AMERICAN FEDERAL
EMPLOYEE STOCK OWNERSHIP PLAN
AMERICAN FEDERAL
EMPLOYEE STOCK OWNERSHIP PLAN
Table of Contents
INTRODUCTION 1
ARTICLE I. DEFINITIONS 1
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1.1. Account 1
1.2. Acquisition Loan 1
1.3. Affiliate 1
1.4. Aggregation Group 1
1.5. Board 1
1.6. Code 2
1.7. Compensation 2
1.8. Contribution Suspense Account 2
1.9. Disability 2
1.10. Diversification Election 2
1.11. Effective Date 2
1.12. Employee 2
1.13. Employer 3
1.14. Employer Stock 3
1.15. Entry Date 3
1.16. Financed Shares 3
1.17. Forfeiture 3
1.18. Hour of Service 3
1.19. Leased Employee 5
1.20. Limitation Year 5
1.21. Normal Retirement Age 5
1.22. One-Year Break in Service 5
1.23. Participant 5
1.24. Plan 5
1.25 Plan Administrator 5
1.26. Plan Year 5
1.27. Qualified Election Period 5
1.28. Qualified Participant 5
1.29. Suspense Account 6
1.30. Trust 6
1.31. Trustees 6
1.32. Valuation Date 6
1.33. Vested 6
1.34. Year of Service 6
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ARTICLE II. ELIGIBILITY AND PARTICIPATION 7
2.1. Eligibility for Participation 7
2.2. Participation of Affiliates, Etc. 7
2.3 Termination of Active Participation 7
2.4. Resumption of Active Participation 7
ARTICLE III. CONTRIBUTIONS 7
3.1. Employer Contributions 7
3.2. Limitations on Annual Additions 8
3.3. Overall Limitations 9
3.4. Participant Contributions 10
3.5. Rollover Contributions 10
ARTICLE IV. PARTICIPANTS' ACCOUNTS 10
4.1 Separate Accounts 10
4.2. Allocations 10
4.3. Release from Suspense Account 11
4.4. Dividends on Employer Stock 12
4.5. Forfeitures 12
4.6. Valuations 12
4.7. Prohibited Allocation 13
ARTICLE V. VESTING 14
5.1. Vesting Schedule 14
5.2. Full Vesting 14
5.3. Past Service 14
5.4. Breaks In Service 14
5.5. Treatment of Forfeitures 15
ARTICLE VI. DISTRIBUTIONS FROM THE PLAN 15
6.1. Time and Manner of Distributions 15
6.2. Diversification Election 17
6.3. Put Option 17
6.4. Designation of Beneficiary 18
6.5. Proof of Death, Etc. 18
ARTICLE VII. THE PLAN ADMINSITRATOR 18
7.1. Organization of the Plan Administrator 18
7.2. Operation of the Plan Administrator 18
7.3. Responsibility of the Plan Administrator 19
7.4. Management of Trust Fund Assets 20
7.5. Expenses 20
7.6. Allocation and Delegation of Responsibility 20
7.7. Indemnification 20
7.8. Service of Process 20
ARTICLE VIII. THE TRUST 21
8.1. Establishment of Trust 21
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8.2. Interest in Trust 21
8.3. Accounts 21
8.4. Investment of Assets and Voting Rights 21
8.5 Acquisition Loans 22
8.7. Liability of Trustees 23
8.8. Allocation of Duties 24
8.9. Legal Limitation 24
ARTICLE IX. GENERAL 24
9.1. Amendment of Plan 24
9.2. Plan Termination 25
9.3. Notice of Amendment, Etc. 25
9.4. Non-Alienation of Benefits 25
9.5. Employment Relation 26
9.6. Payments to Minors and Incompetents 26
9.7. Missing Persons 26
9.8. Sole Source of Benefits 26
9.9. Plan Qualification 26
9.10. Merger Consolidation, Etc. 27
9.11. Exclusive Benefit 27
9.12. Claims for Benefits 27
9.13. Service of Plan Fiduciaries 27
9.14. Governing Law 28
9.15. Gender and Number 28
9.16. Titles and Headings 28
ARTICLE X. TOP-HEAVY PROVISIONS 28
10.1. Definitions 28
10.2. Minimum Contributions 30
10.3. Vesting 30
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Introduction
In order to give its Employees an opportunity to share in its profit
and growth, enjoy the beneficial incidents of stock ownership, and improve the
performance of American Federal Savings Bank (the "Employer"), the Employer
hereby adopts an employee stock ownership plan ("ESOP") under Section 4975(e)(7)
of the Internal Revenue Code of 1986, as amended (the "Code"), as hereinafter
set forth. The Plan is in the form of a stock bonus plan intended to qualify
under Section 401(a) of the Code and is designed to invest primarily in
qualifying employer securities, as defined in Section 4975(e)(8) of the Code. It
is intended that the Plan and its associated Trust will give participating
Employees an ownership interest in the Employer, while furthering their personal
financial goals. At no time shall any of the funds contributed under the Plan be
used for any purpose other than the exclusive benefit of Plan Participants and
their beneficiaries.
Article I. Definitions
Wherever used herein, the following words shall have the following
meanings, unless otherwise stated:
1.1. "Account" means the entire interest of a Participant in the Trust.
1.2. "Acquisition Loan" means any loan to the Plan or Trust described
in Section 404(a)(9) of the Code, not prohibited by Section 4975(c) of the Code,
including a loan which meets the requirements set forth in Section 4975(d)(3) of
the Code and the regulations thereunder, the proceeds of which are used to
finance the acquisition of Employer Stock or to refinance such a loan.
1.3. "Affiliate" means a parent, subsidiary, or other corporation which
is a member of the same controlled group of corporations within the meaning of
Section 414(b) of the Code as the Employer.
1.4. "Aggregation Group" means the Employer and any corporation which
becomes a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which comes under common control (as defined in Section
414(c) of the Code) with the Employer; any organization (whether or not
incorporated) which becomes a member of an affiliated service group (as defined
in Section 414(m) of the Code) which includes the Employer; and any other entity
required to be aggregated with the Employer pursuant to regulations under
Section 414(o) of the Code.
1.5. "Board" means the Board of Directors of the Employer.
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1.6. "Code" means the Internal Revenue Code of 1986 and any amendments
thereto. All citations to Sections of the Code are to such Sections as they may
from time to time be amended or renumbered,
1.7. "Compensation" means with respect to any Participant, such
Participant"s wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer"s trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the renumeration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3) or 402(h)(1)(B).
For a Participant"s initial year of participation, Compensation prior
to the Entry Date on which the Participant commenced participation in the Plan
pursuant to Section 2.1 shall not be recognized.
A Participant"s Compensation in excess of $80,000 during any Plan Year
shall not be taken into account for any purpose under the Plan.
1.8. "Contribution Suspense Account" means the account comprised of
excess Employer contributions and Forfeitures maintained in accordance with
Section 3.2(a).
1.9. "Disability" means a Participant"s inability to engage in the
Participant"s usual and customary duties, or other employment offered by the
Employer for which the Participant is qualified, by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or to last for a continuedous period of at least six (6) months.
Determinations of Disability shall be made by the Plan Administrator in a
uniform and nondiscriminatory manner on the basis of the opinion of a qualified
physician chosen by the Plan Administrator.
1.10. "Diversification Election" means an election made in accordance
with Section 6.2.
1.11. "Effective Date" means January 1, 2000. Upon its adoption, the
Plan shall take effect on the Effective Date.
1.12. "Employee" means any person employed by an Employer (including an
officer but not a director as such) who receives Compensation from such
Employer, but excluding any Employee classified by the Employer as an
independent contractor.
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1.13. "Employer" means American Federal Savings Bank, a federally
chartered savings bank, its successors and assigns, and, when the context
requires, shall include a participating Affiliate which is designated by the
Board in accordance with the provisions of Section 2.2 as an affiliated Employer
under the Plan and whose designation as such has become effective and continues
in effect. An affiliated Employer may revoke its acceptance of such designation
at any time, but until such acceptance has been revoked all the provisions of
the Plan shall apply to the Participants of that Employer and their
beneficiaries. Each affiliated Employer by adopting this Plan appoints the
Employer and the Plan Administrator as its agent to act for it in all matters
relating to the Plan and the Trust, and agrees to furnish the Plan Administrator
with such information as may be necessary for the proper administration of the
Plan.
1.14. "Employer Stock" means common stock issued by Eagle Bancorp, the
Employer"s parent corporation, which stock is readily tradable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Employer Stock" means common stock issued by Eagle
Bancorp having a combination of voting power and dividend rights equal to or in
excess of: (a) that class of common stock of Eagle Bancorp having the greatest
voting power, and (b) that class of common stock of Eagle Bancorp having the
greatest dividend rights. Noncallable preferred stock shall be deemed to be
Employer Stock if such stock is convertible at any time into stock which
constitutes Employer Stock hereunder and if such conversion is at a conversion
price which (as of the date of the acquisition by the Trust) is reasonable. For
purposes of the preceding sentence, pursuant to regulations under 409(e) of the
Code, preferred stock shall be treated as noncallable if after the call there
will be a reasonable opportunity for a conversion which meets the requirements
of the preceding sentence.
1.15. "Entry Date" means January 1 and July 1 of each Plan Year.
1.16. "Financed Shares" means any Employer Stock acquired by the Trust
with the proceeds of an Acquisition Loan.
1.17. "Forfeiture" means the part of a Participant"s Account which is
not Vested and becomes forfeited following the Participant"s termination of
employment.
1.18. "Hour of Service" means:
(a) (i) each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for an Employer during the period in
which the duties are performed;
(ii) each hour for which an Employee is paid, or entitled to
payment, by an Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including Disability), layoff, jury duty,
military duty or leave of absence; and
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(iii) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer.
(b) Hours of Service determined in accordance with Subsection (a)(i)
shall be credited to the period during which the duties were performed.
(c) Hours of Service determined in accordance with Subsection (a)(ii)
shall be credited to the period to which the Employee is compensated for
other than the performance of services.
(d) Hours of Service determined in accordance with Subsection (a)(iii)
shall be credited to the period to which the award or agreement relates.
(e) For purposes of Subsection (a)(ii), a payment shall be deemed to
be made by or due from an Employer regardless of whether such payment is
made by or due from an Employer directly or indirectly through, among
others, a trust fund or insurance company to which an Employer contributes
or pays premiums, and regardless of whether contributions made or due to
the trust fund, insurance company or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the
aggregate.
(f) Notwithstanding any provision in this Section 1.18 to the
contrary, (i) no more than 501 Hours of Service for a Plan Year are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such
period occurs in a single computation period); and (ii) no Hours of Service
will be credited to an Employee if payment is made or due under a plan
maintained solely for the purpose of complying with applicable workers'
compensation, unemployment compensation or disability insurance laws.
(g) Hours of Service with a member of the Aggregation Group shall be
recognized, except that simultaneous service with more than one such entity
shall not result in duplication of credited Hours of Service.
(h) Hours of Service shall be computed and credited in accordance with
paragraphs (b) and (c) of Section 2530.200b-2 of the Department of Labor
Regulations.
(i) Solely for purposes of determining whether a One-Year Break in
Service has occurred in a particular Plan Year, an individual who is absent
from work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such
individual but for such absence, or in any case in which such hours cannot
be determined, eight Hours of Service per day of such absence, provided
that the individual timely provides the Plan Administrator with such
information as it shall require regarding such absence. For purposes of
this Subsection, an absence from work for maternity or paternity reasons
means an absence (i) by reason of the pregnancy of the individual, (ii) by
reason of the birth of a child of the individual, (iii) by reason of the
placement of a child with the individual in connection with the adoption of
such child by such individual, or (iv) for purposes of caring for such
child for a period beginning immediately following such birth or placement.
The Hours of Service credited
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under this Subsection shall be credited in the Plan Year in which the
absence begins if the crediting is necessary to prevent a One-Year Break in
Service in that period, or in all other cases, in the following Plan Year.
(j) With respect to those Employees for whom records of actual Hours
of Service are not kept (e.g. salaried Employees), Hours of Service shall
be credited using an equivalency of 45 Hours of Service for each week for
which an Employee is paid or entitled to payment for at least one Hour of
Service.
