SEVERANCE PLAN
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
ROSWELL, NEW MEXICO
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Effective on October 10, 2006
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
SEVERANCE PLAN
ARTICLE I
PURPOSE
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Section 1.1 Statement of Purpose
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First Federal Banc of the Southwest, Inc. adopts this Severance Plan for
the benefit of its eligible employees and those of other Participating
Employers. The Company recognizes that it may be subject to the possibility of a
negotiated or unsolicited Change in Control, which may result in a loss of
employment for some of its Employees. The purpose of the Plan is to encourage
the Bank's Employees and those of other Participating Employers to continue
working for their employers with their full time and attention devoted to their
employer's affairs by providing prescribed income security and benefit
continuation in the event of an Involuntary Severance following a Change in
Control.
Section 1.2 Other Severance Plans, Policies, and Practices Superseded
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As of the Effective Date, this Plan supersedes in its entirety any plan,
policy, or practice of the Bank for the provision of severance benefits to
Employees in the event of termination of employment following a Change in
Control, whether written or oral or formal or informal. No severance benefits
shall be provided to any person who incurs a termination of employment with the
Bank on or after the Effective Date following a Change in Control, except as
provided under the terms of the Plan or as provided under the terms of a written
executed employment agreement or change in control agreement specifically
providing for the payment of benefits following termination of employment with
the Bank or other Participating Employer in connection with or following a
Change in Control.
ARTICLE II
DEFINITIONS
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For purposes of the Plan, the following terms shall have the meanings
assigned to them below, unless a different meaning is plainly indicated by the
context:
Section 2.1 Affiliated Employer means the Bank; any corporation
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which is amember of a controlled group of corporations (as
defined in section 414(b) of the Code) that includes the Bank; any trade or
business (whether or not incorporated) that is under common control (as defined
in section 414(c) of the Code) with the Bank; any organization (whether or not
incorporated) that is a member of an affiliated service group (as defined in
section 414(m) of the Code) that includes the Bank; any leasing organization (as
defined in section 414(n) of the Code) to the extent that any of its employees
are required pursuant to section 414(n) of the Code to be treated as employees
of the Bank; and any other entity that is required to be aggregated with the
Bank pursuant to regulations under section 414(o) of the Code.
Section 2.2 Bank means First Federal Bank.
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Section 2.3 Base Salary means, for any Employee as of any date of
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reference, the Employee's annual rate of base salary. However, amounts earned in
excess of $220,000 (as indexed) will not be included in an Employee's Base
Salary. For these purposes, Base Salary will be indexed in the same time and in
the same manner as required under Code Section 401(a)(17).
Section 2.4 Board means the Board of Directors of First Federal Banc
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of the Southwest, Inc.
Section 2.5 Cause means, with respect to the conduct of an Employee
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in connection with his employment with any Participating Employer, personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, or willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any material breach of any
material provision of this Plan, in each case as measured against standards
generally prevailing at the relevant time in the community banking industry;
provided, however, that, solely for purposes of the Plan, an Employee shall not
be deemed to have been discharged for Cause unless and until the Committee
determines (after reasonable notice to the Employee and a reasonable opportunity
for the Employee to make oral and written presentations to the Committee, on his
own behalf, or through a representative, who may be his legal counsel, to refute
the grounds for the proposed determination) that grounds exist for discharging
the Employee for "Cause". No act or failure to act on the part of the Employee
shall be considered "willful" unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief that the Employee's
action or omission was in the best interest of the Bank.
Section 2.6 Change in Control shall be deemed to have occurred at
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such time as (a) any "person" (as the term is used in Sections 13(d) and l4(d)
of the Securities Exchange Act of 1934 ("Exchange Act")) is or becomes the
"beneficial owner" (as defined in Rule l3d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board 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 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) consummation of a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction unless, immediately
following such transaction, at least a majority of the members of the board of
directors or other governing body of the resulting or surviving entity are
individuals who were members of the Board immediately prior to the transaction
and equity interests representing at least a majority of the voting power in the
election of directors or other members of the board of directors or other
governing board of the resulting or surviving entity are owned, immediately
following such transaction, by persons who owned common stock of the Company
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immediately prior to such transaction and in substantially the same relative
proportions as their ownership of common stock of the Company immediately prior
to such transaction; or (d) consummation of a tender offer pursuant to which the
shareholders owning beneficially or of record more than 50% of the outstanding
securities of the Company have tendered their shares pursuant to such tender
offer and such tendered shares have been accepted by the tender offeror; or (e)
consummation of a dissolution or complete liquidation of the Bank or the
Company, or shareholder approval of a plan for the dissolution or complete
liquidation of the Bank or the Company. Notwithstanding anything to the contrary
herein, in the event of an Employee's Involuntary Severance due to a reason set
forth in section 2.14(b) hereof, "Change in Control" shall also satisfy the
definition set forth in the Regulations.
