NAZARETH NATIONAL BANK
DIRECTORS' DEFERRED COMPENSATION PLAN #2
October 1, 1985
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions
1
2. Participant Compensation Deferral
4
2.1 Eligibility
4
2.2 Participation
4
2.3 Form of Deferral; Deferral
Amounts
5
2.4 Election to Defer
Irrevocable
5
3. Benefits
6
3.1 Termination Benefits
6
3.2 Survivorship Benefits
8
3.3 Recipients of
Payments: Designation of Beneficiary
8
4.
Administration and Interpretation of the Plan
10
5. Claims Procedure
11
6. Review Procedure
11
7. Funding
12
8. Assignment of Benefits
12
9. Directorship Not Guaranteed by Plan
13
10. Taxes
13
11. Amendment and Termination
13
12. Misrepresentations
13
13. Tax Consequences
14
14. Miscellaneous
14
-1-
<PAGE>
NAZARETH NATIONAL BANK
----------------------
DIRECTORS' DEFERRED COMPENSATION PLAN
NAZARETH NATIONAL BANK a banking organization organized and
existing
under the laws of the United States (the
"Bank") hereby establishes this
Directors Deferred Compensation Plan (the
"Plan"), effective as of October 1,
1985 ("effective date"), for the purpose of
promoting in the members of its
Board of Directors the strongest interest
in the successful operation of the
Bank and to provide benefits upon
termination of service for any reason,
including death or disability.
1. Definitions.
A. Actual Deferrals - "Actual Deferrals" shall mean all amounts
which
have been subtracted from the Participant's
Compensation pursuant to Section
2.2a, below.
B. Administrative Committee - "Administrative Committee" shall
mean
the committee appointed pursuant to Section
4 of the Plan.
C. Age - "Age" shall mean the age of the person as of his last
birthdate.
D. Benefit Schedule - "Benefit Schedule" shall mean the
separate
schedule setting forth the Participant's
benefits under the Plan.
E. CEO - "CEO" shall mean the chief executive officer of the Bank
or
the senior full-time officer of the Bank
who is a director.
F. Compensation - "Compensation" shall mean Fees and, in the case
of a
Participant who is also a Key Executive,
Salary.
G. Deferral Period - "Deferral Period" shall mean the 4-year
period
which Compensation is being deferred
pursuant to the Participant's Deferred
Compensation Agreement and Section 2,
below. The Deferral period shall commence
on the first day of the Plan Year
coincident with or next following the
execution of the Deferred Compensation
Agreement.
H. Deferred Compensation Agreement - "Deferred Compensation
Agreement"
shall mean a written agreement between a
Director and the Bank, whereby the
Director agrees to defer a portion of his
Compensation and the Bank agrees to
make benefit payments, both in accordance
with the provisions of the Plan.
I. Director - "Director" shall mean a member of the Board of
Directors
of the Bank.
-2-
<PAGE>
J. Disability - "Disability" shall mean a physical or mental
condition
of such severity and probable prolonged
duration as to render it unlikely, in
the judgment of the Administrative
Committee, that the Participant will be able
to resume the duties he was performing for
the Bank prior to the onset of the
condition with respect to which such
disability is alleged. In making such
determination, the Administrative Committee
shall rely upon the judgment of one
or more physicians selected by the
Administrative Committee and upon such
evidence as is presented by the
Participant. No determination of disability
shall be made if the Participant fails to
provide such evidence as is required
by the Administrative Committee and/or
fails to submit to examination by the
physician (s) selected by the
Administrative Committee.
K. Fees - "Fees" shall mean all fees earned by a Participant in
his
capacity as a Director.
L. Key Executive - "Key Executive" shall mean (i) the CEO, and
(ii)
any other Director who is an employee of
the Bank and who is designated as a
"Key Executive" by the Board of Directors
of the Bank.
M. Normal Benefit - "Normal Benefit" shall mean the normal
benefit
amount specified in the Benefit
Schedule.
N. Normal Benefit Date - "Normal Benefit Date" shall mean the later
of
(i) the first day of the month following
the month in which a Participant
reaches age 65, or (ii) the first day of
the month following the end of the
Deferral Period.
O. Participant - "Participant" shall mean a Director who has
entered
into a Deferred Compensation Agreement with
the Bank.
P. Plan Year - "Plan Year" shall mean the 12-month period beginning
on
the effective date of the Plan and on each
anniversary of such date.
Q. Pre-Termination Survivor's Benefit - "Pre-Termination
Survivor's
Benefit" shall mean the pre-termination
survivor's benefit amount specified in
the Benefit Schedule.
R. Salary - "Salary" shall mean the salary earned by a Director in
his
capacity as a Key Executive.
S. Stated Deferral - "Stated Deferral" shall mean the amount of
Compensation the Participant agrees to
defer in the Deferred Compensation
Agreement.
-3-
<PAGE>
T. Termination of Service - "Termination of Service" shall mean
the
Participant's ceasing to be a Director for
any reason whatsoever, voluntary or
involuntary, including by reason of death
or disability; provided, however, that
if the Participant is also a Key Executive,
Termination of Service shall mean
the Participant's ceasing to be both a
Director and an Employee of the Bank.