1.19. "Leased Employee" means any person (other than an employee of the
recipient) who, pursuant to an agreement between the recipient and any other
person ("Leasing Organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year, and such services are performed under the primary direction or
control of the recipient. Notwithstanding the foregoing, a leased employee shall
not be considered an employee of the recipient if (a) the leased employee is
covered by a money purchase pension plan providing (i) a nonintegrated employer
contribution rate of at least 10% of compensation, as defined in Code Section
415(c)(3), (ii) immediate participation, and (iii) full and immediate vesting,
and (b) leased employees do not constitute more than 20% of the recipient"s
non-highly compensated work force.
1.20. "Limitation Year" means, for purposes of Section 415 of the Code,
the Plan Year.
1.21. "Normal Retirement Age" means an Employee's 62nd birthday.
1.22. "One-Year Break in Service" means a Plan Year during which a
Participant does not complete more than 500 Hours of Service.
1.23. "Participant" means any Employee participating in the Plan in
accordance with Article II.
1.24. "Plan" means the American Federal Employee Stock Ownership Plan,
as set forth herein, as the same may be amended from time to time, and includes
the Trust.
1.25 "Plan Administrator" means the ESOP Committee appointed by the
Board to serve at its pleasure to administer the Plan as provided in Article
VII.
1.26. "Plan Year" means the 12-month period ending on December 31 of
each year.
1.27. "Qualified Election Period" means the six-Plan-Year period
beginning with the Plan Year in which the Participant first becomes a Qualified
Participant.
1.28. "Qualified Participant" means a Participant who has attained age
55 and who has completed at least 10 years of participation under the Plan.
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1.29. "Suspense Account" means the account comprised of unallocated
shares of Employer Stock maintained in accordance with Section 4.4 hereof.
1.30. "Trust" means the American Federal Employee Stock Ownership Trust
described in Article VIII which constitutes part of the Plan.
1.31. "Trustees" means the persons appointed by the Board to serve at
its pleasure as Trustees of the Trust.
1.32. "Valuation Date" means the last day of the Plan Year, and such
other date(s) as the Plan Administrator may designate for valuing Plan assets.
1.33. "Vested" means the portion of a Participant's Account that is
nonforfeitable.
1.34. "Year of Service" means the computation period of 12 consecutive
months during which an Employee has completed at least 1,000 Hours of Service
with an Employer determined as follows:
(a) For purposes of eligibility for participation, the computation
period shall begin with the date on which the Employee first performs or is
credited with an Hour of Service. The participation computation period for
determining a Year of Service shall then commence with the first day of the
Plan Year which includes the first anniversary of the date on which the
Employee first performed an Hour of Service.
(b) For purposes of determining a Participant's Vested interest in his
Account, the computation period shall be the Plan Year.
(c) Service prior to the Effective Date shall be counted for
eligibility and vesting and vesting purposes.
(d) Notwithstanding any other provision of the Plan, contributions,
benefits and service credit with respect to qualified military service
shall be provided in accordance with Section 414(u) of the Code.
(e) Solely for the purposes of determining the date as of which an
Employee satisfies the eligibility requirements for participation under
Article II and for determining Years of Service for vesting under Article
V, Years of Service shall be computed by taking into account service with
any member of an Aggregation Group, including service as a Leased Employee
within such Group. Years of Service may also include any period of prior
employment by any predecessor or affiliated organization upon such terms
and conditions (uniformly applicable to Participants similarly situated) as
the Plan Administrator may approve.
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Article II. Eligibility and Participation
2.1. Eligibility for Participation. An Employee shall become a
Participant in the Plan as of the Effective Date, if on such date the
Participant has attained age 21 and completed one Year of Service, and otherwise
on the Entry Date coinciding with or next following the date he or she has
attained age 21 and completed one Year of Service. Leased Employees and
Employees covered by a collective bargaining agreement under which retirement
benefits were the subject of good faith bargaining, shall not be eligible to
participate in the Plan.
2.2. Participation of Affiliates, Etc. The Employer may at any time and
from time to time by action of its Board (a) authorize an Affiliate to
participate in the Plan with respect to its employees, or (b) provide for the
merger into this Plan, and continuation of as a part of this Plan, any other
retirement or pension plan of the Employer or an Affiliate, on such terms and
conditions as the Board may establish.
2.3 Termination of Active Participation. Active participation in the
Plan shall cease when a Participant ceases to be an Employee for any reason.
2.4. Resumption of Active Participation. A former active Participant
who resumes employment as an Employee shall recommence participation in the Plan
as of the date he or she is credited with his first Hour of Service after
reemployment. If an Employee has become a Participant in the Plan and his or her
status as an Employee is subsequently terminated due to a transfer of employment
to a nonparticipating Affiliate or to a class of persons not treated as
Employees, the individual shall resume participation immediately upon his or her
reemployment with an Employer or transfer to an eligible classification.
Article III. Contributions
3.1. Employer Contributions.
(a) For each Plan Year, each Employer shall contribute to the Plan, in
cash or shares of Employer Stock, such amount as the Employer in its sole
discretion shall determine, which sum may be zero, subject to the
limitations imposed by Section 3.2 below; provided, however, that the
aggregate contribution for each Plan Year (i) shall not exceed the maximum
deductible contribution for such Plan Year under Section 404 of the Code,
and (ii) the Employer shall contribute sufficient cash to make any required
payments of principal and interest on any outstanding Acquisition Loan. and
to restore any Forfeitures pursuant to Section 5.5(b).
(b) The Employer may contribute all or part of the entire amount due
on behalf of one or more other Employers and charge the amount thereof to
the Employer responsible therefor. In any Plan Year, the contribution on
behalf of Participants who are Employees of an Employer, when expressed as
a percentage of the aggregate Compensation of such Participants, may, but
need not, be the same as the contribution on behalf of the Participants who
are Employees of another Employer.
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(c) Contributions for any Plan Year shall be paid to the Trustees not
later than the due date (including any extensions thereof) for filing the
Employer's federal income tax return for its taxable year on account of
which such contribution was made.
(d) All or part of the contributions made under Section 3.1.(a) may be
used to purchase Employer Stock allocated to the Account of any Participant
or beneficiary in order to make a distribution under Article VI hereof to
any other Participant or beneficiary.
3.2. Limitations on Annual Additions.
(a) Notwithstanding any other provision herein, the maximum Annual
Additions that may be contributed or allocated to a Participant's Account
for any Limitation Year shall not exceed the lesser of:
(i) the Defined Contribution Dollar Limitation, or
(ii) 25 percent of the Participant's compensation, within the
meaning of Section 415(c)(3) of the Code for the Limitation Year.
The "Defined Contribution Dollar Limitation" shall mean $30,000 or, if greater,
one fourth of the defined benefit dollar limitation set forth in Section
415(b)(1) of the Code (as adjusted under Section 415(d) of the Code) as in
effect for the Limitation Year. The compensation limitation referred to above in
(ii) shall not apply to any contribution for medical benefits (within the
meaning of Section 419A(f)(2) of the Code) after separation from service which
is otherwise treated as an Annual Addition, or to any amount otherwise treated
as an Annual Addition under Section 415(l)(1) of the Code.
(b) For purposes of the Plan, "Annual Additions" shall mean, with
respect to a Participant, the total of (i) the Employer contributions
(whether or not used to pay principal or interest on any Acquisition Loan);
(ii) Forfeitures (including any income attributable to Forfeitures); and
(iii) amounts described in Sections 415(l)(1) and 419A(d)(2) of the Code
(using the definitions found in Sections 415(l)(2) and 419A(d)(3) of the
Code), allocated to a Participant's Account for the Limitation Year by the
Employer. Notwithstanding any provision in this Section 3.2(b) to the
contrary, if not more than one-third of the total Employer contributions
for the Plan Year are allocated to the Accounts of Participants who are
highly compensated employees (within the meaning of Section 414(q) of the
Code), then the term "Annual Additions" shall not include Forfeitures of
Employer Stock if such Employer Stock was acquired with the proceeds of an
Acquisition Loan, or any amounts contributed to the Trust by an Employer,
if applied to the repayment of interest on an Acquisition Loan. If, as a
result of the allocation of Forfeitures, a reasonable error in estimating a
Participant's compensation or other limited facts and circumstances that
the Commissioner of the Internal Revenue Service finds justifiable under
Treasury regulation Section 1.415-6(b)(6), the total Annual Additions to a
Participant's Account would otherwise exceed the above limitations, the
amount of such excess shall be allocated to a Contribution Suspense
Account. The amount allocated to the Contribution Suspense
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Account shall be deemed to be a contribution of the Employer made on
account of the Plan for the next Plan Year.
(c) If any Employer maintains any other defined contribution plan,
each Participant's Annual Additions under the Plan shall be aggregated with
the Participant's annual additions (within the meaning of Section 415(c)(2)
of the Code) under each such other plan for the purposes of applying the
limitations of Section 3.2(b). In the event the aggregated plan limitations
of this Section 3.2 would be exceeded, the contributions provided under the
other plan shall be reduced to the extent necessary to achieve compliance
with the limitations of Section 415 of the Code.
3.3. Overall Limitations.
(a) If a Participant participates, or previously participated, in one
or more defined benefit plans (as defined in Section 414 (j) of the Code)
maintained by the Aggregation Group, the sum of the following fractions
shall not exceed 1.0 as of the end of any Plan Year:
(i) Defined Contribution Fraction -- the numerator of which is
the sum of all Annual Additions for the Participant as of the end of
the Plan Year under all defined contribution plans for the current and
all prior Plan Years of the Aggregation Group in which the Participant
participates (including Annual Additions attributable to the
Participant's nondeductible Employee contribution to all defined
benefit plans, whether or not terminated, maintained by the
Aggregation Group, and the Annual Additions attributable to all
welfare benefit funds, as defined in Section 419(e) of the Code, and
individual medical benefit accounts, as defined in Section 415 (l)(2)
of the Code, maintained by the Aggregation Group), and the denominator
of which is the sum of the lesser of the following amounts for the
current Plan Year and for each Plan Year in which the Participant was
employed by an Employer:
(A) 125 % of the dollar limitation in effect for such year
under Section 415(c)(1)(A) of the Code, or
(B) 140% of the maximum amount that may be taken into
account for such year pursuant to Section 415(c)(1)(B) of the
Code.
The limits of (A) and (B) shall be applied as though the Plan and
referenced Sections of the Code had been in effect during the entire
period of the Participant's employment with an Employer.
(ii) Defined Benefit Fraction -- the numerator of which is the
aggregate projected annual benefit (determined as of the last day of
the Plan Year) for the Participant under all defined benefit plans
maintained by the Aggregation Group, and the denominator of which is
the lesser of:
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(A) 125% of the dollar limitation in effect for such Plan
Year under Section 415(b)(1)(A) and 415(d) of the Code, or
(B) 140% of the maximum amount that may be taken into
account under Section 415(b)(1)(B) of the Code with respect to
the Participant for such Plan Year.
(b) The 125% applied in Section 3.3(a) shall be reduced to "100%" for
any Plan Year in which either:
(i) the Plan is included in the Aggregated Plans which are
Top-Heavy (as defined in Article X), and the Plan or any other plan
included in the Aggregated Plans fails to provide the minimum benefit
prescribed by Section 416(h) of the Code and the regulations
thereunder; or
(ii) the Plan is included in the Aggregated Plans which would be
Top-Heavy if 90% were substituted for 60% in the definition of
Top-Heavy.
(c) In the event that the combined plan limitations of this Section
3.3 are exceeded, the benefits provided under the defined benefit plan
shall be reduced to the extent necessary to achieve compliance with the
limitations of Section 415 of the Code.
3.4. Participant Contributions. No Participant shall be required or
permitted to contribute to the Plan.
3.5. Rollover Contributions. This Plan will not accept rollover
contributions from any other tax-qualified retirement plan or individual
retirement account.
Article IV. Participants' Accounts
4.1 Separate Accounts. The Plan Administrator shall maintain an Account
for each Participant, to which shall be credited, as of each Valuation Date, the
Participant"s share of Employer contributions to the Plan, Forfeitures under the
Plan, if any, and all earnings and/or losses thereon. Separate subaccounts shall
be maintained to record each Participant"s interest in Employer Stock and other
investments of the Trust.