Section 2.7 Code means the Internal Revenue Code of 1986, as amended.
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Section 2.8 Code Section 409A Key Employee means a "key employee" within
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the meaning of Code Section 409A.
Section 2.9 Committee means the Benefits Committee of the Bank or such
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other person or entity as the Board may specify to perform the duties of the
Committee under the Plan; provided, however, that following a Change in Control,
the Committee shall consist exclusively of those individuals serving on the
Committee immediately prior to the Change in Control and such other individuals
as may be appointed by the incumbent members of the Committee.
Section 2.10 Company means First Federal Banc of the Southwest, Inc.
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Section 2.11 Effective Date means October 10, 2006.
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Section 2.12 Employee means an employee of a Participating Employer who
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is listed on Exhibit A.
Section 2.13 FDI Act mean s the Federal Deposit Insurance Act, as the same
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may be amended from time to time, and the corresponding provisions of any
successor statute.
Section 2.14 Involuntary Severance means a) the discharge or dismissal
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of an Employee by a Participating Employer other than for Cause or (b)
termination of employment at an Employee's election after any action following a
Change in Control which, either alone or together with other actions, results
in: (i) the material reduction of the Employee's base compensation or benefits
by more than 20% or (ii) the relocation of the Employee's principal place of
employment by more than 30 miles from its location immediately prior to the
Change in Control'.
Section 2.15 Participating Employer means the Bank and its wholly
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owned subsidiaries and any successor thereto and any other Affiliated Employer
which, with the prior written approval of the Board and subject to such terms
and conditions as may be imposed by the Board, shall adopt this Plan.
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Section 2.16 Plan means this First Federal Banc of the Southwest, Inc.
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Severance Plan, as the same may be amended from time to time.
Section 2.17 Regulations means the proposed or final U.S. Treasury
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Department Regulations under Code Section 409A.
Section 2.18 Separation from Service means, consistent with Code Section
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409A(2)(a)(i), an Employee's death, retirement, or termination of employment. No
Separation from Service shall be deemed to occur due to military leave, sick
leave or other bona fide leave of absence if the period of such leave does not
exceed six months or, if longer, so long as an Employee's right to reemployment
is provided by law or contract. If the leave exceeds six months and an
Employee's right to reemployment is not provided by law or by contract, then an
Employee shall have a Separation from Service on the first date immediately
following such six-month period. An Employee shall not be treated as having a
Separation from Service if the Employee provides more than insignificant
services for the Bank and Company following the Employee's actual or purported
termination of employment with Bank and Company. Services shall be treated as
not being insignificant if such services are performed at an annual rate that is
at least equal to 20 percent of the services rendered by the Employee for Bank
and Company, on average, during the immediately preceding three full calendar
years of employment (or if employed less than three years, such shorter period
of employment) and the annual base compensation for such services is at least
equal to 20 percent of the average base compensation earned during the final
three full calendar years of employment (or if employed less than three years,
such shorter period of employment). Where an Employee continues to provide
services to a previous employer in a capacity other than as an employee, a
Separation from Service will not be deemed to have occurred if the Employee is
providing services at an annual rate that is 50 percent or more of the services
rendered, on average, during the immediate preceding three full calendar years
of employment (or if employed less than three years, such lesser period) and the
annual base compensation for such services is 50 percent or more of the annual
base compensation earned during the final three full calendar years of
employment (or if less, such lesser period).
Section 2.19 Severance Period means (a) in the case of a Tier One Employee,
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a period of twelve (12) months -; (b) in the case of a Tier Two Employee, a
period of six (6) months; and (c) in the case of a Tier Three Employee, a period
of three (3) months .
Section 2.20 Tier One Employee means an Employee listed as a Tier One
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Employee in Exhibit A.
