies to the
Employees of all Employers. No amendment, suspension, supersession, merger,
consolidation, or termination of the Plan shall reduce any Participant's or
Beneficiary's proportionate interest in the Trust Fund, or shall divert any
portion of the Trust Fund to purposes other than the exclusive benefit of the
Participants and their Beneficiaries prior to the satisfaction of all
liabilities under the Plan. Except as is required for purposes of compliance
with the Code or ERISA, each as amended from time to time, neither the
provisions of Section 4.1 and 4.2 relating to the crediting of contributions,
forfeitures and shares of Stock released from the Unallocated Stock Fund, nor
any other provision of the Plan relating to the allocation of benefits to
Participants, may be amended more frequently than once every six months.
Moreover, there shall not be any transfer of assets to a successor plan or
merger or consolidation with another plan unless, in the event of the
termination of the successor plan or the surviving plan immediately following
such transfer, merger, or consolidation, each participant or beneficiary would
be entitled to a benefit equal to or greater than the benefit he would have been
entitled to if the plan in which he was previously a participant or beneficiary
had terminated immediately prior to such transfer, merger, or consolidation.
Following a termination of this Plan by the Association, the Trustee shall
continue to administer the Trust and pay benefits in accordance with the Plan as
amended from time to time and the Committee's instructions.
Section 14. Miscellaneous Provisions.
-------------------------
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
----------------------------------
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
-----------------------------
anticipation of benefits from the Plan will be permitted or recognized by the
Employers, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former Spouse, child or other dependent of a Participant pursuant to
a State domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code.
14.3 Limit of Employer Liability. The liability of the Employers with
----------------------------
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
29
14.4 Treatment of Expenses. All expenses incurred by the Committee
----------------------
and the Trustee in connection with administering this Plan and Trust Fund shall
be paid by the Trustee from the Trust Fund to the extent the expenses have not
been paid or assumed by the Employers or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted
------------------
to include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
14.6 Nondiversion of Assets. Except as provided in Sections 5.3 and
-----------------------
13.3, under no circumstances shall any portion of the Trust Fund be diverted to
or used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions. If any provision of this Plan is
---------------------------
held to be invalid or unenforceable, the other provisions of the Plan shall not
be affected but shall be applied as if the invalid or unenforceable provision
had not been included in the Plan.
14.8 Service of Process. The agent for the service of process upon
-------------------
the Plan shall be the president of the Association, or such other person as may
be designated from time to time by the Association.
14.9 Governing State Law. This Plan shall be interpreted in
--------------------
accordance with the laws of the State of Ohio to the extent those laws are
applicable under the provisions of ERISA.
14.10 Special Rules for Persons Subject to Section 16(b) Requirements.
---------------------------------------------------------------
Notwithstanding anything herein to the contrary, any former Participant who is
subject to the provisions of Section 16(b) of the Securities Exchange Act of
1934, who becomes eligible to again participate in the Plan, may not become a
Participant prior to the date that is six months from the date such former
Participant terminated participation in the Plan.
In addition, any person subject to the provisions of Section 16(b) of the
1934 Act receiving a distribution of Stock from the Plan must hold such Stock
for a period of six months commencing with the date of distribution. However,
this restriction will not apply to Stock distributions made in connection with
death, retirement, disability or termination of employment, or made pursuant to
the terms of a qualified domestic relations order.
Section 15. Top-Heavy Provisions.
---------------------
15.1 Determination of Top-Heavy Status. The Committee shall determine
----------------------------------
on a regular basis whether each Plan Year is or is not a "Top-Heavy Year" for
purposes of implementing the provisions of Sections 15.2, and 15.3, which apply
only to the extent the Plan is top-heavy or super top-heavy within the meaning
of Section 416 and the Treasury Regulations promulgated thereunder. In making
this determination, the Committee shall use the following definitions and
principles:
30
15.1-1 The "Employer" includes all business entities which are
considered commonly controlled or affiliated within the meaning of Sections
414(b), 414(c), and 414(m) of the Code.
15.1-2 The "plan aggregation group" includes each qualified
retirement plan maintained by the Employer (i) in which a Key Employee is a
Participant during the Plan Year, (ii) which enables any plan described in
clause (i) to satisfy the requirements of Section 401(a)(4) or 410 of the
Code, or (iii) which provides contributions or benefits comparable to those
of the plans described in clauses (i) and (ii) and which is designated by
the Committee as part of the plan aggregation group.
15.1-3 The "determination date," with respect to the first Plan Year
of any plan, means the last day of that Plan Year, and with respect to each
subsequent Plan Year, means the last day of the preceding Plan Year. If
any other plan has a determination date which differs from this Plan's
determination date, the top-heaviness of this Plan shall be determined on
the basis of the other plan's determination date falling within the same
calendar years as this Plan's determination date.
