10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-K

(Mark One)

þ          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2007

                                                                                                 or

¨        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

              OF THE SECURITIES EXCHANGE ACT OF 1934

     Commission file number:  000-25391

________________

Capitol Federal Financial

(Exact name of registrant as specified in its charter)

                                                                           United States                                                                     48-1212142

                                                                              (State or other jurisdiction of incorporation                                      (I.R.S. Employer

                                                                               or organization)                                                                     Identification No.)

                                                                                           700 Kansas Avenue, Topeka, Kansas                                                66603

(Address of principal executive offices)                                             (Zip Code)

Registrant’s telephone number, including area code:

(785) 235-1341

Securities registered pursuant to Section 12(b) of the Act:

                                                            Common Stock, par value $0.01 per share                                                            The NASDAQ Stock Market LLC

                                                                                  (Title of Class)                                                                         (Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ      No o

 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act.

Yes o      No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes þ     No o

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Act. (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yeso Noþ

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, computed by reference to the average of the closing bid and asked price of such stock on the NASDAQ Stock Market as of March 31, 2007, was $766.4 million.  The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the Registrant that such person is an affiliate of the registrant.

As of November 16, 2007, there were issued and outstanding 74,232,582 shares of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts II and IV of Form 10-K - Portions of the Annual Report to Stockholders for the year ended September 30, 2007.  Part III of Form 10-K - Portions of the proxy statement for the Annual Meeting of Stockholders for the year ended September 30, 2007.

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			Page No.
PART I	Item 1.	Business	4
	Item 1A.	Risk Factors	35
	Item 1B.	Unresolved Staff Comments	37
	Item 2.	Properties	37
	Item 3.	Legal Proceedings	37
	Item 4.	Submission of Matters to a Vote of Security Holders	38
PART II	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
	Item 6.	Selected Financial Data	38
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
	Item 8.	Financial Statements and Supplementary Data	38
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	38
	Item 9A.	Controls and Procedures	39
	Item 9B.	Other Information	39
PART III	Item 10.	Directors, Executive Officers, and Corporate Governance	39
	Item 11.	Executive Compensation	39
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	40
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	40
	Item 14.	Principal Accounting Fees and Services	40
PART IV	Item 15.	Exhibits and Financial Statement Schedules	41
SIGNATURES			42
INDEX TO EXHIBITS

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FORWARD-LOOKING STATEMENTS  

Capitol Federal Financial (the “Company”), and its wholly-owned subsidiary, Capitol Federal Savings Bank (“Capitol Federal Savings” or the “Bank”), may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the Securities and Exchange Commission (“SEC”).  These forward-looking statements may be included in this Annual Report on Form 10-K and the exhibits attached to it, in the Company’s reports to stockholders and in other communications by the Company, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control.  The words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

· our ability to continue to maintain overhead costs at reasonable levels;

· our ability to continue to originate a significant volume of one- to four-family mortgage loans in our market area;

· our ability to acquire funds from or invest funds in wholesale or secondary markets;

· the future earnings and capital levels of the Bank, which could affect the ability of the Company to pay dividends in accordance with its dividend policies;

· the credit risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

· the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

· the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

· the effects of, and changes in, foreign and military policies of the United States Government;

· inflation, interest rate, market and monetary fluctuations;

· our ability to access cost-effective funding;

· the timely development of and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

· the willingness of users to substitute competitors’ products and services for our products and services;

· our success in gaining regulatory approval of our products and services, when required;

· the impact of changes in financial services laws and regulations, including laws concerning taxes, banking, securities and insurance;

· technological changes;

· acquisitions and dispositions;

· changes in consumer spending and saving habits; and

· our success at managing the risks involved in our business.

This list of important factors is not all inclusive.  We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

PART I

As used in this Form 10-K, unless we specify otherwise, “the Company,” “we,” “us,” and “our” refer to Capitol Federal Financial, a United States corporation. “Capitol Federal Savings,” and “the Bank,” refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial. “MHC” refers to Capitol Federal Savings Bank MHC, a mutual holding company and majority-owner of Capitol Federal Financial.

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Item 1.  Business

General

The Company is a federally chartered mid-tier mutual holding company incorporated in March 1999.  The Bank is a wholly-owned subsidiary of the Company, which is majority-owned by MHC, a federally chartered mutual holding company.  The Company’s common stock is traded on the Global Select tier of the NASDAQ Stock Market under the symbol “CFFN.”