Section 2.21 Tier Two Employee means an Employee listed as a Tier Two
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Employee in Exhibit A.
Section 2.22 Tier Three Employee means an Employee listed as a Tier Three
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Employee in Exhibit A.
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ARTICLE III
BENEFITS
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Section 3.1 Severance Benefits
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(a) An Employee whose employment with all Participating Employers is
terminated under circumstances constituting an Involuntary Severance and whose
termination occurs upon or within twelve (12) months following a Change in
Control shall be entitled to the following benefits: a Tier One Employee shall
receive as severance pay under this Plan a lump sum payment representing one
hundred percent (100%) of Base Salary; a Tier Two Employee shall receive as
severance pay under this Plan a lump sum payment representing fifty percent
(50%) of Base Salary; and a Tier Three Employee shall receive as severance pay
under this Plan a lump sum payment representing twenty-five percent (25%) of
Base Salary. Except as provided in section 3.4, the lump sum shall be due and
payable on the date of the Employee's Involuntary Severance. Notwithstanding
anything in the Plan to the contrary: if an Employee's Involuntary Severance
occurs prior to his Separation from Service, his severance benefit shall be
deferred until and shall be payable on the date of his Separation from Service
provided, however, if such Employee is also a Code Section 409A Key Employee and
the following is required by Code Section 409A and the regulations thereunder,
his severance benefit shall be deferred until and shall be payable in a lump sum
on the six-month anniversary of the later of his Involuntary Severance or his
Separation from Service. Any severance benefit that is not paid in full within
eight (8) calendar days following the recipient's Involuntary Severance shall
accrue interest at the applicable federal rate ("AFR") as determined under Code
Sections 280G and 1274(d), credited daily and compounded annually, from the date
of Involuntary Severance to the actual date of payment.
(b) Notwithstanding the preceding paragraphs of this section 3.1, in no
event shall the benefits payable hereunder, when aggregated with other benefits
subject to Section 280G of the Internal Revenue Code of 1986, constitute an
"excess parachute payment" under Section 280G of the Internal Revenue Code of
1986 or any successor thereto, and in order to avoid such a result, the benefits
payable hereunder will be reduced, if necessary, to an amount, the value of
which is one dollar ($1.00) less than the amount which would be considered an
excess parachute payment.
Section 3.2 Insurance Benefits.
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An Employee who is eligible for severance benefits under section 3.1 shall
also be eligible for continuation of coverage under any group medical, dental
and other plans which constitute "group health plans" (within the meaning of
section 607(1) of ERISA) for a period equal to the Employee's Severance Period;
provided the Employee is participating in such group health plans at the time of
their Involuntary Serverance. Such coverage shall be substantially comparable
and on terms and conditions (including, but not limited to, coverage of spouses
and dependents and any premium-sharing arrangements) no less favorable to the
Employee than those in effect immediately prior to his Involuntary Severance,
provided, however, that nothing set forth herein is intended to shorten the
period that such Employee is entitled to health care continuation coverage under
Code Section 4980B, or other applicable federal, state, or local law. If the
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Employee is eligible for a continuation of coverage under this section 3.2 and a
continuation of coverage under applicable federal, state or local law, the
periods of coverage shall run concurrently.
Section 3.3 Vesting.
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The benefits to be provided under sections 3.1 and 3.2 of the Plan shall be
completely vested and nonforfeitable upon the occurrence of a Change in Control.
Section 3.4 Benefits Contingent on Execution of Release
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The provision of severance benefits under the Plan to any Employee shall be
subject to the condition that the Employee execute and deliver to the Committee
an instrument, in such form as the Committee shall prescribe, which shall
include a release in favor of the Participating Employers and their officers,
employees, agents, owners, heirs, successors and assigns for certain
employment-related claims. Such release shall include, but not be limited to, a
release of any claims which the Employee may have against any Participating
Employer under the Age Discrimination in Employment Act of 1967, as amended; the
Fair Labor Standards Act, as amended; the Worker Adjustment Retraining and
Notification Act, as amended; the Civil Rights Act of 1866, as amended; Title
VII of the Civil Rights Act of 1964, as amended; and any other federal, state or
local law, rule or regulation under which the Employee may have a claim arising
out of his employment with a Participating Employer or the termination of such
employment. No Participating Employer shall have any obligation to provide
benefits under this Plan to any Employee who fails or refuses, following request
in writing made within five (5) business days after the Employee's Involuntary
Severance or the occurrence of a Change in Control (whichever is later) to sign
and deliver such a release. If a request for a release is timely made, the
Participating Employers' obligation to provide benefits under the Plan shall be
deferred until such release has been executed and delivered by the Employee and
any period during which the Employee has a legal right to revoke the release has
expired.