15.1-4 A "Key Employee," with respect to a Plan Year, means an
Employee who at any time during the five years ending on the top-heavy
determination date for the Plan Year has received compensation from an
Employer and has been (i) an officer of the Employer having Total
Compensation greater than 50 percent of the limit then in effect under
Section 415(b)(1)(A) of the Code, (ii) one of the 10 Employees owning the
largest interests in the Employer having Total Compensation greater than
the limit then in effect under Section 415(c)(1)(A), (iii) an owner of more
than five percent of the outstanding equity interest or the outstanding
voting interest in any Employer, or (iv) an owner of more than one percent
of the outstanding equity interest or the outstanding voting interest in an
Employer whose Total Compensation exceeds $150,000. In determining which
individuals are Key Employees, the rules of Section 416(i) of the Code and
Treasury Regulations promulgated thereunder shall apply. The Beneficiary
of a Key Employee shall also be considered a Key Employee.
15.1-5 A "Non-key Employee" means an Employee who at any time during
the five years ending on the top-heavy determination date for the Plan Year
has received compensation from an Employer and who has never been a Key
Employee, and the Beneficiary of any such Employee.
15.1-6 The "aggregated benefits" for any Plan Year means (i) the
adjusted account balances in defined contribution plans on the
determination date, plus (ii) the adjusted value of accrued benefits in
defined benefit plans, calculated as of the annual valuation date
coinciding with or next preceding the determination date, with respect to
Key Employees and Non-key Employees under all plans within the plan
aggregation group which includes this Plan. For this purpose, the
"adjusted account balance" for and the "adjusted value of accrued benefit"
31
for any Employee shall be increased by all plan distributions made with
respect to the Employee during the five years ending on the determination
date. Further, the adjusted account balance under a plan shall not include
any amount attributable to a rollover contribution or similar transfer to
the plan initiated by an Employee and made after 1983, unless both plans
involved are maintained by the Employer, in which event the transferred
amount shall be counted in the transferee plan and ignored for all purposes
in the transferor plan. Finally, the adjusted value of accrued benefits
under any defined benefit plan shall be determined by assuming whichever
actuarial assumptions were applied by the Pension Benefit Guaranty
Corporation to determine the sufficiency of plan assets for plans
terminating on the valuation date.
15.1-7 This Plan shall be "top-heavy" for any Plan Year in which the
aggregated benefits of the Key Employees exceed 60 percent of the total
aggregated benefits for both Key Employees and Non-key Employees.
15.1-8 This Plan shall be "super top-heavy" for any Plan Year in
which the aggregated benefits of the Key Employees exceed 90 percent of the
total aggregated benefits for both Key Employees and Non-key Employees.
15.1-9 A "Top-Heavy Year" means a Plan Year in which the Plan is top-
heavy.
15.2 Minimum Contributions. For any Top-Heavy Year, each Employer
----------------------
shall make a special contribution on behalf of each Participant to the extent
that the total allocations to his Account pursuant to Section 4 is less than the
lesser of (i) four percent of his Total Compensation for that year, or (ii) the
highest ratio of such allocation to Total Compensation received by any Key
Employee for that year. For purposes of the special contribution of this
Section 15.2, a Key Employee's Total Compensation shall include amounts the Key
Employee elected to defer under a qualified 401(k) arrangement. Such a special
contribution shall be made on behalf of each Participant who is employed by an
Employer on the last day of the Plan Year, regardless of the number of his Hours
of Service, and shall be allocated to his Account.
For any Plan Year when (1) the Plan is top-heavy and (2) a Non-key Employee
is a Participant in both this Plan and a defined benefit plan included in the
plan aggregation group which is top heavy, the sum of the Employer contributions
and forfeitures allocated to the Account of each such Non-key Employee shall be
equal to at least five percent (5%) of such Non-key Employee's Total
Compensation for that year.
32
15.3 Minimum Vesting. If a Participant's vested interest in his
----------------
Account is to be determined in a Top-Heavy Year, it shall be based on the
following "top-heavy table":
Vesting Percentage of
Years Interest Vested
------- ---------------
fewer than 3 0
3 or more 100%
33
TRUST AGREEMENT
BETWEEN
FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF WARREN
AND
________________________
FOR THE
FIRST FEDERAL SAVINGS
AND LOAN ASSOCIATION OF WARREN
EMPLOYEE STOCK OWNERSHIP TRUST
CONTENTS
Page No.
Section 1 Creation of Trust 1
Section 2 Investment of Trust Fund and
Administrative Powers of the
Trustee 2
Section 3 Compensation and Indemnification
of Trustee and Payment of Expenses
and Taxes 7
Section 4 Records and Valuation 8
Section 5 Instructions from Committee 8
Section 6 Change of Trustees 9
Section 7 Miscellaneous 9
2
This TRUST AGREEMENT dated_____________ BETWEEN First Federal Savings and
Loan Association of Warren, a federally-chartered savings and loan association
with its principal office at 185 East Market Street, Warren, Ohio 44482
(hereinafter called the "Company"), AND ________________, with offices
at________________ (hereinafter called the "Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, effective____________, the Company approved and adopted an
employee stock ownership plan for the benefit of its employees, First Federal
Savings and Loan Association of Warren Employee Stock Ownership Plan,
(hereinafter called the "Plan"); and
WHEREAS, the Company has authorized the execution of this Trust Agreement
and has appointed_________________ as Trustee of the Trust Fund created pursuant
to the Plan; and
WHEREAS,________________ has agreed to act as trustee and to hold and
administer the assets of the Plan in accordance with the terms of this Trust
Agreement;
NOW, THEREFORE, the Company and the Trustee agree as follows:
Section 1. Creation of Trust.