The Bank is the only operating subsidiary of the Company.  The Bank is a federally-chartered and insured savings bank headquartered in Topeka, Kansas and is examined and regulated by the Office of Thrift Supervision (“OTS”), its primary regulator.  It is also regulated by the Federal Deposit Insurance Corporation (“FDIC”).  We primarily serve the entire metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and a portion of the metropolitan area of greater Kansas City through 29 traditional and nine in-store banking offices.   At September 30, 2007, we had total assets of $7.68 billion, deposits of $3.92 billion and total equity of $867.6 million.

We have been, and intend to continue to be, a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve.  We attract retail deposits from the general public and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family (“single-family") residences.  We also originate consumer loans, loans secured by first mortgages on nonowner-occupied one- to four-family residences, permanent and construction loans secured by one- to four-family residences, commercial real estate loans and multi-family real estate loans.  While our primary business is the origination of one- to four-family mortgage loans funded through retail deposits, we also purchase one- to four-family mortgage loans from correspondent lenders located within our market areas and select market areas in Missouri and nationwide lenders, and invest in certain investment and mortgage-related securities funded through retail deposits and advances from Federal Home Loan Bank Topeka (“FHLB”).  We may originate loans outside our market area on occasion, and most of the whole loans we purchase are secured by properties located outside of our market area.

Our revenues are derived principally from interest on loans and mortgage-related securities and interest and dividends on investment securities.  Our primary sources of funds are customer deposits, borrowings, scheduled amortization and prepayments of mortgage loan and mortgage-backed securities principal and calls and maturities of investment securities and funds provided by operations.

We offer a variety of deposit accounts having a wide range of interest rates and terms, which generally include savings accounts, money market accounts, interest bearing and non-interest bearing checking accounts and certificates of deposit with terms ranging from 91 days to 96 months.

Our executive offices are located at 700 South Kansas Avenue, Topeka, Kansas 66603, and our telephone number at that address is (785) 235-1341.

Available Information

Our Internet website address is www.capfed.com.  Financial information, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be obtained free of charge from our website.  These reports are available on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.  These reports are also available on the SEC’s website at http://www.sec.gov.

Market Area and Competition

Our corporate office is located in Topeka, Kansas.  We have a network of 38 branches located in 8 counties throughout the State of Kansas.  We operate in three primary market areas:  Johnson County, Kansas, the city of Wichita, Kansas and the cities of Topeka and Lawrence, Kansas.  In addition to providing full service banking offices, we also provide our customers telephone and Internet banking capabilities.  Management considers our strong retail banking network, together with our reputation for financial strength and customer service, as our major strengths in attracting and retaining customers in our market areas.

Johnson County, Kansas is located in the south central area of the Kansas City metropolitan area.  According to the U.S. Census Bureau Population Estimates Program, Johnson County’s population increased approximately 14% from

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2000 to 2006.  Johnson County’s economy is well diversified.  The 2006 inflation-adjusted local median household income in Johnson County was estimated to be $69 thousand compared to the estimated national average of $48 thousand and the estimated Kansas average of $45 thousand as reported by the U.S. Census Bureau. The Johnson County market represents the greatest concentration of the Bank’s retail operations, both lending and deposit gathering.  Approximately half of the Bank’s branches are located in the Johnson County market.  The Bank ranked first in deposit market share in Johnson County, with an 11.12% market share based on the FDIC “Summary of Deposits - Market Share Report” dated June 30, 2007.  The Bank continues to rank first in total deposit market share in Johnson County, despite a slight decrease in market share due to the entrance of new competitors such as credit unions, de novo institutions and increased banking locations by established financial institutions.   The Bank is consistently one of the top three lenders in Johnson County with regard to loan volume.  We believe Johnson County’s highly diversified economy reduces our potential to a downturn in one or a handful of economic sectors.