Section 3.5 Withholding.
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Payments under Section 3.1 hereof shall be subject to all applicable
federal, state and local income withholding taxes.
ARTICLE IV
ADMINISTRATION
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Section 4.1 Named Fiduciaries.
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The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Committee and any
person or entity named as a fiduciary pursuant to the written documentation
pertaining to the Plan. This Article IV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
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to him or it, and none of such responsibilities or any other responsibility
shall be shared by two or more of such Named Fiduciaries. Whenever one Named
Fiduciary is required by the Plan to follow the directions of another Named
Fiduciary, the two Named Fiduciaries shall not be deemed to have been assigned a
shared responsibility, but the responsibility of the Named Fiduciary giving the
directions shall be deemed his sole responsibility, and the responsibility of
the Named Fiduciary receiving those directions shall be to follow them insofar
as such instructions are on their face proper under applicable law.
Section 4.2 Benefits Committee.
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(a) There shall be a Benefits Committee, consisting of not less than 3
individuals who shall be appointed by the Chief Executive Officer of the Bank
and who shall accept such appointment by delivering a written notice of such
acceptance to the Chief Executive Officer as hereinafter provided; provided,
however, that following the occurrence of a Change in Control, the Benefits
Committee shall consist solely of those individuals serving as members of the
Committee immediately prior to the Change in Control who consent to so serve and
any additional individuals appointed from time to time by the incumbent members
of the Committee. The Committee shall have the powers and responsibilities
enumerated in section 4.2(c). The Committee shall elect a Chairman who shall,
and may appoint a Secretary who need not, be a member of the Committee. Any
filing which is required or permitted to be made with the Committee shall be
deemed to be satisfactorily made upon mailing or delivering such filing to the
Secretary of the Committee, or, if a Secretary is not appointed, to the Chairman
of the Committee. A member of the Committee may resign only by giving at least
thirty (30) days' prior written notice of resignation to the Committee and to
the Chairman of the Board, and such resignation shall be effective on the date
specified in such notice.
(b) The Committee shall hold meetings at such times and may make such
administrative rules as it may deem proper. Except as provided in the last
sentence of this section 4.2(b), any action of the Committee shall be taken
pursuant to a majority vote taken at a meeting, or pursuant to the unanimous
consent of its members without a meeting, and such action shall constitute the
action of the Committee and shall be binding in the same manner as if all
members of the Committee had joined therein. A majority of the members of the
Committee shall constitute a quorum. The Committee shall record minutes of any
actions taken at its meetings or of any other official action of the Committee
and shall report to the Board at least once each year on its activities. No
member of the Committee who would be affected by a particular matter upon which
the Committee is scheduled to act shall be permitted to participate in the
Committee's action with respect to such matter, nor shall he be considered a
member of the Committee for purposes of determining the existence of a quorum or
a majority or unanimous vote with respect to such action, unless all of the
members of the Committee are affected thereby. Any person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the Secretary of the
Committee or by two (2) of the members of the Committee or by a representative
of the Committee authorized by the Committee to sign the same in its behalf.
(c) The Committee shall, subject to the responsibilities of the Board and
the terms and conditions of the Plan, have the following responsibilities:
(i) To review the performance of the Plan Administrator;
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(ii) To hear and decide appeals, pursuant to the claims
procedure contained in Article V of the Plan, taken from the
decisions of the Plan Administrator;
(iii) To hear and decide questions, including interpretation
of the Plan, as may be referred to the Committee by the Plan
Administrator;
(iv) To report and make recommendations to the Board
regarding changes in the Plan, including changes in the operation
and management of the Plan;
(v) To designate an alternate Plan Administrator to serve in
the event that the Administrator is absent or otherwise unable to
discharge his responsibilities;
(vi) To remove and replace the Plan Administrator or
alternate, or both of them, and to fill a vacancy in either
office;
(vii) To discharge such other responsibilities or follow
such directions as may be assigned or given by the Board,
consistent with the terms of the Plan; and
(viii) To perform any duty or take any action which is
allocated to the Committee under the Plan.
The Committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.
Section 4.3 Plan Administrator.
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There shall be a Plan Administrator, who shall be the Committee, or such
person, committee or entity as shall be appointed by the Committee, and who
shall, subject to the responsibilities of the Committee and the Board, have the
responsibility for the day-to-day control, management, operation and
administration of the Plan (except trust duties). The Plan Administrator shall
have the following responsibilities:
(a) To maintain records necessary or appropriate for the administration of
the Plan;
(b) To give and receive such instructions, notices, information, materials,
reports and certifications as may be necessary or appropriate in the
administration of the Plan;
(c) To prescribe forms and make rules and regulations consistent with the
terms of the Plan and with the interpretations and other actions of the
Committee;
(d) To require such proof or other evidence as to any matter as may be
necessary or appropriate in the administration of the Plan;
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, communications with Employees and other persons;
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(f) To determine any question arising in connection with the Plan, and the
Plan Administrator's decision or action in respect thereof shall be final and
conclusive and binding upon the Bank, Employees, and any other person having an
interest under the Plan; provided, however, that any question relating to
inconsistency or omission in the Plan, or interpretation of the provisions of
the Plan, shall be referred to the Committee by the Plan Administrator and the
decision of the Committee in respect thereof shall be final;
(g) Subject to the provisions of Article V, to review and dispose of claims
under the Plan filed pursuant to Article V;
(h) If the Plan Administrator shall determine that by reason of illness,
senility, insanity, or for any other reason, it is undesirable to make any
payment to a Employee, or any other person entitled thereto, to direct the
application of any amount so payable to the use or benefit of such person in any
manner that he may deem advisable or to direct in his discretion the withholding
of any payment under the Plan due to any person under legal disability until a
representative competent to receive such payment in his behalf shall be
appointed pursuant to law;
(i) To discharge such other responsibilities or follow such directions as
may be assigned or given by the Committee or the Board, consistent with the
terms of the Plan; and
(j) To perform any duty or take any action which is allocated to the Plan
Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only by giving at least 30 days' prior written notice of resignation to the
Committee, and such resignation shall be effective on the date specified in such
notice.
Section 4.4 Allocation of Fiduciary Responsibilities and Employment of
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Advisors.
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Any Named Fiduciary may:
(a) allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or it may
designate, provided that such allocation and designation shall be made in
writing and filed with the Plan Administrator;
(b) employ one or more persons to render advice to him or it with regard to
any of his or its responsibilities under the Plan; and
(c) consult with counsel, who may be counsel to the Bank.
Section 4.5 Other Administrative Provisions.
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(a) Any person whose claim has been denied in whole or in part must exhaust
the administrative review procedures provided in Article V prior to initiating
any claim for judicial review.
(b) No bond or other security shall be required of a member of the Plan
Administrator, the Committee and/or any officer or employee of the Bank to whom
fiduciary responsibilities are allocated by a Named Fiduciary, except as may be
required by applicable law.
(c) Subject to any limitation on the application of this section 4.5(c)
pursuant to applicable law, neither the Plan Administrator nor any member of the
Committee nor any officer or employee of the Bank to whom fiduciary
responsibilities are allocated by a Named Fiduciary, shall be liable for any act
of omission or commission by himself or by another person, except each for his
own individual willful and intentional malfeasance.
(d) The Plan Administrator or the Committee may, except with respect to
actions under Article V or as otherwise provided by law, shorten or extend (but
not beyond sixty (60) days) or waive the time required by the Plan for filing
any notice or other form with the Plan Administrator or Committee, as
applicable, or taking any other action under the Plan.
(e) The Plan Administrator or the Committee may direct that the costs of
services provided pursuant to section 4.4, and such other reasonable expenses as
may be incurred in the administration of the Plan, shall be paid out of the
funds of the Plan, unless the Bank shall pay them.
(f) Any person, group of persons, committee, corporation or organization
may serve in more than one fiduciary capacity with respect to the Plan.