------------------
1.1 Trustee.________________ shall be trustee of the Trust Fund created in
-------
accordance with and in furtherance of the Plan, and shall serve as Trustee until
its removal or resignation in accordance with Section 6.
1.2 Trust Fund. The Trustee hereby agrees to accept contributions from
-----------
the Employer as defined in the Plan and amounts transferred from other qualified
retirement plans from time to time in accordance with the terms of the Plan.
All such property and contributions, together with income thereon and increments
thereto, shall constitute the "Trust Fund" to be held in accordance with the
terms of the Trust Agreement.
1.3 Incorporation of Plan. An instrument entitled "First Federal Savings
----------------------
and Loan Association of Warren Employee Stock Ownership Plan" is incorporated
herein by reference, and this Trust Agreement shall be interpreted consistently
with that Plan. All words and phrases defined in that Plan shall have the same
meaning when used in this Trust Agreement.
1.4 Name. The name of this trust shall be "First Federal Savings and Loan
-----
Association of Warren Employee Stock Ownership Trust."
1.5 Nondiversion of Assets. In no event 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 the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan, except to the extent that assets
may be returned to the Employer in accordance with the Plan where the Plan fails
to qualify initially under Section 401(a) of the Code, or where they are
attributable to contributions made by mistake of fact or conditioned upon their
deductibility.
Section 2. Investment of Trust Fund and Administrative Powers of the
---------------------------------------------------------
Trustee.
- --------
2.1 Stock and Other Investments. The basic investment policy of the Plan
----------------------------
shall be to invest primarily in Stock of the Employer for the exclusive benefit
of the Participants and their Beneficiaries. The Committee shall have full and
complete investment authority and responsibility with respect to the purchase,
retention, sale, exchange, and pledge of Stock and the payment of Stock
Obligations, and the Trustee shall not deal in any way with Stock except in
accordance with the written instructions of the Committee. The Trustee shall
invest, or keep invested, all or a portion of the Trust Fund in Stock, and shall
pay Stock Obligations out of assets of the Trust Fund, as instructed from time
to time by the Committee. The Trustee shall invest any balance of the Trust
Fund (the "Investment Fund") in such other property as the Committee, in its
sole discretion, shall deem advisable, subject to any delegation of such
investment responsibility pursuant to Section 2.2. Nothing contained herein
shall provide investment discretion authority or any like kind responsibility in
regard to the assets of the Trust Fund.
In connection with instructions to acquire Stock, the Trustee may purchase
newly issued or outstanding Stock from an Employer or any other holders of
Stock, including Participants, Beneficiaries, and Plan fiduciaries. All
purchases and sales of Stock shall be made by the Trustee at fair market value
as determined by the Committee in good faith and in accordance with any
applicable requirement under ERISA. Such purchases may be made with assets of
the Trust Fund, with funds borrowed for this purpose (with or without guarantees
of repayment to the lender by an Employer), or by any combination of the
foregoing.
Notwithstanding any other provision of this Trust Agreement or the Plan,
neither the Committee nor Trustee shall make any purchase, sale, exchange,
investment, pledge, valuation, or loan, or take any other action involving those
assets for which it is responsible which (i) is inconsistent with the policy of
the Plan and Trust, (ii) is inconsistent with the prudence and diversification
requirements set forth in Sections 404(a)(1)(B) and (C) of ERISA (to the extent
such requirements apply to an employee stock ownership plan and trust), (iii) is
prohibited by Section 406 or 407 of ERISA, or (iv) would impair the
qualification of the Plan or the exemption of the Trust under Sections 401 and
501 of the Code.
2.2 Delegation of Investment Responsibility. The Committee may, by
----------------------------------------
written notice, direct the Trustee to segregate any portion or all of the
Investment Fund into one or more separate accounts for each of which full
investment responsibility will be delegated to an investment manager appointed
in such notice pursuant to Section 402(c)(3) of ERISA (hereinafter a "Manager").
For any separate account where the Trustee is to maintain custody of the assets,
the Trustee and the Manager shall agree upon procedures for the transmittal of
investment instructions from the Manager to the Trustee, and the Trustee may
provide the Manager with such documents as may be necessary to authorize the
Manager to effect transactions directly on behalf of the segregated account.
2
Further, the Committee may, by written notice, direct the Trustee to
segregate any portion or all of the Investment Fund into one or more separate
accounts for each of which full investment responsibility will be delegated to
an insurance company through one or more group annuity contracts, deposit
administration contracts, or similar contracts, which may provide for
investments in any commingled separate accounts established under such
contracts. An insurance company shall be a Manager with respect to any amounts
held under such a contract except to the extent the insurer's assets are not
deemed assets of the Plan and Trust Fund pursuant to Section 401(b)(2) of ERISA.
The allocation of amounts held under such a contract among the insurer's general
account and one or more individual or commingled separate accounts shall be
determined by the Company except as otherwise agreed by the Company and the
insurer.