U. Vested Percentage - "Vested Percentage" shall mean the
percentage
determined under Section 3.1b, below. 2.
Participant Compensation Deferral. 2.1
Eligibility.
All Directors who are age 80 or less shall be eligible to
participate in the Plan.
2.2
Participation.
a.
Initial Participants. An eligible Director may become a
Participant hereunder as of the effective date of the Plan
by filing a Deferred Compensation Agreement with the
Administrative Committee within the 30-day period
immediately preceding such effective date.
b.
New Participants. A Director who first becomes a Director
subsequent to the effective date of the Plan shall be
entitled to participate in the Plan commencing with the Plan
Year following the Plan Year in which he becomes a Director
by filing a Deferred Compensation Agreement with the
Administrative Committee no later than the fifteenth day of
the month immediately preceding the commencement of such
Plan Year.
2.3 Form of
Deferral; Deferral Amounts.
a.
Form of Deferral. The Director shall make the election
provided for in Section 2.1b, above, by executing a Deferred
Compensation Agreement in the form provided by the Bank. The
Deferred Compensation Agreement shall set forth the Stated
Deferral which shall be a fixed dollar amount to be
subtracted from the Compensation otherwise payable to the
Participant during the Deferral Period. The amount specified
in the Deferred Compensation Agreement shall be deferred
ratably over the Deferral Period and the Participant's
Compensation shall be correspondingly reduced.
b.
Deferral Amounts. A Participant may elect to defer from his
Fees earned and payable in each Plan
-4-
<PAGE>
Year in the Deferral Period up to $6,000. A Participant who
is the Key Executive may elect to defer up to $11,000 of his
salary earned and payable in each plan year in the Deferral
Period. The Administrative Committee may from time to time,
in its sole discretion, adjust the amount permitted to be
deferred hereunder.
2.4
Election to Defer Irrevocable. A Participant's election to
defer
Compensation shall be irrevocable.
3.
Benefits.
3.1
Termination Benefits.
a.
Generally. The Bank shall pay to the Participant an amount
equal to the product of the Normal Benefit multiplied by the
Vested Percentage. The benefit shall be paid over a 15-year
period in monthly, quarterly or annual installments as the
Administrative Committee, in its sole discretion, shall
determine. Except as provided in Section 3.1c, below, such
payments shall commence on the first day of the month
coincident with or next following the later of the Normal
Benefit Date or the Participant's Termination of Service.
b.
Vested Percentage. The Vested Percentage shall equal 25
percent for each Plan Year in the Deferral Period in which
the Participant
completes his deferrals for such Plan Year,
but not more than 100 percent with respect to each Stated
Deferral. If a Participant's Termination of Service by
reason of Disability occurs during a Plan Year in the
Deferral Period, the Participant shall be deemed to have
completed the deferrals for such Plan Year. If a
Participant's Termination of Service for reasons other than
death or Disability occurs in a Plan Year prior to
completing the deferrals in such Plan Year, the Participant
may contribute to the Bank the amount that otherwise would
have been deferred in the balance of such Plan Year. The
contribution shall be made within 60 days after the
Participant's Termination of Service. Any Participant making
such a contribution shall be treated as having completed the
deferrals with respect to such Plan Year.
c.
Early Termination. If a Participant's Termination of Service
occurs prior to the Normal Benefit Date, the Administrative
Committee, in its discretion but subject to the approval of
the Board of Directors, may permit the payment of benefits
under Section 3.1a to commence at any time prior to the
Normal Benefit Date, provided, however, that the benefits
calculated under Section 3.1a shall be reduced at the
annually compounded rate of 12.5 percent from the Normal
Benefit Date to the date of actual payment.
d.
Incomplete Deferrals. In addition to the benefit payable
under Section 3.1a or Section 3.1c, above, if a
Participant's Termination of Service for reasons other than
death
or
-5-
<PAGE>
Disability occurs during a Plan Year and prior to completing
the deferrals with respect to such Plan Year, and if the
Participant does not contribute the remaining deferrals for
such Plan Year as described in Section 2.2b, above, the Bank
shall pay to the Participant his Actual Deferrals for such
Plan Year, together with interest compounded annually on
such amounts at the rate of 6 percent per annum. The Bank
shall pay such amount in a single payment within 60 days
after the Termination of Service.
3.2
Survivorship Benefits.
a.
Death Prior to Commencement of Normal Benefits. If a
Participant dies prior to receiving any Normal Benefit
payments, the Bank shall pay to the beneficiary the
Pre-Termination Survivor's Benefit specified in the Benefit
Schedule. Such benefit shall be paid over a 15 year period
in monthly, quarterly, or annual installments as the
Administrative Committee, in its sole discretion, shall
determine, commencing on the first day of the month
coincident with or next following the Participant's death.
Payment of the Pre-Termination Survivor's Benefit shall
relieve the Bank of the obligation to pay any other benefits
under the Plan.
b.
Death After Commencement of Benefits. If a participant dies
after commencement of Normal Benefit Payments but prior to
receiving all such payments, the Bank shall pay the
remaining payments to the Participant's beneficiary at the
same time as such payments would have been made to the
Participant.
3.3
Recipient