Wichita, which is located in Sedgwick County, is the largest city in Kansas.  The majority of the U.S. general aviation aircraft is produced in Wichita.   The Bank has six branches located in Wichita. The Bank ranked seventh in deposit market share in Wichita, with a 6.2% market share based on the FDIC “Summary of Deposits - Market Share Report” dated June 30, 2007. The Bank’s market share percentage and overall market ranking in Wichita has decreased over the past 5 years as a result of aggressive pricing by competitors and an increased number of financial institutions and banking locations.  The decline in commercial airline and general aviation airplane sales following the 2001 terrorist attacks on the United States has had an impact on the Wichita-area economy, but we have not felt the impact of that downturn in the credit quality of our loan portfolio in Wichita.  We believe this is a result of the majority of families having dual incomes and the gradual appreciation in home values in Wichita. The Bank is consistently one of the top five lenders in Sedgwick County with regard to loan volume.

Topeka is the Kansas state capital and therefore houses numerous state agencies.  The University of Kansas is located in Lawrence.  The Bank has six branches, including the home office, located in Topeka and four branches located in Lawrence.  The Bank ranked first in deposit market share in Topeka and Lawrence combined, with a 30.2% market share based on the FDIC “Summary of Deposits - Market Share Report” dated June 30, 2007.  The Bank continues to rank first in market share percentage, despite a decrease in market share over the past 5 years.  The reason for the decrease in market share is the same as in our other major market areas.  The Bank is consistently one of the top three lenders in this market area with regard to loan volume.

Deposit market share is measured by total deposits, without consideration for type of deposit. We do not have commercial deposit accounts because of our focus on retail deposits, while many of our competitors have both commercial and retail deposits in their total deposit base.  This will tend to show the Bank with a smaller market share compared to other institutions in our market areas.

We are one of the largest originators of one- to four-family mortgage loans in the state of Kansas.  Through our strong relationships with real estate agents and marketing efforts which reflect our reputation and pricing, we attract mortgage loan business from walk-in customers, customers that apply online, and existing customers.   Competition in originating one- to four-family mortgage loans primarily comes from other savings institutions, commercial banks, credit unions and mortgage bankers.  Other savings institutions, commercial banks, credit unions and finance companies provide vigorous competition in consumer lending.

We purchase one- to four-family mortgage loans from correspondent lenders located within our market areas and select market areas in Missouri and nationwide lenders.  Purchasing loans from nationwide lenders provides geographic diversification, reducing our exposure to concentrations of credit risk.  At September 30, 2007 loans purchased from nationwide lenders were secured by properties located in one of the continental 48 states, including Kansas, and Washington, D.C.  At September 30, 2007, purchases from nationwide lenders in the following states comprised greater than 5% of total loans purchased from nationwide lenders:  Illinois 13.6%; Florida 7.7%; Arizona 6.0%; Texas 5.8%, and Virginia 5.6%.

Lending Activities

General.  The Bank’s primary lending activity is the origination of loans secured by first mortgages on one- to four-family residential properties.  We also make consumer loans, construction loans secured by residential properties, commercial properties and multi-family real estate loans secured by multi-family dwellings or commercial properties.  At September 30, 2007, our net loan portfolio totaled $5.29 billion, which constituted 68.9% of our total assets.  For a discussion of our market risk associated with loans see“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

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All originated loans are generated by our own employees or loan agents.  Loans over $500 thousand must be underwritten by two senior level underwriters.  Any loan greater than $750 thousand must be approved by the Asset and Liability Management Committee (“ALCO”) and loans over $1.5 million must be approved by the board of directors.  For loans requiring ALCO and/or board of directors’ approval, management is responsible for presenting to the ALCO and/or board of directors information about the creditworthiness of the borrower and the estimated value of the subject property.  Information pertaining to the creditworthiness of the borrower generally consists of a summary of the borrower’s credit history, employment stability, sources of income, net worth, and debt ratios.  The estimated value of the property must be supported by an independent appraisal report prepared in accordance with our appraisal policy.

Under the Financial Institutions Reform, Recovery, and Enforcement Act, the maximum amount which we could have loaned to any one borrower and the borrower’s related entities at September 30, 2007 was $118.9 million.  Our largest lending relationship to a single borrower or a group of related borrowers at September 30, 2007 consisted of 16 multi-family real estate projects, two single-family homes, and five commercial real estate projects located in Kansas and Texas.  Total commitments and loans outstanding to this group of related borrowers was $50.6 million as of September 30, 2007.  Most of the multi-family real estate loans qualify for the low income housing tax credit program.  We have 30 years experience with this group of borrowers, who usually build and manage their own properties.  All of these loans were current and performing in accordance with their repayment terms at September 30, 2007.