Any Manager shall have all of the powers given to the Trustee pursuant to
Section 2.3 with respect to the portion of the Trust Fund committed to its
investment discretion and control. The Trustee shall be responsible for the
safekeeping of any assets which remain in its custody, but in no event shall the
Trustee be under any duty to question or make any inquiry or suggestion
regarding the action or inaction of a Manager or an insurer or the advisability
of acquiring, retaining, or disposing of any asset of a segregated account. The
Employer shall indemnify and hold the Trustee harmless from any and all costs,
damages, expenses, and liabilities which the Trustee may incur by reason of any
action taken or omitted to be taken by the Trustee upon directions from the
Committee, a Manager, or an insurer pursuant to this Section 2.2.
2.3 Trustee Powers. In addition to and not by way of limitation upon the
---------------
fiduciary powers granted to it by law, the Trustee shall have the following
specific powers, subject to the limitations set forth in Section 2.1:
2.3-1 to receive, hold, manage, invest and reinvest the money or other
property which constitutes the Trust Fund, without distinction between principal
and income;
2.3-2 to hold funds uninvested temporarily without liability for interest
thereon, and to deposit funds in one or more savings or similar accounts with
any banks and savings and loan associations which are insured by an
instrumentality of the federal government, including the Trustee if it is such
an institution.
2.3-3 at the direction of the Committee, to invest or reinvest the whole
or any portion of the money or other property which constitutes the Trust Fund
in such common or preferred stocks, investment trust shares, mutual funds,
commingled trust funds, partnership interests, bonds, notes, or other evidences
of indebtedness, and real and personal property as the Trustee in its absolute
judgment and discretion may deem to be for the best interests of the Trust Fund,
regardless of nondiversification to the extent that such nondiversification is
clearly prudent, and regardless of whether any such investment or property is
authorized by law regarding the investment of trust funds, of a wasting asset
nature, temporarily nonincome producing, or within or without the United States;
3
2.3-4 to invest in common and preferred stocks, bonds, notes, or other
obligations of any corporation or business enterprise in which an Employer or
its owners may own an interest;
2.3-5 at the direction of the Committee, to exchange any investment or
property, real or personal, for other investments or properties at such time and
upon such terms as the Trustee shall deem proper;
2.3-6 at the direction of the Committee, to sell, transfer, convey or
otherwise dispose of any investment or property, real or personal, for cash or
on credit, in such manner and upon such terms and conditions as the Trustee
shall deem advisable, and no person dealing with the Trustee shall be under any
duty to inquire as to the validity, expediency, or propriety of any such sale or
as to the application of the purchase money paid to the Trustee;
2.3-7 to hold any investment or property in the name of the Trustee, with
or without the designation of any fiduciary capacity, or in name of a nominee,
or unregistered, or in such other form that title may pass by delivery;
provided, however, that the Trustee's records always show that such investment
or property belongs to the Trust Fund and the Trustee shall not be relieved
hereby of its responsibility to maintain safe custody of the Trust Fund;
2.3-8 to organize one or more corporations to hold, manage, or liquidate
any property, including real estate, owned or acquired by the Trust Fund if in
the sole discretion of the Trustee the organization of such corporation or
corporations is for the best interest of the Trust;
2.3-9 to extend the time for payment of, to modify, to renew, or to
release security from any mortgage, note or other evidence of indebtedness, or
to take advantage of or waive any default; to foreclose mortgages and bid in
property under foreclosure or to take title to property by conveyance in lieu of
foreclosure, either with or without the payment of additional consideration;
2.3-10 to vote in person or by proxy all stocks and other securities
having voting privileges; to exercise or refrain from exercising any option or
privilege with respect to stocks and other securities, including any right or
privilege to subscribe for or otherwise to acquire stocks and other securities;
or to sell any such right or privilege; to assent to and join in any plan of
refinance, merger, consolidation, reorganization or liquidation of any
corporation or other enterprise in which this Trust may have an interest, to
deposit stocks and other securities with any committee formed to effectuate the
same, to pay any expense incidental thereto, to exchange stocks and other
securities for those which may be issued pursuant to any such plan, and to
retain as an investment the stocks and other securities received by the Trustee;
and to deposit any investment in a voting trust; notwithstanding the preceding,
participants and beneficiaries shall be entitled to direct the manner in which
stock allocated to their respective accounts are to be voted on all matters.