4.2. Allocations. Employer Stock contributed to the Plan with respect
to a Plan Year, Employer Stock released from the Suspense Account pursuant to
Section 4.3(a) with respect to a Plan Year, and Employer contributions and
Forfeitures (other than Employer contributions and Forfeitures used to pay
principal or interest on an Acquisition Loan) for such Plan Year shall be
allocated to the Accounts of all Participants who are employed by an Employer on
the last day of the Plan Year and are credited with 1,000 or more Hours of
Service during such Plan Year, or whose employment terminated during such Plan
Year by reason of death, Disability, or at or after the attainment of Normal
Retirement Age. The amount of Employer Stock or cash allocated to each
Participant's Account shall be in the proportion that the Participant's
Compensation for the Plan Year from such Employer bears to the Compensation of
all such Plan Participants employed by such Employer for
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such Plan Year. Allocations of Employer Stock shall be expressed in terms of the
number of whole and fractional interests in Employer Stock.
4.3. Release from Suspense Account.
(a) Financed Shares shall initially be credited to a Suspense Account
and shall be allocated to the Accounts of Participants only as payments of
principal and interest on the Acquisition Loan are made by the Trustees.
The number of Financed Shares to be released from the Suspense Account for
allocation to Participants' Accounts for each Plan Year shall be based upon
the ratio that the payments of principal and interest on the Acquisition
Loan for the Plan Year bear to the total projected payments of principal
and interest for the Plan Year and over the remainder of the Acquisition
Loan repayment period (determined without any reference to any possible
extensions or renewals thereof). For purposes of computing the above ratio,
if the interest rate on an Acquisition Loan is variable, the interest to be
paid in subsequent Plan Years shall be calculated by assuming that the
interest rate in effect as of the end of the applicable Plan Year will be
the interest rate in effect for the remainder of the term of the
Acquisition Loan. Notwithstanding the foregoing, in the event such
Acquisition Loan shall be repaid with the proceeds of a subsequent
Acquisition Loan (the "Substitute Loan"), such repayment shall not operate
to release all such Employer Stock in the Suspense Account, but, rather,
such release shall be effected pursuant to the foregoing provisions of this
Section 4.3 on the basis of payments of principal and interest on the
Substitute Loan.
(b) At the Employer's option, in lieu of applying the provisions of
Section 4.3(a) with respect to an Acquisition Loan, Employer Stock shall be
released from the Suspense Account as the principal amount of such
Acquisition Loan is repaid (without regard to interest payments), provided
the following three conditions are satisfied:
(i) the Acquisition Loan shall provide 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 ten (10)
years;
(ii) the interest portion of any payment shall be disregarded
only to the extent it would be treated as interest under standard loan
amortization tables; and
(iii) if the Acquisition Loan is renewed, extended or refinanced,
the sum of the expired duration of the Acquisition Loan and the
renewal, extension or new Acquisition Loan period shall not exceed ten
(10) years.
(c) If at any time there is more than one Acquisition Loan
outstanding, separate accounts shall be established within the Suspense
Account for each such Acquisition Loan. Each such Acquisition Loan for
which a separate account is maintained shall be treated separately for
purposes of the provisions governing the release of Employer Stock from the
Suspense Account under this Section 4.3.
11
(d) It is intended that the provisions of this Section 4.3 shall be
applied and construed in a manner consistent with the requirements of
Section 54.4975-7(b)(8) of the Treasury regulations. Employer Stock
released from the Suspense Account for a Plan Year in accordance with this
Section 4.3 shall be held in the Trust on an unallocated basis until
allocated by the Plan Administrator pursuant to Section 4.2 as of the last
day of that Plan Year.
4.4. Dividends on Employer Stock
(a) Dividends declared and paid on shares of Employer Stock allocated
to Participants" Accounts shall, bein the discretion of the Plan
Administrator, be (i) allocated to each Participant"s Account in proportion
that the number of shares of Employer Stock allocated to the Participant"s
Account bears to the total number of allocated shares of Employer Stock in
the Trust., or (ii) used to repay an Acquisition Loan; provided, however,
that if cash dividends on allocated shares of Employer Stock are used to
repay an Acquisition Loan, Employer Stock having a fair market value not
less than the amount of the dividend which would otherwise have been
credited to a Participant"s Account shall be allocated to each such
Account.
(b) Cash dividends declared and paid on Employer Stock held in the
Suspense Account shall be used to repay the related Acquisition Loan. Stock
dividends on Employer Stock held in the Suspense Account shall be held in
the Suspense Account and released as provided in Section 4.3.
(c) If so determined by the Plan Administrator, any cash dividends on
Employer Stock allocated to Participants" Accounts may be paid currently
(or within ninety (90) days after the end of the Plan Year in which the
dividends are paid to the Trust) in cash to such Participant on a
nondiscriminatory basis, or the Employer may pay such dividends directly to
Participants. Such distribution (if any) of cash dividends to Participants
may be limited to Participants who are still Employees, may be limited to
dividends on shares of Employer Stock which are then Vested or may be
applicable to dividends on all shares allocated to Participants' Accounts.
4.5 Forfeitures.
The allocation of Forfeitures to Participants" Accounts of Forfeitures
shall be made after application of the rules set forth in Section 5.5.
4.6. Valuations.
(a) As of the Valuation Date, each Participant's Account shall be
valued at fair market value and credited with the Participant"s allocable
share of any Forfeitures, earnings, losses or expenses of the Trust.
(b) All valuations of Employer Stock which are not readily tradable on
an established securities market with respect to activities carried on by
the Plan shall be
12
made by an independent appraiser meeting requirements similar to those
contained in Treasury regulations under Section 170(a)(1) of the Code.
(c) The allocation to a Participant's Account of earnings, losses, or
expenses of the Trust shall be made (i) in the first Plan Year, in the same
proportion as the allocation made pursuant to Section 4.2 hereof, and (ii)
in each succeeding Plan Year, in the proportion that the Participant"s
Account balance at the close of business as of the last day of the prior
Plan Year bore to the total Account balances of all Plan Participants as of
such date.
4.7. Prohibited Allocation.
(a) No portion of the Trust attributable to (or allocable in lieu of)
Employer Stock acquired by the Plan in a sale to which Section 1042 of the
Code applies ("Section 1042 Stock") may accrue or be allocated directly or
indirectly under the Plan:
(i) during the "Nonallocation Period", for the benefit of
(A) any taxpayer who makes an election under Section 1042(a)
of the Code with respect to the Employer Stock,
(B) any individual who is related to the taxpayer (within
the meaning of Section 267(b) of the Code), except as provided
below,
(ii) for the benefit of any other person who owns (after
application of Section 318(a) of the Code applied without regard to
the employee trust exception of Section 318(a)(2)(B)(i)) more than 25
percent of
(A) any class of outstanding stock of the Employer or any
Affiliate, or
(B) the total value of any class of outstanding stock of
Employer or any Affiliate.
(b) Notwithstanding the foregoing, Section 1042 Stock or other assets
in the Trust in lieu thereof may accrue or be allocated to lineal
descendants of the taxpayer referred to in Section 4.7(a)(i)(A) above,
provided that the aggregate amount allocated to the benefit of all such
lineal descendants during the "Nonallocation Period" does not exceed more
than five percent (5%) of the Section 1042 Stock (or amounts allocated in
lieu thereof) held by the Plan which are attributable to a sale to the Plan
by any person related to such descendants (within the meaning of Section
267(c)(4)) of the Code.
(c) A person shall be treated as failing to meet the stock ownership
limitation under Section 4.7(a)(ii) above if such person fails such
limitation:
(i) at any time during the one (1) year period ending on the date
of sale of Section 1042 Stock to the Plan, or
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(ii) on the date as of which Section 1042 Stock is allocated to
Participants in the Plan.
(d) for purposes of this Section 4.7, "Nonallocation Period" means the
period beginning on the date of the sale of the Section 1042 Stock and
ending on the later of:
(i) the date which is ten (10) years after the date of sale, or
(ii) the date of the Plan allocation attributable to the final
payment of the Acquisition Loan incurred in connection with such sale.
Article V. Vesting
5.1. Vesting Schedule. A Participant's interest in his or her Account
shall become Vested as follows:
Participant"s
Years of Service Vested Percentage
---------------- -----------------
2 or less 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
5.2. Full Vesting. Notwithstanding the provisions of Section 5.1 above,
each Participant shall become fully Vested upon the attainment of Normal
Retirement Age, death or Disability (provided the Participant is employed by an
Employer on that date), or the date on which the Participant is required to be
fully Vested under the applicable provisions of the Code on account of the
termination or partial termination of the Plan or the complete discontinuance of
contributions to the Plan.
5.3. Past Service. For purposes of determining a Participant's Vested
interest in his or her Account, Years of Service shall include employment with
an Employer before the Effective Date.
5.4. Breaks In Service.
(a) Except as provided in paragraphs (b) and (c) below, all of a
Participant's Years of Service shall be used in determining the
Participant's Vested interest in his or her Account.
14
(b) If a Participant terminates employment and incurs five (5) or more
consecutive One-Year Breaks in Service, then in the event that the
Participant is reemployed, all Years of Service after such termination will
be disregarded for the purpose of determining the Participant's Vested
interest in his or her Account that accrued before such Breaks.
(c) If a Participant had no Vested interest at the time the
Participant terminated employment, Years of Service prior to any period of
consecutive One-Year Breaks in Service shall not be taken into account if
the number of consecutive One-Year Breaks in Service equals or exceeds the
greater of five (5), or the number of Years of Service credited to the
Participant prior to such Break(s).
5.5. Treatment of Forfeitures.
(a) If a Participant terminates employment, and receives and, pursuant
to Section 6.1, receives the value of the Participant"s Vested interest in
his Account, the portion of the Account which is not Vested will be treated
as a Forfeiture. For purposes of this Section 5.5(a), if the percentage of
a Participant"s Vested interest in his Account is zero, the Participant
shall be deemed to have received a distribution of such interest as of the
Valuation Date coinciding with or next following the Participant"s
termination of employment. If a Participant terminates employment and does
not receive a distribution or deemed distribution, then any amount credited
to the Participant"s Account which is not Vested at the time of the
Participant"s termination of employment shall be forfeited shall become a
Forfeiture as of the end of the Participant"s fifth consecutive One-Year
Break in Service. If a portion of a Participant"s Account is forfeited,
Employer Stock allocated to the Participant"s aAccount shall be forfeited
only after other assets.
(b) If a former Participant shall be reemployed by the Employer before
incurring five (5) consecutive One-Year Breaks in Service, and such former
Participant had received, or was deemed to have received, a distribution of
the Participant"s Vested interest in his Account prior to his reemployment,
the forfeited amount the nonvested portion of the Participant"s Account,
and any undistributed portion of the Participant"s Vested interest in the
Account shall be reinstated, and both prior and subsequent Years of Service
shall be taken into account, subject to the rules of Section 5.4, for
purposes of determining the Participant"s Vested interest in such
reinstated Account. The amount of the Forfeiture or, in the event of a
deemed distribution, the undistributed portion of the Participant"s
Account, shall be restored in full based on the value of Employer Stock and
other assets at the date of Forfeiture, unadjusted by any gains or losses
occurring subsequent to the Valuation Date coinciding with or preceding the
Participant"s termination of employment. The amount necessary to restore
the Account shall be derived first from the net earnings of any Accounts
forfeited in such Plan Year; second, from any Forfeitures at the end of
such Plan Year; and third, from Employer contributions.
(c) All Forfeitures occurring during any Plan Year shall be used first
to restore any Forfeitures for reemployed individuals pursuant to Section
5.5(b), and any remainder shall be allocated among Participants in
proportion to their Compensation as provided in Section 4.2.
Article VI. Distributions from the Plan
6.1. Time and Manner of Distributions.
(a) Distribution of the balance in a Participant"s Account shall
commence as soon as practicable after the date of the Participant"s death,
retirement at or after Normal Retirement Age, or Disability. Distribution
of amounts allocated to the Accounts of such Participants for the Plan Year
in which the Participant died, retired at or after Normal Retirement Age,
or incurred a Disability shall be made as soon as administratively
practicable after the allocation for the Plan Year has been determined.
(b) Upon a Participant"s separation from service for any reason not
described in Section 6.1(a), unless the Participant elects to defer
distribution of his or her Account, distribution of the Vested interest in
portion of the Participant"s Account shall commence not later than ninety
(90) days after the close of the fifth Plan Year following the Plan Year in
which the Participant separated from service and is not reemployed.
Notwithstanding the foregoing, if the value of the Vested portion of a
Participant"s Account exceeds Five Thousand Dollars ($5,000), the
Participant may elect to defer distribution until his or her Normal
Retirement Age.