The second largest lending relationship at September 30, 2007, consisted of eight loans totaling $12.9 million.  Four loans are secured by multi-family real estate units and four are secured by single-family homes.  We have 30 years of experience with the borrowers.  All units were built and are presently being managed by the borrowers.  Each of the loans to this group of borrowers was current and performing in accordance with repayment terms at September 30, 2007.

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Loan Portfolio.  The following table presents information concerning the composition of our loan portfolio in dollar amounts and in percentages (before deductions for loans in process, net deferred fees and discounts and allowances for losses) as of the dates indicated.

	September 30,
	2007			2006			2005			2004			2003
	Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$    4,992,398	93.38	%	$       4,931,505	93.80	%	$    5,189,006	94.44	%	$    4,492,205	93.70	%	$    4,069,197	93.43	%
Multi-family and commercial	60,625	1.13		56,774	1.08		49,563	0.74		44,119	0.92		46,345	1.06
Construction	74,521	1.39		45,452	0.87		45,312	0.83		54,782	1.14		48,537	1.11
Total real estate loans	5,127,544	95.90		5,033,731	95.75		5,283,881	96.17		4,591,106	95.76		4,164,079	95.60
Other Loans:
Consumer Loans:
Savings	5,249	0.10		6,250	0.12		8,377	0.15		9,141	0.19		10,963	0.25
Automobile	4,234	0.08		3,660	0.07		2,555	0.05		2,274	0.05		3,798	0.09
Home equity	208,986	3.91		213,182	4.05		198,506	3.61		190,509	3.97		174,538	4.02
Other	560	0.01		588	0.01		998	0.02		1,283	0.03		1,602	0.04
Total consumer loans	219,029	4.10		223,680	4.25		210,436	3.83		203,207	4.24		190,901	4.40
Commercial business loans	53	--		62	--		70	--		129	--		201	--
Total other loans	219,082	4.10		223,742	4.25		210,506	3.83		203,336	4.24		191,102	4.40
Total loans receivable	5,346,626	100.00	%	5,257,473	100.00	%	5,494,387	100.00	%	4,794,442	100.00	%	4,355,181	100.00	%
Less:
Loans in process	42,481			22,605			14,803			23,623			27,039
Unearned loan fees and deferred costs	9,893			9,318			10,856			18,794			15,896
Allowance for loan losses	4,181			4,433			4,598			4,495			4,550
Total loans receivable, net	$    5,290,071			$       5,221,117			$    5,464,130			$    4,747,530			$    4,307,696

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The following table shows the composition of our loan portfolio by fixed- and adjustable-rate loans at the dates indicated.

	September 30,
	2007			2006			2005			2004			2003
	Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
	(Dollars in thousands)
Fixed-Rate Loans:
Real estate:
One- to four-family	$    3,286,204	61.47	%	$    3,031,734	57.67	%	$    3,273,627	59.58	%	$    3,118,912	65.06	%	$    3,005,475	69.01	%
Multi-family and commercial	60,029	1.12		56,076	1.07		48,987	0.89		43,482	0.91		45,653	1.05
Construction	42,333	0.79		30,685	0.58		26,418	0.49		38,058	0.79		36,588	0.84
Total real estate loans	3,388,566	63.38		3,118,495	59.32		3,349,032	60.96		3,200,452	66.76		3,087,716	70.90
Consumer	76,663	1.44		67,021	1.27		39,617	0.72		26,439	0.55		26,817	0.62
Commercial business	53	--		62	--		70	--		129	--		201	--
Total fixed-rate loans	3,465,282	64.82		3,185,578	60.59		3,388,719	61.68		3,227,020	67.31		3,114,734	71.52
Adjustable-Rate Loans:
Real estate:
One- to four-family	1,706,194	31.91		1,899,771	36.13		1,915,379	34.86		1,373,293	28.64		1,063,722	24.42
Multi-family and commercial	596	0.01		698	0.02		576	0.01		637	0.01		692	0.01
Construction	32,188	0.60		14,767	0.28		18,894	0.34		16,724	0.35		11,949	0.28
Total real estate loans	1,738,978	32.52		1,915,236	36.43		1,934,849	35.21		1,390,654	29.00		1,076,363	24.71
Consumer	142,366	2.66		156,659	2.98		170,819	3.11		176,768	3.69		164,084	3.77
Total adjustable-rate loans	1,881,344	35.18		2,071,895	39.41		2,105,668	38.32		1,567,422	32.69		1,240,447	28.48
Total loans	5,346,626	100.00	%	5,257,473	100.00	%	5,494,387	100.00	%	4,794,442	100.00	%	4,355,181	100.00	%
Less:
Loans in process	42,481			22,605			14,803			23,623			27,039
Unearned loan fees and deferred costs	9,893			9,318			10,856			18,794			15,896
Allowance for loan losses	4,181			4,433			4,598			4,495			4,550
Total loans receivable, net	$    5,290,071			$    5,221,117			$    5,464,130			$    4,747,530			$    4,307,696