All stock which has been allocated to participant's accounts for which the
Trustee has received no written direction and all unallocated Employer
securities will be voted by the Trustee in direct proportion to any participant
directions received and solely in the interest
4
of the participants and beneficiaries. Whenever such voting rights are to be
exercised, the Employer, the Committee and the Trustee shall see that all
participants and beneficiaries are provided with adequate opportunity to deliver
their instructions to the Trustee regarding voting of stock allocated to their
accounts. The instructions of the participants with respect to the voting of
allocated shares hereunder shall be confidential;
2.3-11 to abandon any property, real or personal, which the Trustee shall
consider to be worthless or not of sufficient value to warrant its keeping or
protecting; to abstain from the payment of taxes, water rents, assessments,
repairs, maintenance, and upkeep of any such property; to permit any such
property to be lost by tax sale or other proceedings, and to convey any such
property for a nominal consideration or without consideration;
2.3-12 to borrow money from an Employer or from others (including the
Trustee), and to enter into installment contracts, for the purchase of Stock
upon such terms and conditions and at such reasonable rates of interest as the
Committee may deem to be advisable, to issue its promissory notes as Trustee to
evidence such debt, to secure the payment of such notes by pledging any property
of the Trust Fund, and to authorize the holders of any such notes to pledge them
to secure obligations of the holders and in connection therewith to repledge any
assets of the Trust as security therefor; provided that, with respect to any
extension of credit to the Trust involving, as a lender or guarantor, an
Employer or another "disqualified person" within the meaning of Section
4975(e)(2) of the Code --
(a) each loan or installment contract is primarily for the benefit of
Participants and Beneficiaries of the Plan;
(b) any interest on a loan or installment contract does not exceed a
reasonable rate;
(c) the proceeds of any loan shall be used only to acquire Stock, to repay
the loan, or to repay a previous loan meeting these conditions, and the
subject of any installment contract shall be only the Trust's purchase
of Stock;
(d) any collateral pledged to a creditor by the Trustee shall consist only
of the assets purchased with borrowed funds or received in accordance
with an installment contract and the creditor shall have no recourse
against the Trust Fund except with respect to the collateral (although
the creditor may have recourse against an Employer as guarantor);
(e) payments with respect to a loan or installment contract shall be made
only from those amounts contributed by the Employer to the Trust Fund,
from amounts earned on such contributions, and from cash dividends
received on unallocated Stock held by the Trust as collateral for such
an obligation; and
(f) upon the payment of any portion of balance due on a loan or upon any
installment payment, a proportionate part of any assets originally
pledged as collateral for such indebtedness shall be released from
encumbrance in accordance with Section 4.2 of the Plan and the
Committee shall at least annually advise the Trustee of the number of
shares of Stock so released and the proper allocation of such shares
under the terms of the Plan;
5
2.3-13 to manage and operate any real property which shall at any time
constitute an asset of the Trust Fund; to make repairs, alterations, and
improvements thereto; to insure such property against loss by fire or other
casualty; to lease or grant options for the sale of such property, which lease
or option may be for a period of time which may extend beyond the life of this
Trust; and to take any other action or enter into any other contract respecting
such property which is consistent with the best interests of the Trust;
2.3-14 to pay any and all reasonable and normal expenses incurred in
connection with the exercise of any power, right, authority or discretion
granted herein, and, upon prior notice to the Company, to employ and compensate
agents, investment counsel, custodians, actuaries, attorneys, and accountants in
such connection;
2.3-15 to employ and consult with any legal counsel, who also may be
counsel to an Employer or the Administrator, with respect to the meaning or
construction of this Trust Agreement, the extent of the Trustee's obligations
and duties hereunder, and whether the Trustee should take or decline to take a
particular action hereunder, and the Trustee shall be fully protected with
respect to any action taken or omitted by it in good faith pursuant to such
advice;
2.3-16 to defend any action or proceeding instituted against the Trust
Fund, to institute any action on behalf of the Trust Fund, and to compromise or
submit to arbitration any dispute concerning the Trust Fund;
2.3-17 to make, execute, acknowledge and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be necessary
or appropriate to carry out the powers herein granted;
2.3-18 to commingle the Trust Fund created pursuant hereto, in whole or in
part, in a single trust with all or any portion of any other trust fund,
assigning an undivided interest to each such commingled trust fund, provided
that such commingled trust is itself exempt from taxation pursuant to Section
501(a) of the Code, or its successor Section; and provided further that the
trust agreement governing such commingled trust shall be deemed incorporated by
reference in the Plan;
2.3-19 where two or more trusts governed by this Trust Agreement have an
undivided interest in any property, to credit the income from such property to
such trusts in proportion to their undivided interests, and when non pro rata
distributions of property or money are made from such trusts, to make
appropriate adjustments to the undivided fractional interests of such trusts;
2.3-20 to invest all or any portion of the Trust Fund in one or more group
annuity contracts, deposit administration contracts, and other such contracts
with insurance companies, including any commingled separate accounts established
under such contracts;
6
2.3-21 generally, with respect to all cash, stocks and other securities,
and property, both real and personal, received or held in the Trust Fund by the
Trustee, to exercise all the same rights and powers as are or may be lawfully
exercised by persons owning cash, or stocks and other securities, or such
property in their own right; and to do all other acts, whether or not expressly
authorized, which it may deem necessary or proper for the protection of the
Trust Fund; and
2.3-22 whenever more than two persons shall qualify to act as co-trustees,
to exercise and perform every power (including discretionary powers), authority
or duty by the concurrence of a majority of them the same effect as if all had
joined therein, except that the unanimous vote of such persons shall be
necessary to determine the number (one or more) and identity of persons who may
sign checks, make withdrawals from financial institutions, have access to safe
deposit boxes, or direct the sale of trust assets and the disposition of the
proceeds.
2.4 Brokerage. If permitted in writing by the Committee, the Trustee
----------
shall have the power and authority to be exercised in its sole discretion at any
time and from time to time to issue and place orders for the purchase or sale of
securities with qualified brokers and dealers. Such orders may be placed with
such qualified brokers and/or dealers who also provide investment information or
other research or statistical services to the Trustee in its capacity as a
fiduciary or investment manager for other clients.
Section 3. Compensation and Indemnification of Trustee and Payment of
----------------------------------------------------------
Expenses and Taxes.