15
(c) Notwithstanding any other provision of the Plan, unless a
Participant elects otherwise, distribution of the value of the Vested
interest inportion of the Participant"s Account must commence not later
than the sixtieth (60th) day after the close of the Plan Year in which
occurs the latest of: (i) the date the Participant attained age 65; (ii)
the date the Participant"s employment terminates; or (iii) the tenth (10th)
anniversary of the date on which the Participant commenced participation in
the Plan.
(d) A Participant"s benefits must begin to be distributed in
accordance with the requirements of the Code not later than April 1st of
the calendar year following the later of: (i) the calendar year in which
the Participant attains age 70 1/2, or (ii) the calendar year in which the
Participant retires; provided, however, that (A) clause (ii) shall not
apply in the case of a Participant who is a five percent (5%) owner at any
time during the five (5) Plan Year period ending in the calendar year in
which he attains 70 1/2, and (B) in the case of a Participant who becomes a
five percent (5%) owner thereafter, clause (ii) shall cease to apply.
(e) Distributions shall be made in a lump sum, or at the Participant"s
election, in five (5) level annual installments. Distribution of the Vested
portion of a Participant"s Account shall be made in a lump sum. All
distributions shall be made in the form of Employer Stock, except for the
value of fractional shares, which shall be made in cash.
(f) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Participant's election under this Section 6.1(f), a
Participant may elect, at the time and in the manner prescribed by the Plan
Administrator, to have all or any portion of an eligible rollover
distribution paid in a direct rollover directly to an eligible retirement
plan specified by the Participant.
An "eligible rollover distribution" is any distribution of all or any
portion of the balance to the credit of the Participant, except that an eligible
rollover distribution does not include: (i) any distribution that is one of a
series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and the Participant's
designated beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Code Section
401(a)(9); (iii) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); and (iv) other items
designated not to be eligible rollover distributions by regulation, revenue
ruling, notice, or other guidance issued by the Department of the Treasury.
An "eligible retirement plan" is an individual retirement account
described in Code Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the Participant's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity. The Participant's
16
surviving spouse and the Participant's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in Code
section 414(p), are considered Participants with regard to the interest of the
spouse or former spouse.
6.2. Diversification Election.
(a) Each Qualified Participant shall be permitted to make a
Diversification Election with respect to 25 percent of the total number of
shares of Employer Stock acquired by or contributed to the Plan that have
ever been allocated to such Qualified Participant"s Account (reduced by the
number of shares to which any prior Diversification Election applied)
within 90 days after the last day of each Plan Year during the
Participant"s Qualified Election Period. Within 90 days after the close of
the last Plan Year in the Participant"s Qualified Election Period, a
Qualified Participant may make a Diversification Election with respect to
50 percent of the total number of shares of Employer Stock acquired by or
contributed to the Plan that have ever been allocated to such Qualified
Participant"s Account (reduced by the number of shares previously
distributed pursuant to a Diversification Election). A Participant"s
Diversification Election shall be submitted to the Plan Administrator in
writing and shall specify one of the options set forth in Section 6.2(b) or
6.3(c).
(b) If the Diversification Election so directs, the Plan shall
distribute the portion of the Participant's Account that is covered by the
Diversification Election within 90 days after the last day of the period
during which the Diversification Election can be made.
(c) In lieu of a distribution under Section 6.2(b), a Diversification
Election may direct the Plan to transfer the portion of the Participant's
Account that is covered by the Diversification Election to another
qualified plan of an Employer which accepts such transfers, provided that
such plan permits employee-directed investments. Such transfer shall be
made no later than 90 days after the last day of the period during which
the election can be made.
6.3. Put Option. If at the time of distribution, Employer Stock
distributed from the Trust is not treated as "readily tradable on an established
market" within the meaning of Section 409(h) of the Code, a Participant or
beneficiary who receives shares of such Employer Stock pursuant to Section 6.1
or 6.2 shall have the right (a "put") to require the Employer"s parent, Eagle
Bancorp, to purchase the shares of Employer Stock for their fair market value
determined pursuant to Section 4.63. The put shall be exercisable by written
notice to the Plan Administrator during the first 60 days after the stock is
distributed by the Plan and, if not exercised in that period, during the first
60-day period in the next Plan Year after the valuation of Employer Stock under
Section 4.36(b) has been completed. If the put is exercised, the Trustees may,
in their discretion, assume Eagle Bancorp"s rights and obligations with respect
to purchasing the stock. If the put is exercised, payment of the fair market
value of the distributed sharesa Participant's Account balance shall be made in
a lump sum not later than thirty (30) days after the Participant exercises the
put option. The put set forth in this Section shall be nonterminable and shall
continue in effect to the extent provided herein
17
even though all Acquisition Loans have been repaid, or the Plan ceases to be a
qualified ESOP.
6.4. Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries to receive any benefits payable to him under the
Plan upon the Participant"s death and may change any such designation at will.
Such beneficiary or beneficiaries shall receive benefits pursuant to Section
6.1. of the Plan. Any designation or change of designation shall be made in
writing in the form and manner prescribed by the Plan Administrator and shall be
effective upon receipt by the Plan Administrator. Notwithstanding the foregoing,
if the Participant is married, the Participant"s surviving spouse shall be the
designated beneficiary, unless such spouse has consented in a duly notarized
written consent to the designation of another beneficiary (or unless the Plan
Administrator determines in accordance with the Code that no such consent is
necessary). If the Participant fails to properly designate a beneficiary, or if
the Plan Administrator shall be unable to locate the designated beneficiary
after reasonable efforts have been made, or if no named beneficiary shall
survive the Participant, distribution of the Vested portion of entire value of
the the deceased Participant's Account shall be made to the Participant's
estate.
6.5. Proof of Death, Etc. The Plan Administrator may require the
execution and delivery of such documents, papers and receipts as the Plan
Administrator may determine necessary or appropriate in order to establish the
fact of death of the Participant and the right and identity of any beneficiary
or other person or persons claiming any benefits under this Plan.
Article VII. The Plan Administrator
7.1. Organization of the Plan Administrator The Board shall appoint in
writing an ESOP Committee of not less than three (3) persons to serve as Plan
Administrator. The Plan Administrator shall elect a Chairman from their number,
and a Secretary who may, but need not, be named as a Plan Administrator. Any
person serving as a Plan Administrator, any subcommittee or agent to whom the
Plan Administrator delegates any authority, and any other person or group of
persons, may serve in more than one fiduciary capacity with respect to the Plan.
A person exercising administrative responsibilities delegated by the Plan
Administrator shall be subject to removal by the Plan Administrator at any time,
and may resign by delivering a written resignation to the Plan Administrator.
The Plan Administrator shall report to the Board periodically with regard to the
matters for which it is responsible under the Plan, but in no event less
frequently than at each annual meeting.
7.2. Operation of the Plan Administrator. ESOP Committee members
serving as Plan Administrator from time to time may make such rules regarding
their services as Plan Administrator as they may deem necessary or appropriate.
No person serving as a Plan Administrator shall be entitled to act on or decide
any matter relating to any of his or her rights or benefits under the Plan. All
decisions of the Plan Administrator not allocated to a specified person as
provided in Section 7.6 shall be made by majority vote.
18
7.3. Responsibility of the Plan Administrator. The Plan Administrator
shall be the named fiduciary of the Plan and shall serve as the administrator as
defined in Section 3(16) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). The Plan Administrator shall have general responsibility
for:
(i) Operating, interpreting and administering the Plan in
accordance with the terms of the pertinent documents, written
resolutions adopted from time to time governing the Plan and any
related funding agreement;
(ii) Determining benefit eligibility and certifying such
eligibility to the Trustees;
(iii) Establishing procedures and adopting uniform rules and
regulations including, without limitation, funding and liquidity
policies for the Trust, as it deems necessary or appropriate for the
effective administration of the Plan;
(iv) Hiring persons and organizations to provide legal,
accounting, actuarial and other services necessary to the Plan;
(v) Issuing directions for the payment of any fees, taxes,
charges or other costs incidental to the operation and management of
the Plan as provided in Section 7.5;
(vi) Preparing and filing all reports and returns required to be
filed by the Plan with any government agency and submitting an annual
report of the operations of the Plan to the Board;
(vii) Compliance with all disclosure requirements imposed by
state or federal law;
(viii) Maintenance of all records of the Plan other than those
required to be maintained by the Trustees, including, without limiting
the foregoing, records and information with respect to the employment
date, date of participation in the Plan and, elections by
Participants, their spouses and beneficiaries, and consents granted
and determinations made under the Plan and the Trust; and
(ix) Performance of all other acts required by law to be
performed by the Plan Administrator.
The Plan Administrator shall have, except as otherwise provided herein, all
powers necessary to carry out the provisions of the pertinent documents, shall
have the exclusive right to construe such documents and to determine and resolve
any question that may arise in connection with the funding, application or
administration of the Plan, and may secure all reasonable assistance and advice
in the performance of its duties. The Plan Administrator shall be entitled to
rely conclusively upon all tables, valuations, certificates,
19
opinions and reports furnished by any actuary, accountant, controller, counsel
or person who is employed or engaged for such purposes.
7.4. Management of Trust Fund Assets. The Trustees shall have exclusive
responsibility under the Plan for the management and control of the assets of
the Trust.
7.5. Expenses. The persons serving as Plan Administrator shall be
reimbursed for any reasonable expenses incurred in connection with their
services. All costs and expenses incurred in the implementation, administration
and operation of the Plan, including the Plan Administrator's expenses, shall be
paid by the Plan to the extent not paid by the Employer. Except as otherwise
required by ERISA, no bond or other security shall be required of the Plan
Administrator or any member thereof in any jurisdiction.
7.6. Allocation and Delegation of Responsibility. The persons serving
as Plan Administrator may allocate their duties among themselves in any manner
they deem appropriate, by a written agreement signed by all persons serving as
Plan Administrator. A copy of any such agreement shall be delivered to the Board
and a copy shall be maintained with the Plan records. In the event the Plan
Administrator should so allocate its duties, an individual shall be liable only
for those duties specifically allocated to him or her under the agreement, and
not for those allocated to any other person. The Plan Administrator may delegate
to any person or agent its responsibility to perform any act hereunder,
including, without limitation, those matters involving the exercise of
discretion, provided that such delegation shall be subject to revocation at any
time at the discretion of the Plan Administrator.
7.7. Indemnification, To the maximum extent permitted by law, no person
serving as Plan Administrator shall be personally liable by reason of any
contract or other instrument executed by the person or on his behalf in his
capacity as a Plan Administrator nor for any mistake of judgment made in good
faith, and the Employer shall indemnify and hold harmless directly from its own
assets (including the proceeds of any insurance policy, the premiums of which
are paid from the Employer's own assets) each person serving as Plan
Administrator and each other officer, Employee, or director of the Employer to
whom any duty or power relating to the administration or interpretation of the
Plan or to the management and control of the assets of the Plan may be delegated
or allocated, against any cost or expense (including counsel fees) or liability
(including any amount imposed in the form of a money judgment, civil penalty,
excise tax, or any sum paid in settlement of a claim with the approval of the
Employer) arising out of any act or omission to act in connection with the Plan
unless arising out of such person's gross negligence, willful misconduct or bad
faith. No such individual shall be liable with respect to a breach of fiduciary
duty if such a breach occurred before the individual became a fiduciary or after
he or she ceased to be a fiduciary.
7.8. Service of Process. The President of the Employer, its Chief
Financial Officer, or or such other person(s) as may from time to time be
designated by the Plan Administrator, shall be the agents for service of process
under the Plan.
20
Article VIII. The Trust
8.1. Establishment of Trust. The Employer shall execute a trust
agreement with three (3) Trustees appointed by the Board, establishing the
American Federal Employee Stock Ownership Trust into which all contributions to
the Plan shall be paid, and from which all benefits under the Plan and any Plan
expenses not paid directly by the Employer shall be paid. All contributions to
the Plan shall be paid over to the Trustees and held pursuant to the provisions
of the Trust
8.2. Interest in Trust. No person shall have any interest in or right
to any part of the earnings or the assets of the Trust, except as and to the
extent provided herein. The Employer and any participating affiliated Employers
shall have no liability for the payment of benefits from the Trust nor for the
administration of funds paid to the Trustees.
8.3. Accounts. The Trustees shall receive Employer contributions,
invest and reinvest Trust assets and earnings thereon and make such
disbursements from the Trust as may be directed by the Plan Administrator in
writing. A Participant's interest in the Trust shall be reflected in his or her
Account. One or more subaccounts may be established under each Participant's
Account for such purposes as the Plan Administrator deems appropriate.