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The following table presents the contractual maturity of our loan portfolio at September 30, 2007, net of loans in process.  Mortgage loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due.  The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses.

	Real Estate
				Multi-family and									Commercial
	One- to Four-Family			Commercial			Construction (2)			Consumer(3)			Business			Total
		Weighted			Weighted			Weighted			Weighted			Weighted			Weighted
		Average			Average			Average			Average			Average			Average
	Amount	Rate		Amount	Rate		Amount	Rate		Amount	Rate		Amount	Rate		Amount	Rate
	(Dollars in thousands)
Amounts due:
Within one year(1)	$          2,720	6.71	%	$                 --	--	%	$          2,004	5.85	%	$      5,903	7.27	%	$            --	--	%	$          10,627	6.86%
After one year:
One through five years	41,866	5.86		2,243	6.49		30,036	6.48		14,762	7.74		22	7.00		88,929	6.40
After five years	4,947,812	5.55		58,382	6.48		--	--		198,364	8.41		31	6.50		5,204,589	5.67
Total due after one year	4,989,678	5.55		60,625	6.48		30,036	6.48		213,126	8.36		53	6.71		5,293,518	5.68
Total loans	$    4,992,398	5.55	%	$         60,625	6.48	%	$        32,040	6.44	%	$  219,029	8.33	%	$          53	6.71	%	5,304,145	5.68%
Less:
Unearned loan fees and
deferred costs																9,893
Allowance for loan losses																4,181
Total loans receivable, net																$        5,290,071

   ⁽¹⁾  Includes demand loans, loans having no stated maturity and overdraft loans.

   ⁽²⁾  Construction loans are presented based upon the term to complete construction.

   ⁽³⁾  For home equity loans, the maturity date calculated assumes the customer always makes the required minimum payment.  Interest-only home equity lines of credit assume a balloon payment of unpaid principal at 120 months.  All other home equity lines of credit assume a term of 240 months.

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The following table presents, as of September 30, 2007, the amount of loans due after September 30, 2008, and whether these loans have fixed or adjustable interest rates.

	Maturing After September 30, 2008
	Fixed	Adjustable	Total
Real Estate Loans:
One- to four-family	$     3,283,333	$     1,706,345	$       4,989,678
Multi-family and Commercial	60,029	596	60,625
Construction	19,176	10,860	30,036
Consumer	73,298	139,828	213,126
Commercial Business	53	--	53
Total	$     3,435,889	$     1,857,629	$       5,293,518

One- to Four-Family Residential Real Estate Lending.  The Bank’s lending efforts are focused primarily on the origination and purchase of loans secured by first mortgages on owner-occupied one- to four-family residences in our market areas.  Additional lending volume is generated by purchasing whole one- to four-family mortgage loans from nationwide lenders.  These purchases allow us to attain geographic diversification and manage credit concentration risks in our loan portfolio.  At September 30, 2007, one- to four-family mortgage loans totaled $4.99 billion, or 93.4% of our total loan portfolio, including our nationwide purchased loan portfolio of $918.2 million, or 17.2% of our total loan portfolio.

One- to four-family loans are generally underwritten using an automated underwriting system developed by a third party.  The system’s components closely resemble the Bank’s manual underwriting standards which are generally in accordance with Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”) underwriting guidelines.  The automated underwriting system analyzes the applicant’s data, with emphasis on credit history, employment and income history, qualifying ratios reflecting the applicant’s ability to repay, asset reserves and loan-to-value ratio.  Loans that do not meet the automated underwriting standards are referred to a staff underwriter for manual underwriting.  Full documentation to support the applicant’s credit, income, and sufficient funds to cover all applicable closing costs and reserves at closing are required on all loans.  Properties securing one- to four-family loans are appraised by either staff appraisers or independent fee appraisers approved by the board of directors who are independent of the loan origination function.