- -------------------
3.1 Fees and Expenses from Fund. Compensation of Trustee. In
---------------------------
consideration for rendering services pursuant to this Trust Agreement the
Trustee shall be paid fees in accordance with the Trustee's fee schedule as in
effect from time to time. Fee changes resulting in fee increases shall be
effective upon not less than 30 days' notice to the Company. In addition, the
Trustee shall be reimbursed for any reasonable expenses, including reasonable
attorneys' fees, incurred in the administration of the Trust created hereby.
Fees and expenses shall be allocated to Participant Accounts, if any, unless
paid directly by the Employer. All compensation and expenses of the Trustee
shall be paid out of the Trust Fund or by the Employer as specified in the Plan.
If and to the extent the Trust Fund shall not be sufficient, such compensation
and expenses shall be paid by the Employer upon demand. If payment is due but
not paid by the Employer, such amount shall be paid from the assets of the
Trust Fund. The Trustee is hereby empowered to withdraw all such compensation
and expenses which are 60 days past due from the Trust Fund, and, in furtherance
thereof, liquidate any assets of the Trust Fund, without further authorization
or direction from or by any person.
3.2 Indemnification. Notwithstanding any other provision of this Trust
----------------
Agreement, any individual designated as a trustee hereunder shall be indemnified
and held harmless by the Employer to the fullest extent permitted by law against
any and all costs, damages, expenses and liabilities including, but not limited
to attorneys' fees and disbursements reasonably incurred by
7
or imposed upon such individual in connection with any claim made against him or
in which he may be involved by reason of his being, or having been, a trustee
hereunder, to the extent such amounts are not satisfied by insurance maintained
by the Employer, except liability which is adjudicated to have resulted from the
gross negligence or willful misconduct of the Trustee by reason of any action so
taken. Further, any corporate trustee and its officers, directors and agents may
be indemnified and held harmless by the Employer to the fullest extent permitted
by law against any and all costs, damages, expenses and liabilities including,
but not limited to attorneys' fees and disbursements reasonably incurred by or
imposed upon such persons and/or corporation in connection with any claim made
against it or them or in which it or them may be involved by reason of its
being, or having been, a trustee hereunder as may be agreed between the Employer
and such trustee, except liability which is adjudicated to have resulted from
the gross negligence or willful misconduct of the Trustee by reason of any
action so taken.
3.3 Expenses. All expenses of administering this Trust and the Plan,
---------
whether incurred by the Trustee or the Committee, shall be paid by the Trustee
from the Trust Fund to the extent such expenses shall not have been assumed by
the Employer.
3.4 Taxes. All taxes that may be levied or assessed upon or in respect of
------
the Trust Fund shall be paid from the Trust Fund. The Trustee shall notify the
Committee of any proposed or final assessments of taxes and may assume that any
such taxes are lawfully levied or assessed unless the Committee advises it in
writing to the contrary within fifteen days after receiving the above notice
from the Trustee. In such case, the Trustee, if requested by the Committee in
writing, shall contest the validity of such taxes in any manner deemed
appropriate by the Committee; the Employer may itself contest the validity of
any such taxes, in which case the Committee shall so notify the Trustee and the
Trustee shall have no responsibility or liability respecting such contest. If
either party to this Agreement contests any such proposed levy or assessments,
the other party shall provide such information and cooperation as the party
conducting the contest shall reasonably request.
Section 4. Records and Valuation.
----------------------
4.1 Records. The Trustee, and any investment manager appointed pursuant
--------
to Section 2.2, shall maintain accurate and detailed records and accounts of all
investments, receipts, disbursements and other transactions made by it with
respect to the Trust Fund, and all accounts, books and records relating thereto
shall be open at all reasonable time to inspection and audit by the Committee
and the Employer.
4.2 Valuation. From time to time upon the request of the Committee, but
----------
at least annually as of the last day of each Plan Year, the Trustee shall
prepare a balance sheet of the Investment Fund in accordance with Section 8.2 of
the Plan and shall deliver copies of the balance sheet to the Committee and the
Employer.
8
4.3 Discharge of Trustee. Ninety days after the filing of any balance
---------------------
sheet under Section 4.2 or any accounting under Section 6, the Trustee shall be
forever released and discharged from any liability or accountability other than
for gross negligence or wilful misconduct on the part of the Trustee to anyone
with respect to the transactions shown or reflected in such balance sheet or
accounting, except with respect to any acts or transactions as to which the
Committee, within such ninety-day period, files written objections with the
Trustee. The written approval of the Committee of any balance sheet or
accounting so filed by the Trustee, or the Committee's failure to file written
objections within ninety days, shall be a settlement of such balance sheet or
accounting as against all persons, and shall forever release and discharge the
Trustee from any liability of accountability to anyone with respect to the
transactions shown or reflected in such balance sheet or accounting other than
liability arising out of the Trustee's gross negligence or wilful misconduct.
