FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
2006 RETENTION PAY PLAN
THIS
RETENTION PAY PLAN is entered into this 10th day of October, 2006, by
First Federal Banc of the Southwest, Inc. (the "Company") for the benefit of
certain key employees
of First Federal Bank
(the "Bank") listed on
Schedule A
hereto (each of whom shall be referred to herein as
"Employee").
RECITALS
WHEREAS, the
Company desires to be ensured of the
Employees'
continued
active participation in the business of the Bank and the Company in
the event of
a Change in Control; and
WHEREAS, in order to
induce the
Employee to remain in the employ of the
Bank and the
Company and any successors thereto, and to provide further
incentive to preserve and maintain the Bank's ongoing operations and project
stability and
soundness to the
Bank's customers
and employees, the Company
desires to provide
benefits which shall be due the Employee in the event his or
her employment with
the Bank and Company and any successors thereto continues
for a specified period of time following a Change in Control.
NOW
THEREFORE, the First Federal Banc of the Southwest, Inc. 2006
Retention
Pay Plan (the "Plan") provides as follows:
1.
Purpose. The Plan provides a Retention Bonus to certain executive
officers and key
employees who
maintain their employment with the Bank and
Company, or any
successor to the Bank or the Company, for a minimum specified
period following a Change in Control.
2.
Term of Plan. The term
of the Plan expires
December 31, 2007 in the
event a Change in Control has not occurred in 2007.
3.
Definitions.
The following words
and terms shall have the meanings set
forth below for the purposes of this Plan:
(a) Acquiror. Any
company, bank or person that acquires 50% or more
--------
of the Company's outstanding common stock.
(b) Change in Control.
"Change in Control"
shall be deemed to have
-----------------
occurred at such time as (a) any "person" (as the term is used
in
Sections 13(d) and l4(d) of the Securities Exchange Act of 1934
("Exchange Act"))
is or becomes the "beneficial owner" (as
defined in Rule
l3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or
more
of the combined voting power of the Company's outstanding
securities except
for any securities purchased by the Bank's
employee stock
ownership plan or trust; or (b) individuals who
constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof,
provided that any
person becoming a
director subsequent to
the
date hereof whose
election was approved by a vote of at least
three-quarters of the
directors comprising
the Incumbent Board,
or whose nomination
for election by the
Company's
stockholders
<PAGE>
was approved by the same Nominating Committee serving under an
Incumbent Board,
shall be, for
purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or
(c) consummation
of a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of
the
Bank or the Company or similar transaction unless, immediately
following such transaction, at least a majority of the members
of
the board of directors or other governing body of the resulting
or surviving entity are individuals who were members of the
Board
immediately
prior to the transaction and equity interests
representing at
least a majority of the voting power in the
election of directors or other members of the board of
directors
or other governing board of the resulting or surviving entity
are
owned, immediately
following such
transaction,
by persons who
owned common
stock of the Company immediately prior to such
transaction and in substantially the same relative proportions
as
their ownership
of common stock of the Company immediately prior
to such transaction; or (d) consummation of a tender offer
pursuant to which the
shareholders
owning beneficially or of
record 50% or more of the outstanding securities of the Company
have tendered their shares pursuant to such tender offer and
such
tendered shares have been accepted by the tender offeror;
or (e)
consummation of a dissolution or complete liquidation of the
Bank
or the Company, or shareholder approval of a plan for the
dissolution or complete liquidation of the Bank or the Company.
(c) Cause.
Cause means personal dishonesty, incompetence,
willful
-----
misconduct, any
breach of fiduciary duty involving personal
profit, intentional
failure to perform
stated duties, or the
willful violation of
any law, rule, or
regulation
(other than
traffic violations or similar offenses) or final
cease-and-desist
order, any of which results in a material loss to the Bank or
the
Company.
(d) Bonus Employment
Period. The period of
time as set forth in
the
------------------------
attached Schedule A in
which an Employee must
work for the Bank
and Company,
or any successor thereto, following a Change in
Control, in order to receive the Retention