Notwithstanding the foregoing, the Trust shall be treated as a single trust for
purposes of investment and administration, and nothing contained herein shall
require a physical segregation of assets for any Account. The Trustees shall
render an account of the transactions of the Trust to the Board at least
annually and at such other times as may reasonably be required by the Board.
8.4. Investment of Assets and Voting Rights.
(a) The Trustees shall invest all contributions to the Plan and any
earnings thereon primarily in Employer Stock, provided that no investment
in such Stock shall be made at a price in excess of the fair market value
of such Stock at the time of purchase. Assets of the Trust not invested in
Employer Stock shall be invested by the Trustees or by an investment
manager appointed by the Trustees. Employer contributions made in cash, and
other cash received by the Trustees, may be used to acquire Employer Stock
directly from Eagle Bancorp or its shareholders, or by purchase on the open
market.
(b) All voting and tender offer rights with respect to Employer Stock
held by the Trust shall be exercised by the Trustees in accordance with the
following provisions of this Section 8.4(b):
(i) At least 30 days before each annual or special shareholders"
meeting of Eagle Bancorp, the Plan Administrator shall cause each
participant to be furnished with a copy of the proxy solicitation
material, together with a form requesting confidential instructions on
how the Employer Stock allocated to such Participant"s Account
(including fractional shares to 1/1000th of a share) are to be voted.
Upon timely receipt of such instructions, as tabulated by the transfer
agent, the Trustees shall vote the Employer Stock in accordance with
such instructions.
21
The instructions received from Participants shall be held by the
Trustees in strict confidence and shall not be divulged or released to
any person including officers or Employees of any Employer or
Affiliate.
(ii) The Trustees shall not vote any allocated Employer Stock for
which voting instructions are not timely received from Participants
pursuant to paragraph (i) above.
(iii) The Trustees shall vote unallocated shares of Employer
Stock held in the Trust.
(iv) The Plan Administrator shall cause each Participant to be
notified of a tender or exchange offer and utilize its best efforts to
distribute or cause to be distributed to each Participant in a timely
manner all information distributed to shareholders of Eagle Bancorp in
connection with any such tender or exchange offer. Each Participant
shall have the right from time to time with respect to the Employer
Stock allocated to his account to instruct the Trustees in writing as
to the manner in which to respond to any pending tender or exchange
offer for all such Employer Stock or any portion thereof. The Trustees
shall tender or exchange such Employer Stock as and to the extent so
instructed. The Trustees shall not sell, convey or transfer any
allocated Employer Stock for which no directions are timely received
from participants pursuant to this paragraph. The individual
instructions received by the Trustees from Participants shall be held
in strict confidence by the Trustees and shall not be divulged or
released to any person, including officers or Employees of any
Employer or of any Affiliate; provided, however, that the Trustees
shall advise the Employer, at any time upon request, of the total
number of shares not subject to instructions to tender or exchange.
The Trustees and the Plan Administrator shall not make recommendations
to Participants on whether to instruct the Trustees to tender or
exchange.
(v) The Trustees shall determine, in the exercise of their
fiduciary responsibilities, whether or not to sell, convey or transfer
any unallocated shares of Employer Stock held in the Trust in response
to a tender or exchange offer.
8.5 Acquisition Loans. The Trustees may incur Acquisition Loans from
time to time to finance the acquisition of Financed Shares for the Trust, to
repay such Acquisition Loan, or to repay a prior Acquisition Loan. All
Acquisition Loans shall satisfy the following requirements:
(a) The Acquisition Loan must be at a reasonable rate of interest;
(b) Any collateral pledged to the creditor by the Plan shall consist
only of Employer Stock purchased with the borrowed funds or that were used
as collateral on a prior Acquisition Loan repaid with the proceeds of the
current Acquisition Loan;
22
(c) Under the terms of the Acquisition Loan, any pledge of Employer
Stock shall provide for the release of shares so pledged on a pro-rata
basis pursuant to Section 4.3;
(d) Under the terms of the Acquisition Loan, the creditor shall have
no recourse against the Plan except with respect to such collateral,
earnings attributable to such collateral, Employer contributions (other
than contributions of Employer Stock) that were made to meet obligations
under the Loan, and earnings attributable to such contributions;
(e) The Acquisition Loan must be for a specific term and may not be
payable at the demand of any person, except in the event of default;
(f) In the event of default, the value of Plan assets transferred in
satisfaction of the Acquisition Loan shall not exceed the amount of
default. If the lender is a disqualified person, an Acquisition Loan shall
provide for a transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the payment schedule of the
Acquisition Loan; and
(g) Acquisition Loan payments during a Plan Year must not exceed an
amount equal to: (i) the sum, over all Plan Years, of all contributions and
cash dividends paid by the Employer to the Plan with respect to such
Acquisition Loan and earnings on such Employer contributions and cash
dividends, less (ii) the sum of the Acquisition Loan payments in all
preceding Plan Years. A separate accounting shall be maintained for such
Employer contributions, cash dividends and earnings until the Acquisition
Loan is repaid.
For purposes of this Section, the term "disqualified person" means a
person within the meaning of Section 4975(e)(2) of the Code who is a fiduciary,
a person providing services to the Plan, an Employer any of whose Employees are
covered by the Plan, an employee organization any of whose members are covered
by the Plan, an owner, direct or indirect, of 50% or more of the total combined
voting power of all classes of voting stock or of the total value of all classes
of stock, or an officer, director, 10% or more shareholder, or a highly
compensated Employee.
No Employer Stock, except as provided in Section 6.3, acquired with the
proceeds of an Acquisition Loan may be subject to a put, call, or other option,
or buy-sell or similar arrangement when held by and when distributed from the
Trust, whether or not the Plan is then an ESOP. The protections and rights
granted in this section are nonterminable, and such protections and rights shall
continue to exist under the terms of this Plan so long as any Employer Stock
acquired with the proceeds of an Acquisition Loan is held by the Trust or by any
Participant or other person for whose benefit such protections and rights have
been created, and neither the repayment of such Loan nor the failure of the Plan
to be an ESOP, nor an amendment of the Plan shall cause a termination of said
protections and rights.
8.7. Liability of Trustees. The Trustees shall administer the Trust, in
accordance with the Plan documents, solely for the benefit of Plan Participants,
with the care, skill,
23
prudence and diligence under the circumstances then prevailing that a prudent
man familiar with such matters would employ acting in a like capacity and with
like aims, and shall be liable only to the extent the Trustees fail to act in
such manner. Each Trustee shall be liable for a breach of such duty by another
Trustee only to the extent he could have prevented such breach, or participated
therein, or failed to make reasonable efforts to remedy such breach after
obtaining knowledge thereof. No Trustee shall incur any liability on account of
any action taken at the direction of the Board or the Plan Administrator in
accordance with the terms of the Plan or for any investment decision made at the
direction of a Participant or an investment manager appointed by the Plan
Administrator in the prudent exercise of its duties.
8.8. Allocation of Duties. The Trustees shall have the power to
allocate their duties among themselves by a written instrument signed by all the
Trustees, copies of which are delivered to the Board. In the event the Trustees
should so allocate their responsibilities, each Trustee shall be liable only for
those duties specifically allocated to him or her, and not for those not
specifically allocated to another Trustee.
8.9. Legal Limitation. Neither the Plan Administrator nor the Trustees
shall be required to engage in any transaction, including, without limitation,
the purchase or sale of Employer Stock, if said party determines in its sole
discretion that such action might tend to subject itself, the Plan, an Employer
or any Participant to liability under federal or state laws.
Article IX. General
9.1. Amendment of Plan. (a) The Employer reserves the right at any time
and from time to time, and retroactively if deemed necessary or appropriate, to
conform with governmental regulations or other policies, to modify or amend in
whole or in part any or all of the provisions of the Plan, without the consent
of any Affiliate, Participant or beneficiary.
(b) In the event the vesting schedule provided in Section 5.1 is
amended, or changed on account of the Plan becoming or ceasing to be
Top-Heavy, any Participant who has completed at least three (3) Years of
Service may elect to have his Vested interest in his Account determined
under the Plan without regard to such amendment or change by notifying the
Plan Administrator in writing within the election period hereinafter
described. The election period shall begin on the date such amendment is
adopted or the date such change is effective, as the case may be, and shall
end no earlier than the latest of the following dates:
(i) the date which is 60 days after the day such amendment is
adopted;
(ii) the date which is 60 days after the day such amendment or
change becomes effective; or
24
(iii) the date which is 60 days after the day the Participant is
given written notice of such amendment or change by the Plan
Administrator.
Any election made pursuant to this Section 9.1 (b) shall be irrevocable.
9.2. Plan Termination.
(a) The Employer reserves the right to terminate the Plan in whole or
in part or to discontinue contributions hereto at any time without the
consent of any Employeer, Participant or beneficiary. Each affiliated
Employer, by its adoption of the Plan, shall be deemed to have delegated
this authority to the Employer.
(b) Upon termination of the Plan, no Employer shall make any further
contributions under the Plan and no amount shall thereafter be payable
under the Plan to or in respect of any Participant except as provided in
this Section 9.2. To the maximum extent permitted by ERISA, transfers,
distributions or other dispositions of the assets of the Plan as provided
in this Section 9.2 shall constitute a complete discharge of all
liabilities under the Plan. All of the provisions of the Plan which in the
opinion of the Plan Administrator are necessary for the administration of
the Plan and the administration and distribution, transfer or other
disposition of the assets of the Plan in accordance with this Section 9.2
and Section 9.11 shall remain in force. The interest of each Participant as
of the date of the termination of the Plan in the amount, if any, allocated
to the Participant"s Account shall be nonforfeitable as of such date. Upon
receipt by the Plan Administrator of the approval of the Internal Revenue
Service of such termination, the value of each such Account shall be
determined as of the Valuation Date coinciding with or immediately
preceding the date of distribution and shall be paid from the Trust to each
Participant and former Participant (or, in the event of the death of a
Participant or former Participant, the beneficiary thereof) in the manner
of distribution specified in Article VI above, including payments which are
deferred until the Participant's termination of service, as the Plan
Administrator shall determine. All determinations, approvals and
notifications referred to above shall be in form and substance and from a
source satisfactory to counsel for the Plan.
(c) In the event that the Plan Administrator or the Internal Revenue
Service determines that a partial termination (within the meaning of ERISA)
of the Plan has occurred, then the interest of each Participant affected
thereby in the amount, if any, allocated to his or her Account shall be
nonforfeitable as of the date of such partial termination.
9.3. Notice of Amendment, Etc. Notice of any amendment, modification,
suspension or termination of the Plan shall be given by the Board to the Plan
Administrator, the Trustees and all Employers.
9.4. Non-Alienation of Benefits. No benefit under the Plan shall be
subject in any manner to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, encumbrance, attachment, garnishment, levy, execution, or
other legal or equitable process, except insofar as may be otherwise required by
law or in accordance with a
25
"qualified domestic relations order" (as defined in Section 414(p) of the Code).
Any attempt to do so shall be void and shall entitle the Plan Administrator to
suspend such benefit and to hold or apply the same to or for the benefit of such
Participant or his beneficiary, spouse, child, parent or other blood relative,
or any of them.
9.5. Employment Relation. The establishment of the Plan shall have no
effect on the employment rights of any Employee or former Employee of an
Employer. The adoption and maintenance of the Plan shall not constitute a
contract between the Employer and any Employee, or consideration for, or an
inducement to or condition of, the employment of any Employee.
9.6. Payments to Minors and Incompetents. In the event that the Plan
Administrator shall determine that a Participant or beneficiary hereunder is a
minor, is unable to care for his affairs due to illness or accident, or is
otherwise incompetent to receive a benefit payable hereunder, the Plan
Administrator may, in its discretion, direct that any benefit payment due him,
if not claimed by a duly appointed legal representative, may be held for the
Participant or may be paid to his spouse, child, parent or other blood relative,
or to a person with whom he resides, and any payment so made shall completely
discharge the liability of the Plan therefor.