If a statement of objections is filed by the Committee and the Committee is
satisfied that its objections should be withdrawn or if the balance sheet or
accounting is adjusted to its satisfaction, the Committee shall indicate its
approval of the balance sheet or accounting in a written statement filed with
the Trustee and the Trustee shall be forever released and discharged from any
liability of accountability to anyone in accordance with the immediately
preceding sentence. If an objection is not settled by the Committee and the
Trustee, the Trustee may start a proceeding for a judicial settlement of the
balance sheet or accounting in any court of competent jurisdictions; the only
parties that need be joined in such a proceeding are the Trustee, the Committee,
the Employer and any other parties whose participation is required by law.
4.4 Right to Judicial Settlement. Nothing in this Agreement shall prevent
-----------------------------
the Trustee from having its account settled by a court of competent jurisdiction
at any time. The only parties that need be joined in any such proceeding are
the Employer, the Committee, the Trustee and any other parties whose
participation is required by law.
Section 5. Instructions from Committee.
----------------------------
5.1 Certification of Members and Employees. From time to time the Company
---------------------------------------
shall certify to the Trustee in writing the names of the individuals comprising
the Committee and shall furnish to the Trustee specimens of their signatures and
the signatures of their agents, if any. The Trustee shall be entitled to
presume that the identities of such individuals and their agents are unchanged
until it receives a certification from the Company notifying it of any changes.
5.2 Instructions to Trustee.
------------------------
(a) The Trustee shall pay benefits and administrative expenses under the
Plan only when it receives (and in accordance with) written instructions of the
Committee indicating the amount of the payment and the name and address of the
recipient in accordance with the terms of the Plan. The Trustee need not
inquire into whether any payment the Committee instructs it to make is
consistent with the terms of the Plan or applicable law or otherwise proper.
Any payment made by the Trustee in accordance with such instructions shall be a
complete discharge and acquittance to the Trustee. If the Committee advises the
Trustee that benefits have become
9
payable with respect to a Participant's interest in the Trust Fund but does not
instruct the Trustee as to the manner of payment, the Trustee shall hold the
Participant's interest in the Trust until it receives written instructions from
the Committee as to the manner of payment. The Trustee shall not pay benefits
from the Trust Fund without such instructions, even though it may be informed
from other sources, including, without limitation, a Participant or Beneficiary,
that benefits are payable under the Plan. The Trustee shall have no
responsibility to determine when, to whom or in what amount benefits and
expenses are payable under the Plan. Further, the Trustee shall have no power,
authority or duty to interpret the Plan or inquire into the decisions or
determinations of the Committee, or to question the instructions given to it by
the Committee. If the Committee so directs, the Trustee shall segregate amounts
payable with respect to the interest in the Plan of any Participant and
administer them separately from the rest of the Trust Fund in accordance with
the Committee's instructions.
(b) The Trustee may require the Committee to certify in writing that any
payment of benefits or expenses it instructs the Trustee to make pursuant to
Section 5.2(a) above is: (i) in accordance with the terms of the Plan and/or
(ii) one which the Committee is authorized by the Plan and any other applicable
instruments to direct and/or (iii) made for the exclusive purpose of providing
benefits to Participants and Beneficiaries, or defraying reasonable expenses of
Plan administration and/or (iv) not made to a party in interest (within the
meaning of ERISA Section 3(14)), and/or (v) not a prohibited transaction (within
the meaning of Code Section 4975 and ERISA Section 406). If the Trustee
requests, instructions to pay benefits shall be made by the Committee on forms
prepared by the Trustee to include any or all of the above representations. The
Trustee shall be fully protected in relying on the truth of any such
representation by the Committee and shall have no duty to investigate whether
such representations are correct or to see to the application of any amounts
paid to and received by the recipient.
5.3 Plan Change. In the event of an amendment, merger, division, or
------------
termination of the Plan, the Trustee shall continue to disburse funds and to
take other proper actions in accordance with the instructions of the Committee.
Section 6. Change of Trustees.
-------------------
The Company may at any time remove any person or entity serving as a
trustee hereunder by giving to such person or entity written notice of removal
and, if applicable, the name and address of the successor trustee. Any person
or entity serving as a trustee hereunder may resign at any time by giving
written notice to the Company. Any such removal or resignation shall take
effect within 30 days after notice has been given by the trustee or by the
Company, as the case may be. Within those 30 days, the removed or resigned
trustee shall transfer, pay over and deliver any portion of the Trust Fund in
its possession or control (less an appropriate reserve for any unpaid fees,
expenses, and liabilities) and all pertinent records to the successor or
remaining trustee; provided, however, that any assets which are invested in a
collective fund or in some other manner which prevents their immediate transfer
shall be transferred and delivered to the successor trustee as soon as may be
practicable. Thereafter, the removed or resigned trustee shall
10
have no liability for the Trust Fund or for its administration by the successor
or remaining trustee, but shall render an accounting to the Committee of its
administration of the Trust Fund to the date on which its trusteeship shall have
been terminated. The Company may also, upon 30 days' notice to each person
currently serving as a trustee, appoint one or more persons to serve as co-
trustees hereunder.
Section 7. Miscellaneous.
--------------
7.1 Right to Amend. This Trust Agreement may be amended from time to time
---------------
by an instrument executed by the Company; provided, however, that any amendment
affecting the powers, duties or liabilities of the Trustee must be approved by
the Trustee, and provided, further, that no amendment may divert any portion of
the Trust Fund to purposes other than the exclusive benefit of the Participants
and their Beneficiaries prior to the satisfaction of all liabilities for
benefits. Any amendment shall apply to the Trust Fund as constituted at the
time of the amendment as well as to that portion of the Trust Fund which is
subsequently acquired.