The Bank originates one- to four-family mortgage loans on both a fixed and adjustable-rate basis.  The Bank primarily originates fixed-rate one- to four-family mortgage loans in our market areas.  The Bank purchases both fixed- and adjustable-rate one- to four-family loans, but primarily purchases one- to four-family adjustable-rate mortgage (“ARM”) loans to supplement the ARM portfolio.

Presently, the Bank lends up to 105% of the lesser of the appraised value or purchase price for one- to four-family mortgage loans.  For loans with a loan-to-value ratio in excess of 80%, private mortgage insurance is required in order to reduce the Bank’s loss exposure.   At September 30, 2007, less than 1% of our loan portfolio had a loan-to-value ratio greater than 100%.

Our pricing strategy for mortgage loans includes setting interest rates that are competitive with FNMA or FHLMC and local financial institutions that are consistent with our internal requirements.  ARM loans are offered with either a one-year, three-year, five-year or seven-year term to the initial repricing date.  After the initial period, the interest rate for each ARM loan generally adjusts annually for the remainder of the term of the loan.  A number of different indices are used to reprice our ARM loans.

Fixed-rate loans secured by one- to four-family residences have contractual maturities of up to 30 years, and are fully amortizing with payments due monthly.  However, these loans normally remain outstanding for a substantially shorter period of time because of refinancing and other prepayments.  A significant decrease in the current level of interest rates could considerably alter the average life of a mortgage loan in our portfolio.  Our one- to four-family mortgage loans are generally not assumable and do not contain prepayment penalties.  Our real estate loans generally contain a “due on sale” clause allowing us to declare the unpaid principal balance due and payable upon the sale of the secured

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property.  At September 30, 2007, our fixed-rate one- to four-family mortgage loan portfolio totaled $3.29 billion, or 61.5% of our total loan portfolio.

Our current ARM loans generally provide for specified minimum and maximum interest rates, with a lifetime cap and floor, a limit on the periodic adjustment on the interest rate over the rate in effect prior to adjustment, and do not permit negative amortization of principal.  As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as our cost of funds.  Borrowers are qualified based on the principal, interest, taxes and insurance payment at the initial rate for three, five, and seven year ARM loans, or at 2% higher than the initial rate for one-year ARM loans.  After the initial one, three, five or seven year period, the interest rate is repriced annually and the new principal and interest payment is based on the repriced interest rate and remaining term of the ARM loan.  Our ARM loans are not automatically convertible into fixed-rate loans, however, we do allow borrowers to pay a modification fee to convert an ARM loan to a fixed-rate loan.   At September 30, 2007, the one- to four-family ARM loan portfolio totaled $1.71 billion, or 31.9% of our total loan portfolio.

The Bank also originates interest-only ARM loans that do not require principal payments for a period of up to ten years.  Borrowers are qualified based on a fully amortizing payment at the initial loan rate.  The Bank is more restrictive on debt-to-income ratios and credit scores on interest-only ARM loans than on other ARM loans to offset the potential risk of payment shock at the time the loan rate adjusts and/or the principal and interest payments begin.  At September 30, 2007, 7.5% of our loan portfolio consisted of interest-only ARM loans.  The majority of these loans were purchased from nationwide lenders during fiscal year 2005.  These loans had an initial interest-only term of either five or ten years, with approximately equal distribution between the two terms.  The interest-only loans we purchased had borrowers with an average credit score of 737 at the time of purchase and an average loan-to-value ratio not exceeding 80% at the time of purchase.  As of September 30, 2007, the performance of our interest-only loans is comparable to the performance of the rest of our one- to four-family loan portfolio.

ARM loans can pose different credit risks than fixed-rate loans, primarily because as interest rates rise the borrower’s payment also rises, increasing the potential for default.  This specific risk type is known as repricing risk.

Multi-family and Commercial Real Estate Lending.  We offer a variety of multi-family and commercial real estate loans.  These loans are secured primarily by multi-family dwellings and small office buildings generally located in the Bank’s market areas.  At September 30, 2007, multi-family and commercial real estate loans totaled $60.6 million, or 1.1% of our total loan portfolio.