9.7. Missing Persons. If the Plan Administrator cannot ascertain the
whereabouts of any person to whom a payment is due under the Plan, and if after
such payment is due, a notice of such payment due is mailed to the last known
address of such person, as shown on the records of the Plan Administrator or the
Employer and within three months after such mailing such person has not made
written claim therefor, the Plan Administrator, if it so elects, after receiving
advice from counsel to the Plan, may direct that such payment and all remaining
payments otherwise due to such person be canceled on the records of the Plan and
the amount thereof applied to reduce the contributions of the Employer that had
employed the Participant with respect to whom such payments were due, and upon
such cancellation, the Plan and the Trust shall have no further liability
therefor. However, if such person later notifies the Plan Administrator of his
whereabouts and requests the payment or payments due him under the Plan, the
payments due shall be paid to him from the general assets of the Trust.
9.8. Sole Source of Benefits. The Participants of the Plan and their
beneficiaries shall look solely to the assets of the Trust established hereunder
for the benefits payable hereunder, and the Employer shall not be liable
hereunder except to the extent payments are made to the Trust.
9.9. Plan Qualification. Notwithstanding any other provision of the
Plan, the adoption of the Plan, the execution of the trust agreement and all
contributions to the Trust are conditioned upon the Plan and Trust being
determined initially by the Internal Revenue Service to meet the qualification
requirements of Section 401(a) of the Code, so that the Employer may deduct
currently for Federal income tax purposes its 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) of the Code, the Plan may be amended retroactively to the earliest date
permitted by Treasury regulations in order to secure qualification under Section
401(a) of the Code. If this Plan is held by the Internal Revenue Service not to
qualify under Section 401(a) of the
26
Code as originally adopted, each Employer contribution to the Trust under this
Plan (including any earnings thereon) shall be returned to it, without any
liability to any person, within one year after the date of denial of such
approval, but only if an application for qualification is made within the time
prescribed by law for filing the Employer"s return for the taxable year in which
the Plan was adopted or such later date as the Secretary of the Treasury may
prescribe, 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) of the Code, the
amendment may be modified retroactively to the earliest date permitted by
Treasury regulations in order to secure approval of the amendment under Section
401(a) of the Code.
9.10. Merger, Consolidation, Etc. No merger or consolidation with, or
transfer of assets or liabilities to, any other plan shall occur unless,
immediately after such merger, consolidation or transfer each Participant in the
Plan would, if the Plan were then terminated, be entitled to receive a benefit
equal to or greater than the benefit he would have been entitled to receive
immediately before such merger, consolidation, or transfer if the Plan had then
been terminated.
9.11. Exclusive Benefit. Except to the extent required to be used to
repay an Acquisition Loan, and under the circumstances permitted from time to
time by the law governing the requirements applicable to qualified plans, within
the meaning of Section 401 of the Code (or any successor provision), none of the
assets held by the Trustees under the Plan shall, prior to the satisfaction of
all liabilities under the Plan, ever revert to any Employer or otherwise be
diverted to purposes other than the exclusive benefit of the Participants or
their beneficiaries. Notwithstanding the foregoing:
(a) any contribution made by an Employer or on behalf of an Employer
because of a mistake of fact may be returned to such Employer within one
year after such contribution is made; and
(b) if the deduction of a contribution by an Employer or on behalf of
an Employer is disallowed under Section 404 of the Code, then, to the
extent the deduction is disallowed, such contribution may be returned to
such Employer within one year after the disallowance of the deduction.
9.12. Claims for Benefits. In the event a claim for benefits under the
Plan is denied, notice of such denial shall be given to the Participant or
beneficiary whose claim has been denied, clearly stating the reason for such
denial and informing such Participant or beneficiary of the procedure for
obtaining a full and fair review of such denial.
9.13. Service of Plan Fiduciaries. Any Trustee, member of the Plan
Administrator, or other Plan fiduciary may serve the Plan in more than one such
capacity.
27
9.14. Governing Law. The Plan shall be construed, interpreted,
regulated and administered under the laws of the State of Montana to the extent
federal law does not apply.
9.15. Gender and Number. Wherever used herein, the masculine gender
shall include the feminine gender and the singular shall include the plural,
unless the context clearly requires otherwise.
9.16. Titles and Headings. The titles to Articles and headings of
Sections of the Plan are for convenience of reference only. In case of conflict,
the text of the Plan, rather than such titles and headings, shall control.
Article X. Top-Heavy Provisions
10.1. Definitions.
(a) For purposes of this Article X and as otherwise used in the Plan,
the following definitions shall apply in addition to those set forth in
Article I:
"Aggregated Plans" shall mean (i) all plans of the Aggregation Group
which are required to be aggregated with the Plan, and (ii) all plans of the
Aggregation Group which are permitted to be aggregated with the Plan and which
the Employer elects to aggregate with the Plan, for purposes of determining
whether the Plan is Top-Heavy. A plan (including a terminated plan) shall be
required to be aggregated with the Plan if such a plan during the Plan Year
containing the Determination Date or any of the four preceding Plan Years,
includes as a participant a Key Employee or enables a plan of the Aggregation
Group in which a Key Employee participates to qualify under Section 401(a)(4) or
Section 410 of the Code. A plan of the Aggregation Group shall be permitted to
be aggregated with the Plan if such plan satisfies the requirements of Sections
401(a)(4) and 410 of the Code, when considered together with the Plan and all
plans which are required to be aggregated with the Plan. No plan shall be
aggregated with the Plan unless it is a qualified plan under Section 401 of the
Code. When aggregating plans, the value of account balances and accrued benefits
shall be calculated with reference to the Determination Dates that fall within
the same calendar year.
"Compensation" for purposes of computing the minimum allocation,
compensation shall mean compensation as defined in Treas. Reg. "1.415-2(d), as
limited by Section 401(a)(17) of the Code. For purposes of determining whether
an employee is a Key Employee, compensation shall mean compensation as defined
in Section 415(c)(3) of the Code but including employer contributions made
pursuant to a salary reduction arrangement.
"Determination Date" shall mean, with respect to the first Plan Year,
the last day of such Plan Year, and with respect to any subsequent Plan Year,
the last day of the preceding Plan Year.
28
"Key Employee" shall mean any Employee or former employee who at any
time during the Plan Year containing the Determination Date or the four
preceding Plan Years is or was (i) an officer of the Employer having annual
compensation in excess of 50 percent of the dollar limit in effect under Section
415(b)(1)(A) for the calendar year in which such Plan Year ends; (ii) one of ten
Employees having annual compensation from the Employer for a Plan Year in excess
of the dollar limitation in effect under Section 415(c)(1)(A) of the code for
the calendar year in which such Plan Year ends and owning (or considered as
owning within the meaning of section 318 of the Code) both more than a one-half
percent interest and the largest interests in the Employer; (iii) a five percent
owner of the Employer; or (iv) a one percent owner of the Employer having annual
compensation in excess of $150,000. The determination of who is a Key Employee
will be made in accordance with section 416(i)(1) of the Code and the
Regulations thereunder.
"Non-Key Employee" shall mean an individual who is not a Key Employee.
"Top-Heavy" shall mean that as of the Determination Date for a Plan
Year, the Value of Accumulated Benefits for Key Employees under all Aggregated
Plans exceeds 60% of the Value of Accumulated Benefits for all individuals under
all Aggregated Plans as set forth in Section 416(g) of the Code. Solely for the
purpose of determining if the Plan, or any other plan included in a required
Aggregation Group of which this Plan is a part, is Top-Heavy the accrued benefit
of an Employee other than a Key Employee shall be determined under (a) the
method, if any, that uniformly applies for accrual purposes under all plans
maintained by the Aggregation Group, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate permitted
under the fractional accrual rate of Section 411(b)(1)(C) of the Code.
"Valuation Date" means the annual date on which plan assets must be
valued for the purpose of determining the value of account balances or the date
as of which a defined benefit plan computes plan costs, assets and liabilities
for purposes of minimum funding. The Valuation Date for a defined contribution
plan shall be the most recent Valuation Date for such plan within the 12-month
period ending on the Determination Date.
"Value of Accumulated Benefits" shall mean the sum of:
(i) In the case of a defined benefit plan, the present value of
the accrued benefit determined as of the most recent Valuation Date
which is within a 12-month period ending on the Determination Date and
using the same actuarial assumptions as to interest and mortality as
specified in such defined benefit plan, plus the sum of any amounts
distributed to the individual during the Plan Year which includes the
Determination Date and during the four (4) immediately preceding Plan
Years.
(ii) In the case of a defined contribution plan, the sum of the
accounts of the individual as of the most recent Valuation Date which
is within a 12-month period ending on the Determination Date, plus the
sum of any amounts
29
distributed to the individual during the Plan Year which includes the
Determination Date and during the four (4) immediately preceding Plan
Years.
"Year of Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was Top-Heavy.
(b) Only for purposes of determining a Key Employee"s allocation
percentage under Section 10.2(a), any eEmployer matching and salary
deferral contributions will be included. The minimum contributions
specified in Section 10.2(a) shall apply to all Participants under this
Plan who are Non-Key Employees except any such Participant who was not
employed by an Employer on the last day of the Plan Year. In addition, in
the case of a Non-Key Employee who is a participant in both this Plan and
in a defined benefit plan that is an Aggregated Plan, the minimum
contribution specified in Section 10.2(a) above shall be 5% of
compensation.
10.2. Minimum Contributions.
(a) Except as otherwise provided in Section 10.2(b) below, if the Plan
is determined to be Top-Heavy with respect to a Plan Year, the Employer
contributions and Forfeitures allocated on behalf of any Participant who is
a Non-Key Employee shall not be less than the lesser of 3 percent of such
Participant's compensation (within the meaning of Section 415 of the Code)
or, in the case where the Employer has no defined benefit plan which
designates this Plan to satisfy Section 401 of the Code, the largest
percentage of Employer contributions and Forfeitures allocated on behalf of
any Key Employee for that year. This minimum allocation is determined
without regard to any social security contribution. The minimum allocation
shall be made even though, under other Plan provisions, the Participant
would not otherwise be entitled to receive an allocation, or would have
received a lesser allocation for the year.
(b) The provision in Section 10.2(a) above shall not apply to any
Participant who was not employed by an Employer on the last day of the Plan
Year. The Plan Administrator shall to the maximum permitted by the Code and
in accordance with the regulations thereunder, apply the provisions of this
Section 10 by taking into account the benefits payable and the
contributions made under all other defined contribution and defined benefit
plans maintained by an Employer which are qualified under Section 401(a) of
the Code to prevent inappropriate omissions or required duplication of
minimum benefits or contributions.
10.3. Vesting.
If the Plan is determined to be Top-Heavy with respect to a Plan Year,
the Vested interest of each Participant, who is credited with at least one Hour
of Service on or after the date the Plan becomes Top-Heavy, in the amount
allocated to his Account shall not be less than the percentage determined in
accordance with the most favorable to the Participant of (i) the current vesting
Schedule, or (ii) the following vesting schedule:
30
Participant"s
Years of Service Vested Percentage
---------------- -----------------
less than 2 None
2 20%
3 40%
4 60%
5 80%
6 100%
If in a subsequent Plan Year the Plan is no longer Top-Heavy, the above vesting
Schedule (if otherwise applicable) shall not apply to the portion of the
Participant's Account attributable to Employer contributions and Forfeitures
made on or after the first day of the first Plan Year in which the Plan is no
longer Top-Heavy and the vesting provisions that were in effect prior to the
time the Plan became Top-Heavy shall be reinstated, provided, however, that
portions of a Participant's Account which were Vested prior to the time the Plan
was no longer Top-Heavy shall remain Vested.
IN WITNESS WHEREOF, American Federal Savings Bank has adopted this Plan
this day of , 1999, effective as of the Effective Date.
WITNESS: AMERICAN FEDERAL SAVINGS BANK
________________________________ By____________________________________
Authorized Officer
Eagle Bancorp, the holder of all the issued and outstanding capital
stock of the Employer, a federally chartered savings bank, hereby consents to
the obligations imposed on it pursuant to Section 6.3 of the Plan.
EAGLE BANCORP
By____________________________________
Authorized Officer
31
AMERICAN FEDERAL
EMPLOYEE STOCK OWNERSHIP TRUST
AMERICAN FEDERAL
EMPLOYEE STOCK OWNERSHIP TRUST
This TRUST AGREEMENT ("Agreement") is entered into this day of , 1999,
by and between American Federal Savings Bank, a federally chartered savings bank
having its principal place of business at 1400 Prospect Avenue, Helena, Montana
59601 (the "Employer"), and Larry A. Dreyer, Peter J. Johnson and Don O.
Campbell (collectively, the "Trustees").