(g) Any action taken or omitted by the Plan Administrator or the Committee
with respect to the Plan, including any decision, interpretation, claims denial
or review on appeal, shall be conclusive and binding on the Bank and all
interested parties and shall be subject to judicial modification or reversal
only to the extent determined by a court of competent jurisdiction that such
action or omission was arbitrary and capricious and contrary to the terms of the
Plan.
(h) The Participating Employers, jointly and severally, shall indemnify the
Committee, its members and the Plan Administrator against, and defend them and
hold them harmless from, any and all losses, costs, expenses, liabilities and
exposures of any name and nature whatsoever which they may suffer or incur as a
result of service, including acts or omissions to act, as Plan Administrator or
as a member of the Committee. Following a Change in Control, such
indemnification, defense and hold harmless shall be to an extent and on terms
and conditions no less favorable to the Committee members and Plan Administrator
than those in effect immediately prior to the Change in Control.
(i) The Participating Employers shall purchase and maintain a customary
policy of insurance insuring the Committee, its members and the Plan
Administrator against losses, costs, expenses, liabilities and exposures of any
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name and nature whatsoever which they may suffer or incur as a result of
service, including acts or omissions to act, as Plan Administrator or as a
member of the Committee. Following a Change in Control, such insurance coverage
indemnification, defense and hold harmless shall be to an extent and on terms
and conditions no less favorable to the Committee members and Plan Administrator
than those in effect immediately prior to the Change in Control.
ARTICLE V
BENEFIT CLAIMS AND APPEALS
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Section 5.1 General Procedures.
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(a) (i) Any claim relating to benefits under the Plan shall be filed with
the Plan Administrator on a form prescribed by it. The Plan Administrator shall
appoint a person to review and make a determination on the claim. The Plan
Administrator shall give the claimant written notice of the determination.
Except as provided in section 5.1(a)(ii), a notice of determination (whether or
not adverse) on a claim under this section shall be given not later than 90 days
after receipt.
(ii) If the Plan Administrator finds it necessary, due to special
circumstances (for example, the claimant's failure to provide all information
required to process the claim or the need to hold a hearing), to extend this
period and so notifies the claimant in writing, the decision shall be rendered
as soon as practicable, but in no event later than 180 days after receipt of a
claim. Any notice of such an extension shall be in writing, shall be made within
the initial claim determination period, and shall specify the reasons for the
extension and the date by which a decision on review is expected to be rendered.
(iii) The notice of determination of a claim filed under this section shall
specifically set forth:
(A) The reasons for the denial; and
(B) The pertinent Plan provisions on which the denial
was based; and
(C) Any additional material or information necessary
for the claimant to perfect his claim and an explanation of why such
material or information is needed; and
(D) An explanation of the Plan's procedure for review
of the denial of the claim, the time limits applicable to such
procedure and a statement of the claimant's right to bring a civil
action to recover benefits due to him under the terms of the Plan and
any other civil action under section 502(a) of ERISA following an
adverse benefit determination on review.
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If a claimant does not receive a written notice of the determination of the
claim on or before the date prescribed by this section 5.1(a), the claim shall
be deemed as having been denied on such date for the purpose of permitting the
claimant to request review of the claim.
(b) (i) Any person whose claim filed pursuant to section 5.1(a) has been
denied in whole or in part may request review of the claim by the Committee,
upon a form prescribed by the Committee. The review shall not afford deference
to the initial adverse benefit determination. The claimant shall file such form
with the Committee no later than 60 days after the claimant's receipt of the
written notice of denial provided for in section 5.1(a), or, if such notice is
not provided, within 60 days after such claim is deemed denied pursuant to
section 5.1(a). The claimant may include with such form written comments,
documents, records, and other information relevant to the claim for benefits.
The claimant shall be provided, upon request and free of charge, reasonable
access to and copies of all documents, records and other information relevant to
the claims. The review shall take into account the comments, documents, records
and other information submitted by the claimant and relevant to the claim,
without regard to whether such information was submitted or considered as part
of the initial claim determination. A decision on review shall be rendered by
the Committee and communicated to the claimant by written notice. Such written
notice shall be given not later than 60 days after receipt of the request for
review.
(ii) If the Committee finds it necessary, due to special circumstances (for
example, the need to hold a hearing), to extend this period and so notifies the
claimant in writing, the decision shall be rendered as soon as practicable, but
in no event later than 120 days after receipt of a request for review. Any
notice of such an extension shall be in writing, shall be made within the
initial claim determination period, and shall specify the reasons for the
extension and the date by which a decision on review is expected to be rendered.