Our multi-family and commercial real estate loans are originated with either a fixed or adjustable interest rate.  The interest rate on adjustable-rate loans is based on a variety of indices, generally determined through negotiation with the borrower.  While maximum maturities may extend to 30 years, loans frequently have shorter maturities and may not be fully amortizing, requiring balloon payments of unamortized principal at maturity.

Multi-family and commercial real estate loans are granted based on the income producing potential of the property and the financial strength of the borrower.  Loan-to-value ratios on multi-family and commercial real estate loans usually do not exceed 80% of the appraised value of the property securing the loans.  The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt.  The Bank generally requires personal guarantees of the borrowers covering a portion of the debt in addition to the security property as collateral for such loans.  The Bank also generally requires an assignment of rents or leases in order to be assured that the cash flow from the project will be used to repay the debt.  Appraisals on properties securing these loans are performed by independent state certified fee appraisers approved by the board of directors.

We generally do not maintain a tax or insurance escrow account for multi-family or commercial real estate loans.  In order to monitor the adequacy of cash flows on income-producing properties of $1.5 million or more, the borrower is notified annually to provide financial information including rental rates and income, maintenance costs and an update of real estate property tax payments, as well as personal financial information.

Our multi-family and commercial real estate loans are generally large dollar loans and involve a greater degree of credit risk than one- to four-family mortgage loans.  Such loans typically involve large balances to single borrowers or groups of related borrowers.  Because payments on multi-family and commercial real estate loans are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy.  If the cash flow from the project is reduced, or if leases are not obtained or

11

renewed, the borrower’s ability to repay the loan may be impaired.  See “Asset Quality - Non-performing Loans.”

Construction Lending.  Construction loans are primarily secured by one- to four-family residential real estate, and are obtained primarily by homeowners who will occupy the property when construction is complete.  Presently, all one- to- four-family construction loans are secured by properties located within the Bank’s market areas.  The Bank is also a participant with five other banking institutions on a construction/mini-permanent loan secured by a retail shopping center with two major retailers.  The Bank’s participant share is $15.0 million which is disbursed as the improvements are completed.  Construction loans to builders for speculative purposes are not permitted.

The construction loan application process includes submission of complete plans, specifications and costs of the project to be constructed.  These items are used as a basis to determine the appraised value of the subject property.  All construction loans are manually underwritten using the Bank’s internal underwriting standards.  The construction and permanent loan are closed at the same time allowing the borrower to secure the interest rate at the beginning of the construction period and throughout the permanent loan.  Construction draw requests and the supporting documentation are reviewed and approved by management.  The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.   At September 30, 2007, we had $74.5 million in construction-to-permanent loans outstanding, representing 1.4% of our total loan portfolio.

Consumer Lending.  The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, student loans and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans.  The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers.  Currently, all consumer loans are originated in the Bank’s market areas.  At September 30, 2007, our consumer loan portfolio totaled $219.0 million, or 4.1% of our total loan portfolio.

The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

The majority of the consumer loan portfolio is comprised of home equity lines of credit, which have interest rates that can adjust monthly based upon changes in the prime rate, to a maximum of 18%.  Home equity loans may be originated in amounts, together with the amount of the existing first mortgage, of up to 100% of the value of the property securing the loan.  Home equity loans, including lines of credit and home improvement loans, comprised 3.9% of our total loan portfolio, or $209.0 million, at September 30, 2007.  As of September 30, 2007, 68.1% of the home equity portfolio was adjustable-rate.

In order to minimize risk of loss, home equity loans that are greater than 80% of the value of the property, when combined with the first mortgage, require private mortgage insurance.  The term-to-maturity of home equity loans may be up to 20 years.  Interest-only home equity lines of credit have a 10-year term-to-maturity with a balloon payment at maturity.  Other home equity lines of credit have no stated term-to-maturity and require a payment of 1.5% of the outstanding loan balance per month.    Unused principal on home equity lines of credit may be re-advanced at any time, not to exceed the original credit limit of the loan.

Consumer loans generally have shorter terms to maturity or reprice more frequently, which reduces our exposure to changes in interest rates, and usually carry higher rates of interest than do one- to four-family mortgage loans.  In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

Consumer loans may entail greater risk than do one- to four-family mortgage loans, particularly in the case of consumer loans that are secured by rapidly depreciable assets, such as automobiles.