W I T N E S E T H:
WHEREAS, the Employer has adopted an employee stock ownership plan
("Plan") to be qualified under section 401(a) of the Internal Revenue Code of
1986, as amended ("Code'), as well as the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") for the exclusive benefit of
participating employees ("Participants") and their beneficiaries; and
WHEREAS, the Plan contemplates the establishment of the American
Federal Employee Stock Ownership Trust as a part of the Plan, to which
contributions will be made from time to time, to be accepted, invested and
maintained in accordance with this Agreement; and
WHEREAS, the Plan provides for the assets of the Trust to be invested
primarily in shares of voting common stock of the Employer which constitute
"qualifying employer securities" within the meaning of Section 4975(e)(8) of the
Code ("Employer Stock") and for the assumption of debt for the purpose of
purchasing Employer Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Employer and the Trustees hereby agree as
follows:
ARTICLE I
Trust Fund
Section 1.1 Definitions and Construction. Unless the context of this
Agreement clearly indicates otherwise, the terms defined in Article I of the
Plan shall, when used herein, have the same meaning as in the Plan. In this
Agreement, the masculine gender shall include the feminine and neuter genders,
the singular shall include the plural, and vice versa. The headings in this
Agreement are used for the convenience of reference only and are to be ignored
in any construction of the provisions thereof.
Section 1.2 Trust Fund. The Employer hereby establishes with the
Trustees a Trust, pursuant to the Plan, in which shall be deposited such
Employer Stock and such sums of money as shall from time to time be paid or
delivered to or deposited with the Trustees by or with the approval of the
Employer in accordance with the terms of the Plan. All such Employer Stock and
all such sums of money, all
2
investments and reinvestments thereof and all earnings, appreciation and
additions allocable thereto, less losses, depreciation and expenses allocable
thereto and any payments made therefrom as authorized under the Plan or this
Agreement shall constitute the "Trust Fund". The Trust Fund shall be held,
managed and administered by the Trustees, in trust, and dealt with in accordance
with the provisions of this Agreement and in accordance with any funding policy
or guidelines established under the Plan that are communicated in writing to the
Trustees.
Section 1.3 Non-diversion of Funds. Notwithstanding anything to the
contrary contained in this Agreement or any amendment thereto, no part of the
Trust Fund other than such expenses, fees, indemnities and taxes properly
charged to the Trust Fund under the Plan or this Agreement or as specifically
provided in Sections 9.9 and 9.11 of the Plan, shall be used for or diverted to
purposes other than for the exclusive benefit of Plan Participants and their
beneficiaries.
Section 1.4 Multiple Trustees. If there shall be more than one Trustee
serving hereunder, they shall act by a majority of their number, but any one
Trustee may be authorized to execute documents and to act on behalf of all
Trustees hereunder. The Trustees shall certify in writing any such allocation of
authority, and the limits thereof, to the Plan Administrator and the Employer,
who may rely upon such certification for all purposes until notified in writing
of a change in or revocation of such authority by the Trustees.
ARTICLE II
Investment and Administration
Section 2.1 Administration of Plan. In their capacities as Trustees
hereunder, the Trustees shall have no authority over and shall have no
responsibility for the administration of the Plan, which authority and
responsibility shall be exercised by the Plan Administrator as provided in the
Plan. The Trustees shall be under no duty to enforce the payment of any
contribution to the Trust Fund and shall not be responsible for the adequacy of
the Trust Fund to satisfy any obligations for benefits, expenses and liabilities
under the Plan. The Plan Administrator shall furnish the Trustees with such
information and data relative to the Plan as is necessary for the proper
administration of the Trust Fund.
Section 2.2 In General. The Trust Fund shall be held by the Trustees
and shall be invested and reinvested as provided in this Article II, primarily
in Employer Stock. Assets of the Trust Fund not invested in Employer Stock shall
be invested in stocks, bonds, securities or other property of any kind, nature
or description, without distinction between principal and income. The Trustees'
investment decisions shall give due regard to the funding and liquidity policies
established under the Plan.
Section 2.3 Appointment of Investment Manager. (a) The Trustees may, in
their discretion, appoint an investment manager ("Investment Manager") to direct
the investment and reinvestment of all or any portion of the assets in the Trust
3
Fund, other than Employer Stock. Any such Investment Manager shall either (i) be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended ("Investment Advisers Act"); (ii) be a Bank, as defined in the
Investment Advisers Act; or (iii) be an insurance company qualified to perform
investment services under the laws of more than one state. Any such Investment
Manager must acknowledge that it is a fiduciary with respect to the Plan.
To the extent that an Investment Manager has not been appointed to
invest any portion of the Trust Fund, the Trustees shall invest and reinvest the
Trust Fund consistent with ERISA and the purposes of the Plan.
Section 2.4 Investment in Commingled Funds. The Trustees may invest any
assets of the Trust Fund, other than Employer Stock, in any commingled or group
trust fund described in Section 401(a) of the Code and exempt under Section
501(a) of the Code or in any common trust fund exempt under Section 584 of the
Code. To the extent that the Trust Fund is at any time invested in any
commingled, group or common trust fund, the declaration of trust or other
instrument pertaining to such fund and any amendments thereto are hereby adopted
as part of this Agreement and deemed to form a part of the Plan. If there is any
conflict between the provisions of this Agreement and such declaration of trust
or other instrument, then the terms of the declaration of trust or other
instrument of the commingled, group or common trust shall govern.
Section 2.5 Uninvested Cash. Notwithstanding any provisions of this
Article II to the contrary, the Trustees may hold uninvested cash or cash
balances within the Trust Fund without being required to pay interest thereon,
to the extent they deem advisable to meet the needs of the Plan for short-term
liquidity.
Section 2.6 Trustees' Authority. In addition to and not by way of
limitation of any other powers conferred upon the Trustees by law or by other
provisions of this Agreement, but subject to the provisions of Section 1.3 and
this Article II, the Trustees are authorized and empowered:
(a) to sell, exchange, convey, transfer or dispose of any property,
whether real or personal, at any time held by them, and any sale may be
made by private contract or by public auction, and for cash or upon credit,
or partly for cash and partly upon credit, and no person dealing with the
Trustees shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency or propriety of any such sale or
other disposition;
(b) to retain, manage, operate, repair and rehabilitate and to
mortgage or lease for any period any real estate held by them and, in their
discretion, cause to be formed any corporation or trust to hold title to
any such real property;
(c) subject to Section 2.7, to vote in person or by proxy on any
stocks, bonds, or other securities held by them, to exercise any
4
options appurtenant to any stocks, bonds or other securities for the
conversion thereof into other stocks, bonds or securities, and to exercise
any rights to subscribe for additional stocks, bonds or other securities
and to make any and all necessary payment therefor and to enter into any
voting trust;
(d) with respect to any investment, to join in, dissent from, or
oppose any action or inaction of any corporation, or of the directors,
officers or stockholders of any corporation, including, without limitation,
any reorganization, recapitalization, consolidation, liquidation, sale or
merger;
(e) to settle, adjust, compromise, or submit to arbitration any
claims, debts or damages due or owing to or from the Trust Fund;
(f) to deposit any property with any protective, reorganization or
similar committee, to delegate power thereto and to pay and agree to pay
part of its expenses and compensation and any assessments levied with
respect to any property so deposited.
(g) to commence or defend suits or legal proceedings, and to represent
the Trust Fund in all suits or legal proceedings in any court or before any
other body or tribunal;
(h) to register securities in their names or in the name of any
nominee or nominees with or without indication of the capacity in which the
securities shall be held, or to hold securities in bearer form;
(i) subject to Section 2.8, to borrow or raise moneys for the purposes
of the Trust from any lender, except a corporate Trustee, and for any sum
so borrowed to issue the Trustees' promissory note and to secure the
repayment thereof by pledging all or any part of the Trust Fund, and no
person lending money to the Trustees shall be bound to see to the
application of the money loaned or to inquire into the validity, expedience
or propriety of any such borrowing;
(j) to make distributions upon the direction of the Plan
Administrator;
(k) to employ such agents, counsel, independent appraisers, and
accountants as the Trustees shall deem advisable, who shall be reimbursed
by the Employer for their reasonable expenses and compensation;
(l) to make, execute, acknowledge, and deliver any and all deeds,
leases, assignments and instruments;
5
(m) to invest assets of the Plan in deposits with the Employer, which
deposits bear a reasonable interest rate; and
(n) generally to do all acts which the Trustees may deem necessary or
desirable for the administration and protection of the Trust Fund.
Section 2.7 Exercise of Voting Rights with Respect to Employer Stock.
The Trustees shall vote all Employer Stock held in the Trust Fund, except to the
extent that Participants are entitled to direct the voting of any Employer Stock
allocated to their Accounts as provided in the Plan.
Section 2.8 Acquisition Loans. The Trustees may obtain a loan from any
lender, or enter into a deferred payment obligation on behalf of the Plan (an
"Acquisition Loan") only for the following purposes:
(a) to purchase Employer Stock; or
(b) to make payments of principal or interest, or a combination of
principal and interest, with respect to such Acquisition Loan; or
(c) to make payments of principal or interest, or a combination of
principal and interest, with respect to a previously obtained Acquisition
Loan that is then outstanding.
Any such Acquisition Loan shall meet the requirements set forth in Section 8.6
of the Plan and shall otherwise be on such terms and conditions as the Trustees
may determine.
ARTICLE III
Reliance and Indemnification
Section 3.1 Trustees' Reliance. The Trustees may rely and act upon any
certificate, notice or direction of the Plan Administrator, or of a person
authorized to act on behalf of the Plan Administrator, or of the Employer or of
an Investment Manager which the Trustees believes to be genuine and to have been
signed by the person or persons duly authorized to sign such certificate,
notice, or direction.
Section 3.2 Legal Counsel. The Trustees may consult with legal counsel
(who may be counsel to the Employer) and may charge the expense to the Employer
concerning any question which may arise under this Agreement, and the opinions
of such counsel shall be full and complete protection with respect to any action
taken, or omitted, by the Trustees hereunder in good faith in accordance with
the opinion of such counsel.
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Section 3.3 Indemnification. To the extent permitted by law, the
Employer shall indemnify and save harmless the Trustees from and against any and
all liability, claims, loss, damages and expenses (including, without
limitation, reasonable attorneys' fees) to which the Trustees may be subject by
reason of any act done or omitted to be done under this Agreement or the Plan,
if said act or omission was done or occurred in good faith.
ARTICLE IV
Distributions from the Trust Fund
Section 4.1 In General. The Trustees shall make payments from the Trust
Fund in such manner and amounts, at such times, and to such persons as the Plan
Administrator may direct.
Section 4.2 Direction by the Plan Administrator. (a) A direction by the
Plan Administrator to make a distribution from the Trust Fund shall:
(i) be made in writing;
(ii) specify the amount of the payment, the method of payment,
the date such payment is to be made, the person to whom payment is to
be made, and the address to which the payment is to be sent; and
(iii) be deemed to certify to the Trustees that such direction
and any payment pursuant thereto are authorized under the terms of the
Plan.
(b) The Trustees shall be entitled to rely conclusively on the Plan
Administrator's certification of its authority to direct a payment without
independent investigation. The Trustees shall have no liability to any person
with respect to payments made in accordance with the provisions of this Article
IV.
Section 4.3 Method of Payment. Payments of money by the Trustees may be
made by check. Distributions of Employer Stock shall be made by causing the
Employer, or its transfer agent, to issue to the distributee a stock certificate
evidencing ownership of the designated number of shares of Employer Stock.
ARTICLE V
Trustees' Responsibilities
Section 5.1 General Standard of Care. The Trustees and any Investment
Manager shall at all times discharge their duties with respect to the Trust Fund
solely in the interest of the Plan Participants and their beneficiaries and with
the care, skill, prudence, and diligence that, under the circumstances
prevailing, a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character and with
like aims.