(iii) The notice of determination contemplated by section 5.1(b)(i) shall
specifically set forth:
(A) The reasons for the denial; and
(B) The pertinent Plan provisions on which the denial
was based; and
(C) A statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access to, and
copies of, documents, records, and other information relevant to the
claimant's claim for benefits; and
(D) An explanation of any voluntary appeals process
offered under the Plan and the claimant's right to receive information
concerning any such procedures and a statement of the claimant's right
to bring a civil action under section 502(a) of ERISA following an
adverse benefit determination on review.
Section 5.2 Appointment of Representatives.
------------------------------
(a) A person filing a claim for benefits, or filing a request for a review
of an adverse benefit determination, may appoint a representative to act on the
12
claimant's behalf in any such proceeding. Any such appointment shall be made by
written notice to the Plan Administrator which shall contain the following
information: the appointee's name, street, mailing and electronic mail
addresses, voice telephone and facsimile telephone numbers, a general
description of the matters in which the designated representative has been
authorized to act in the claimant's behalf and the specific acts which the
designated representative is authorized to perform in connection with such
matter. The notice shall be signed by the claimant to evidence his agreement to
the appointment and the representative to evidence his acceptance of
appointment, and each signature shall be acknowledged before a notary public.
Following receipt of such notice, the Plan Administrator, the Committee and
their designees shall be entitled to rely without further investigation upon the
authority of the designated representative to act on the claimant's behalf in a
manner consistent with the terms of the notice unless and until it receives
subsequent written notice to the contrary.
(b) Notwithstanding section 5.2(a), if the Plan Administrator determines to
its satisfaction that a claimant has been determined, by a court of competent
jurisdiction, to be incapable of attending to his own affairs in respect of his
benefit entitlements under the Plan, the Plan Administrator and the Committee
shall accept as evidence of a third party's authority to act in the claimant's
behalf any document or other evidence or any customary document or instrument
issued pursuant to applicable state law.
Section 5.3 Electronic Communications.
-------------------------
Any written notice or other written communication required or permitted to
be given by the Plan Administrator or Committee shall be deemed properly given
if given electronically to an electronic mail address provided by the claimant
or his authorized representative, or, if no authorized representative is
appointed, to an electronic mail address provided to the claimant by the
Employer and customarily used to provide notices to the claimant on employee
relations matters; provided, however, that: (a) the Plan Administrator or
Committee, as applicable, shall take appropriate and necessary measures to
assure that the system for furnishing electronic communications results in the
addressee's actual receipt of electronically transmitted documents; (b) each
prospective recipient of electronically transmitted documents is provided notice
of the nature of the documents to be furnished electronically, the significance
of the documents and the recipient's right to request and receive, free of
charge, a paper copy of each such document; and (c) upon request, the Plan
Administrator or Committee, as applicable, actually furnishes a paper copy of
such document.
ARTICLE VI
AMENDMENT, TERMINATION AND TAX QUALIFICATION
--------------------------------------------
Section 6.1 Amendment and Termination
-------------------------
The Bank expects to continue the Plan indefinitely, but specifically
reserves the right, in its sole discretion, at any time, by appropriate action
13
of the Board or its designees or delegates, to amend, in whole or in part, any
or all of the provisions of the Plan and to terminate the Plan at any time.
Following the occurrence of a Change in Control, the Plan may not be amended or
terminated without the prior written consent of the Committee. Any amendment or
termination of the Plan shall conform to the requirements of Code Section 409A
and the Regulations, to the extent necessary.
Section 6.2 Amendment or Termination Other than by the Bank.
-----------------------------------------------
In the event that an Affiliated Employer shall adopt this Plan, such
Affiliated Employer shall, by adopting the Plan, empower the Bank to amend or
terminate the Plan, insofar as it shall cover employees of such Affiliated
Employer, upon the terms and conditions set forth in section 6.1; provided,
however, that any such Affiliated Employer may, by action of its board of
directors or other governing body, amend or terminate the Plan, insofar as it
shall cover employees of such Affiliated Employer, at different times and in a
different manner. In the event of any such amendment or termination by action of
the board of directors or other governing body of such Affiliated Employer, a
separate plan shall be deemed to have been established for the employees of such
Affiliated Employer.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
Section 7.1 Governing Law.