7.2 Compliance with ERISA. In the exercise of its powers and the
----------------------
performance of its duties, the Trustee shall act in good faith and in accordance
with the applicable requirements under ERISA. Except as may be otherwise
required by ERISA, the Trustee shall not be required to furnish any bond in any
jurisdiction for the performance of its duties and, if a bond is required
despite this provision, no surety shall be required on it.
7.3 Nonresponsibility for Funding. The Trustee shall be under no duty to
------------------------------
enforce the payment of any contributions and shall not be responsible for the
adequacy of the Trust Fund to satisfy any obligations for benefits, expenses,
and liabilities under the Plan.
7.4 Reports. The Trustee shall file any report which it is required by
--------
law to file with any governmental authority with respect to this Trust, and the
Committee shall furnish to the Trustee whatever information is necessary to
prepare the report.
7.5 Dealings with Trustee. Persons dealing with the Trustee, including
----------------------
but not limited to banks, brokers, dealers, and insurers, shall be under no
obligation to inquire concerning the validity of anything which the Trustee
purports to do, nor need any person see to the proper application of any money
paid or any property transferred upon the order of the Trustee or to inquire
into the Trustee's authority as to any transaction.
7.6 Limitation Upon Responsibilities. The Trustee shall have no
---------------------------------
responsibilities with respect to the Plan or Trust other than those specifically
enumerated or explicitly allocated to it under this Trust Agreement or the
provisions of ERISA. All other responsibilities are retained and shall be
performed by one or more of the Employer, the Committee, and such advisors or
agents as they choose to engage.
11
The Trustee may execute any of the trusts or powers hereof and perform any
of its duties by or through attorneys, agents, receivers or employees and shall
not be answerable for the conduct of the same if chosen with reasonable care and
shall be entitled to advice of counsel concerning all matters of trust hereof
and the duties hereunder, and may in all cases pay such reasonable compensation
to all such attorneys, agents, receivers and employees as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney (who may be the attorney for the trustee or
attorney for the Committee), approved by the Trustee in the exercise of
reasonable care. The Trustee shall not be responsible for any loss or damage
resulting from any action or non-action in good faith in reliance upon such
opinion or advice.
The Trustee shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram or other paper or document
believed to be genuine and correct and to have been signed or sent by the proper
person or persons, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statement contained in any such writing but
may accept the same as conclusive evidence of the truth and accuracy of the
statements therein contained.
The Trustee shall not be liable for other than its gross negligence or
willful misconduct. Except in the case of gross negligence or wilful misconduct
on the part of the Trustee, the Trustee in its corporate capacity shall not be
liable for claims of any persons in any manner regarding the Plan; such claims
shall be limited to the Trust Fund. Unless the Trustee participates knowingly
in, or knowingly undertakes to conceal, an act or omission of the Committee or
any other fiduciary, knowing such act or omission to be a breach of fiduciary
responsibility, the Trustee shall be under no liability for any loss of any kind
which may result by reason of such act or omission.
Before taking any action hereunder at the request or direction of the
Committee, the Trustee may require that indemnity in form and amount
satisfactory to the Trustee be furnished for the reimbursement of any and all
costs and expenses to which it may be put including, without limitation,
reasonable attorneys' fees and to protect it against all liability, except
liability which is adjudicated to have resulted from the gross negligence or
willful misconduct of the Trustee by reason of any action so taken.
No provision of this Agreement shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.
7.7 Qualification of Plan and Trust. The Trustee shall be fully protected
--------------------------------
in assuming that the Plan and Trust meet the requirements of Code Section 401
and 501, respectively, and all the
12
applicable provisions of ERISA unless it is advised to the contrary in
writing by the Committee or a governmental agency.
7.8 Party in Interest Information. The Employer shall provide the Trustee
------------------------------
with such information concerning the relationship between any person or
organization and the Plan as the Trustee reasonably requests in order to
determine whether such person or organization is a party in interest with
respect to the Plan within the meaning of ERISA Section 3(14).
7.9 Disputes. If a dispute arises as to the payment of any funds or
---------
delivery of any assets by the Trustee, the Trustee may withhold such payment or
delivery until the dispute is determined by a court of competent jurisdiction or
finally settled in writing by the parties concerned.
7.10 Successor Trustees. This Trust Agreement shall apply to any person
-------------------
who shall be appointed to succeed the person currently appointed as the Trustee;
and any reference herein to the Trustee shall be deemed to include any one or
more individuals or corporations or any combination thereof who or which hall at
any time act as a co-trustee or as the sole trustee.
7.11 Governing State Law. This Trust Agreement shall be interpreted in
--------------------
accordance with the laws of the State of Ohio to the extent those laws may be
applicable under the provisions of ERISA.
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ATTEST: FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WARREN
______________________________ By: _____________________________________
Mary Ann Roberts Steven R. Lewis
Corporate Secretary President and Chief Executive Officer
ATTEST: _____________________________________
as TRUSTEE
______________________________ By: _____________________________________
14