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Section 5.2 No Liability for Acts of Others. No "fiduciary" (as such
term is defined in section 3(21) of ERISA) under this Agreement shall be liable
for an act or omission of another person in carrying out any fiduciary
responsibility where such fiduciary responsibility is allocated to such other
person by this Agreement or pursuant to a procedure established in this
Agreement except to the extent that:
(a) such fiduciary participated knowingly in, or knowingly undertook to
conceal, an act or omission of such other person, knowing such act or omission
to be a breach of fiduciary responsibility;
(b) such fiduciary, by his failure to comply with section 404(a)(1) of
ERISA in the administration of his specific responsibilities which give rise to
his status as a fiduciary, has enabled such other person to commit a beach of
fiduciary responsibility;
(c) such fiduciary has knowledge of a breach of fiduciary responsibility by
such other person, unless he makes reasonable efforts under the circumstances to
remedy the breach; or
(d) such fiduciary is a "named fiduciary" (as such term is defined in
section 401(a) of ERISA) and has violated his duties under section 404(a) (1) of
ERISA:
(i) with respect to the allocation of fiduciary responsibilities among
named fiduciaries or the designation of persons other than named
fiduciaries to carry out fiduciary responsibilities under this Agreement;
(ii) with respect to the establishment or implementation of procedures
for allocating fiduciary responsibilities among named fiduciaries or for
designating persons other than named fiduciaries to carry out fiduciary
responsibilities under this Agreement; or
(iii) in continuing the allocation of fiduciary responsibilities among
named fiduciaries or the designation of persons other than named
fiduciaries to carry out fiduciary responsibilities under this Agreement.
ARTICLE VI
Trustees' Accounts
Section 6.1 Accounts. The Trustees shall keep or cause to be kept
accurate and detailed accounts of all investments, reinvestments, receipts and
disbursements, and other transactions hereunder, and all such accounts and the
books and records relating thereto shall be open to inspection at all reasonable
times by the Employer or the Plan Administrator or persons designated by them.
8
Section 6.2 Valuation of Trust Fund. The Trustees shall value or cause
to be valued the Trust Fund as of the last business day of each Plan Year, and
as of such other date(s) as may be directed by the Plan Administrator upon not
less than sixty (60) days notice ("Valuation Date"). The Trustees shall report
to the Plan Administrator the value of the Trust Fund as of each Valuation Date,
within a reasonable time after the first day of the month next succeeding each
such date.
Section 6.3 Independent Appraiser. The Trustees shall engage a
qualified independent appraiser to determine the fair market value of the
Employer Stock at such times as may be directed by the Plan Administrator, or as
may be necessary or desirable, in the discretion of the Trustees, to comply with
ERISA. The fees and expenses of the appraiser shall be paid by the Employer.
Section 6.4 Reports to the Plan Administrator. (a) Within sixty (60)
days following each Valuation Date, and within sixty (60) days following the
effective date of the resignation or removal of all Trustees as provided in
Section 8.1, the Trustees shall render to the Plan Administrator a written
account setting forth all investments, receipts, disbursements and other
transactions affecting the Trust Fund and any investment fund within the Trust
Fund, which account shall be signed by the Trustees and mailed to the Plan
Administrator.
(b) The Plan Administrator shall notify the Trustees in writing of any
objection or exception to an account so rendered not later than ninety (90)
days following the date on which the Account was mailed to the Plan
Administrator, whereupon the Plan Administrator and the Trustees shall
cooperate in resolving such objection or exception.
(c) If the Plan Administrator has not communicated in writing to the
Trustees within ninety (90) days following the mailing of the account to
the Plan Administrator any exception or objection to the account, the
account shall become an account stated at the end of such ninety (90) day
period. If the Plan Administrator does communicate such an exception or
objection, as to which it later becomes satisfied, the Plan Administrator
shall thereupon indicate in writing its approval of the account, or of the
account as amended, and the account shall thereupon become an account
stated.
(d) Whenever an account shall have become an account stated as
aforesaid, such account shall be deemed to be finally settled and shall be
conclusive upon the Trustees, the Employer and all persons having or
claiming to have any interest in the Trust Fund or under the Plan, and the
Trustees shall be fully and completely discharged and released to the same
extent as if the account had been settled and allowed by a judgment or
decree of a court of competent jurisdiction in an action or proceeding in
which the Trustees, the Employer, and all persons having or claiming to
have an interest in the Trust Fund or under the Plan were parties.
Section 6.5 Right of Judicial Settlement. Notwithstanding the
provisions of section 6.3, the Trustees, the Plan Administrator, and the
Employer, or any of them, shall have the right to apply at any time to a court
of competent jurisdiction for the
9
judicial settlement of the Trustees' account. In any such case, it shall be
necessary to join as parties thereto only the Trustees, the Plan Administrator
and the Employer; and any judgment or decree which may be entered therein shall
be conclusive upon all persons having or claiming to have any interest in the
Trust Fund or under the Plan.
Section 6.6 Enforcement of Agreement. To protect the Trust Fund from
expense which might otherwise be incurred, the Employer and the Plan
Administrator shall have authority, either jointly or severally, to enforce this
Agreement on behalf of all persons claiming any interest in the Trust Fund or
under the Plan, and no other person may institute or maintain any action or
proceeding against the Trustees or the Trust Fund in the absence of written
authority from the Plan Administrator or a judgment of a court of competent
jurisdiction that in refusing authority the Plan Administrator acted
fraudulently or in bad faith.
ARTICLE VII
Taxes: Compensation of Trustees
Section 7.1 Taxes. Any taxes that may be imposed upon the Trust Fund or
the income therefrom shall be deducted from and charged against the Trust Fund.
Section 7.2 Compensation of Trustees; Expenses. The Trustees shall
receive for their services hereunder such compensation as may be agreed upon in
writing from time to time by the Employer and the Trustees and shall be
reimbursed by the Employer for their reasonable expenses, including counsel
fees, incurred in the performance of their duties hereunder. The Trustees shall
deduct from and charge against the Trust Fund such compensation and all such
expenses if not paid by the Employer, except that (a) all commissions paid in
connection with the appraisal, acquisition or sale of Employer Stock shall be
paid by the Employer; and (b) no person serving as a Trustee who receives
full-time pay from an Employer whose Employees participate in the Plan shall
receive any compensation (except for reimbursement of expenses) from the Trust
Fund.
ARTICLE VIII
Resignation and Removal of Trustees
Section 8.1 Resignation or Removal of Trustees. Any Trustee may resign
as a Trustee hereunder at any time by giving thirty (30) days prior written
notice to the Employer. The Employer may remove any Trustee hereunder at any
time by giving the Trustee written notice of such removal, which shall include
notice of the appointment of a successor Trustee. Such removal shall take effect
not earlier than thirty (30) days following receipt of such notice by the
Trustee, unless otherwise agreed upon by the Trustee and the Employer.
Section 8.2 Appointment of Successor. In the event of the resignation
or removal of a Trustee, a successor Trustee shall be appointed by the Employer.
Except as is otherwise provided in Section 8.1, such appointment shall take
effect upon delivery to the remaining Trustees of an instrument so appointing
the
10
successor and an instrument of acceptance executed by such successor. If within
thirty (30) days after notice of resignation shall have been given by a Trustee
a successor shall not have been appointed as aforesaid, the remaining Trustee or
Trustees shall have and exercise all the powers given to the Trustees hereunder
until a successor has been duly appointed in accordance with the foregoing.
Section 8.3 Successor Bound by Agreement. All the provisions of this
Agreement shall apply to any successor Trustees with the same force and effect
as if such successor had been originally named herein as a Trustee hereunder.
ARTICLE IX
Amendment and Termination.
Section 9.1 Amendment and Termination. (a) The Employer may, at any
time and from time to time, by instrument in writing executed pursuant to
authorization of its Board of Directors, (i) amend in whole or in part any or
all of the provisions of this Agreement, or (ii) terminate this Agreement and
the Trust created hereby; provided, however, that no amendment which affects the
rights, duties, fees or responsibilities of the Trustees may be made without the
Trustees' consent.
(b) Effective Date. Any such amendment shall become effective upon
receipt by the Trustees of the instrument of amendment and endorsement
thereon by the Trustees of its consent thereto, if such consent is
required. Any such termination shall become effective upon the receipt by
the Trustees of the instrument of termination or any subsequent termination
date as provided for therein; thereafter the Trustees, upon the direction
of the Plan Administrator, shall liquidate the Trust Fund to the extent
required for distribution and, after the final account of the Trustees has
been approved or settled, shall distribute the balance of the Trust Fund
remaining in its hands as directed by the Plan Administrator, or in the
absence of such direction, as may be directed by a judgment or decree of a
court of competent jurisdiction. Following any such termination, the powers
of the Trustees hereunder shall continue as long as any of the Trust Fund
remains in their hands.
ARTICLE XI
Miscellaneous
Section 10.1 Binding Effect; Assignability. This Agreement shall be
binding upon, and the powers granted to the Employer and the Trustees,
respectively, shall be exercisable by the respective successors and assigns of
the Employer and any corporate Trustee. Any corporation which shall, by merger,
consolidation, purchase, or otherwise, succeed to substantially all the trust
business of a corporate Trustee shall, upon such succession and without any
appointment or other action by the Employer, be and become a successor Trustee
hereunder.
Section 10.2 Governing Law. This Agreement and the trust created and
the Trust Fund held hereunder shall be interpreted, construed and administered
in
11
accordance with the laws of the State of Montana, to the extent federal law does
not apply.
Section 10.3 Notices. Any communication to the Trustees, including any
notice, direction, designation, certification, order, instruction, or objection
shall be in writing and signed by the person authorized under the Plan to give
the communication. The Trustees shall be fully protected in acting in accordance
with any such written communication. Any notice required or permitted to be
given to a party hereunder shall be deemed given if in writing and hand
delivered or mailed, postage prepaid, certified mail, return receipt requested,
to such party at the following address or at such other address as such party
may by notice specify:
If to the Employer:
American Federal Savings Bank
1400 Prospect Avenue
Helena, Montana 59601
Attn: Peter J. Johnson, Chief Financial Officer
If to the Trustees:
Larry A. Dreyer
Peter J. Johnson
Don O. Campbell
American Federal Savings Bank
1400 Prospect Avenue
Helena, Montana 59601
Section 10.4 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of enforceability of
the remaining provisions.
Section 10.5 Waiver. Failure of any party to insist at any time or
times upon strict compliance with any provision of this Agreement shall not be a
waiver of such provision at such time or any later time unless in a writing
designated as a waiver and signed by or on behalf of the party against whom
enforcement of the waiver is sought.
Section 10.6 Non-Alienation. No interest, right or claim in or to any
part of the Trust Fund or any payment therefrom shall be assignable,
transferable or subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any kind, and the
Trustees and the Plan Administrator shall not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same,
except to the extent required by law.
Section 10.7 Qualified Plan and Trust. This Agreement and the trust
hereby created are part of an employee benefit plan which the Employer intends
12
shall be qualified under section 401(a) and 4975(e)(7) of the Code and until
advised to the contrary, the Trustees may assume that the Plan so qualifies and
that the trust is exempt from tax under section 401(a) of the Code. However, any
taxes that may be assessed on or in respect of the Trust Fund shall be a charge
against the Trust Fund. All contributions made prior to the receipt by the
Employer of a determination from the Internal Revenue Service to the effect that
the Trust forming part of the Plan is a qualified trust under Section 401(a) of
the Code and that the Trust is exempt from federal income tax under Section
401(a) of the Code shall be made on the express condition that such a
determination is received, and in the event that the Internal Revenue Service
determines that the Trust and the Plan are not so qualified, all contributions
made prior to the date of the receipt of such determination after giving effect
to any income, gain or loss, less any compensation and expenses properly
chargeable thereto, shall be returned to the Employer.
Section 10.8 Compliance with Securities Laws. In the event that the
Plan or any portion thereof, or any interest therein, by virtue of investments
made in Employer Stock, shall be deemed to be a "security" for purposes of the
Securities Act of 1933, the Securities Exchange Act of 1934 or any other federal
or state law, for which there is no exemption from the registration, reporting,
blue sky or other requirements applicable to securities under such laws, the
Employer shall, at its sole cost and expense, take all such actions as are
necessary or appropriate to comply with the requirements of such laws. The
Employer hereby agrees to indemnify the Trustees and hold them harmless from and
against any claim or liability which may be asserted against the Trustees by
reason of any determination that the Plan or any portion thereof, or any
interest therein, constitutes such a security.
Section 10.9 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 Agreement, the text shall control.
Section 10.10 Construction of Language. Whenever appropriate in this
Agreement, 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
shall be deemed equally to refer to the female gender or the neuter. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise indicated.
Section 10.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
ATTEST: AMERICAN FEDERAL SAVINGS BANK
________________________________ By:____________________________________
Larry A. Dreyer, President
TRUSTEES
________________________________ ____________________________________
Larry A. Dreyer, Trustee
________________________________ ____________________________________
Peter J. Johnson, Trustee
____________________________________
Don O. Campbell, Trustee
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