-------------
(a) The Plan shall be construed, administered, and enforced according to
the laws of the State of New Mexico without giving effect to the conflict of law
principles thereof, except to the extent that such laws are preempted by federal
law.
(b) Any dispute or controversy arising under or in connection with this
Plan shall be settled exclusively by arbitration, conducted before a panel of
three arbitrators sitting in a location selected by the Employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
subject to section 3.2 hereof, the Employee shall be entitled to seek specific
performance of his right to be paid during the pendency of any dispute or
controversy arising under or in connection with this Plan.
Section 7.2 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan, nor any provisions of the Plan,
shall be held or construed to confer upon any Employee any right to a
continuation of employment by the Bank. The Bank reserves the right to dismiss
any Employee or otherwise deal with any Employee to the same extent as though
the Plan had not been adopted.
14
Section 7.3 Construction of Language.
------------------------
Wherever appropriate in the Plan, words used in the singular may be read in
the plural, words used in the plural may be read in the singular, and words
importing the masculine gender include the feminine and the neuter. Any
reference to an Article or section number shall refer to an Article or section
of the Plan, unless otherwise indicated.
Section 7.4 Headings.
--------
The headings of Articles and sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.
Section 7.5 Status as Welfare Benefit Plan Under ERISA.
------------------------------------------
This Plan is an "employee welfare benefit plan" within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and shall be construed, administered and enforced according to the
provisions of ERISA.
Section 7.6 Successors and Assigns.
----------------------
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Plan, in the same manner and to the same extent that the Bank would be required
to perform if no such succession or assignment had taken place.
Section 7.7 Source of Payments.
------------------
All payments provided in this Plan shall be paid in cash or check from the
general funds of the Bank. The Company, however, guarantees payment and
provision of all amounts and benefits due hereunder to Employees and, if such
amounts and benefits due from the Bank are not timely paid or provided by the
Bank, such amounts and benefits shall be paid or provided by the Company.
Section 7.8 Effect on Existing Benefit Plans.
--------------------------------
This Plan shall not affect or operate to reduce any benefit or compensation
inuring to the Employee of a kind elsewhere provided. No provision of this Plan
shall be interpreted to mean that the Employee is subject to receiving fewer
benefits than those available to him without reference to this Plan.
Section 7.9 Required Provisions.
-------------------
(a) The Bank may terminate the Employee's employment at any
time. An Employee shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in section 2.5
hereinabove.
15
(b) If the Employee is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 USC ss.1818(e)(3)) or 8(g)(1) (12 USC ss.1818(g)(1)) of the
FDI Act, the Company's obligations under this Plan shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Company may in its discretion (i) pay the Employee all
or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(c) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) (12 USC ss.1818(e)(4)) or 8(g) (1) (12 USC ss.1818(g)(1)) of the
FDI Act, all obligations of the Bank under this Plan shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.
(d) If the Bank is in default as defined in Section 3(x)(i) (12 USC
ss.1813(x)(1)) of the FDI Act, all obligations of the Bank under this Plan shall
terminate as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.
(e) All obligations of the Bank, if any, under this Plan shall be
terminated, except to the extent determined that continuation of the Plan is
necessary for the continued operation of the Bank, (i) by the Director of the
Office of Thrift Supervision ("Director") or his or her designee, at the time
the Federal Deposit Insurance Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section
13(c) (12 USC ss.1823(c)) of the FDI Act; or (ii) by the Director or his or her
designee at the time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by such
action.
(f) Notwithstanding anything herein contained to the contrary, any payments
to the Employee by the Bank or the Company, whether pursuant to this Plan or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the FDI Act, 12 U.S.C. Section 1828(k), and the regulations promulgated
thereunder in 12 C.F.R. Part 359.
The vested rights of the parties shall not be affected. If and to the extent
that any of the foregoing provisions is not, or shall cease to be, required by
applicable law, rule or regulation, the same shall become inoperative in the
case of the Bank as though eliminated by formal amendment of this Plan.
16
FIRST FEDERAL BANK
SEVERANCE PLAN
EXHIBIT A
Tier One Employees
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Tier Two Employees
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Tier Three Employee
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