Loan Originations, Purchases, Sales and Repayments.  The Bank originates loans through referrals from real estate brokers and builders, our marketing efforts, and our existing and walk-in customers.  While the Bank originates both adjustable and fixed-rate loans, our ability to originate loans is dependent upon customer demand for loans in our market areas.  Demand is affected by the local housing market, competition and the interest rate environment.  During

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the 2007 and 2006 fiscal years, the Bank originated and refinanced $573.2 million and $497.5 million of one- to four-family fixed-rate mortgage loans, and $104.4 million and $148.0 million of one- to four-family ARM loans, respectively.

In an effort to offset the impact of repayments and to retain our customers, the Bank offers existing loan customers the opportunity to modify their original loan terms to new loan terms generally consistent with those currently being offered in our market areas.  This is a convenient tool for customers who may have considered refinancing from an ARM loan to a fixed-rate loan or would like to reduce their term and take advantage of lower rates associated with loan pricing at current market rates.  The program helps ensure the Bank maintains the relationship with the customer and significantly reduces the amount of time it takes for customers to obtain current market pricing and terms without having to refinance their loans, and is a more efficient way for the Bank to process the change.  The Bank charges a fee for this service generally comparable to fees charged on new loans.

The Bank purchases one- to four-family mortgage loans from nationwide lenders to reduce our risk of geographic concentration and to supplement our one- to four-family ARM loan origination volume as ARM loans are not considered as attractive to borrowers as fixed-rate mortgage loans in our local markets.  The lender retains the servicing of these loans.  During 2007 and 2006, the Bank purchased $200 thousand and $178.1 million, respectively, of one- to four-family mortgage loans from nationwide lenders.

The underwriting standards of the lenders from whom the Bank purchases loans are generally similar to the Bank’s internal underwriting standards.  “No Doc” or “Stated Income, Stated Assets” loans are not permitted.  Lenders are required to fully document all data sources for each application.  Management believes these requirements reduce the credit risk associated with these loans.  Before committing to purchase a pool of loans, the Bank’s Chief Lending Officer or Secondary Marketing Manager reviews specific criteria such as loan amount, credit scores, loan-to-value ratios, geographic location, and debt ratios of each loan in the pool.  If the specific criteria do not meet the Bank’s underwriting standards and compensating factors are not sufficient, then a loan may be removed from the pool.  Once the review of the specific criteria is complete and loans not meeting the Bank’s standards are removed from the pool, changes are sent back to the lender for acceptance and pricing.  Before the pool is funded, a Bank underwriter reviews 25% of the loan files and the supporting documentation in the pool.  If a loan does not meet the Bank’s underwriting standards for these loans, it is removed from the pool prior to funding.

The Bank also purchases one- to four-family mortgage loans under contractual agreements with correspondent lenders located within our market areas and select market areas in Missouri.  Approved loans and their servicing rights are purchased on a loan by loan basis.  The loan is originated to our specifications including interest rates, product description and underwriting standards.  The loans may be fixed-rate or ARM loans.  The Bank sets prices for all loan products at least once each week.  The underwriting generally is performed by a third party underwriter who is under contract with us to use the Bank’s internal underwriting standards.  During the 2007 and 2006 fiscal years, the Bank purchased $129.1 million and $151.2 million, respectively, of one- to four-family mortgage loans from correspondent lenders.

The ability of financial institutions, including us, to originate or purchase large dollar volumes of real estate loans may be substantially reduced or restricted under certain economic conditions, with a resultant decrease in interest income from these assets.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

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The following table shows our loan originations, loan purchases and participations, loan sales, swaps and repayment activity for the periods indicated.

	Year Ended September 30,
	2007			2006			2005
	(Dollars in thousands)
Originations by type:
Adjustable-rate:
Real estate - one- to four-family	$	104,362		$	147,959		$	194,802
- multi-family and commercial		--			--			--
Non-real estate – consumer		87,022			101,956			119,527
Total adjustable-rate loans originated		191,384			249,915			314,329
Fixed-rate:
Real estate - one- to four-family		573,239			497,458			514,023
- multi-family and commercial		5,523			12,795			9,368
Non-real estate – consumer		33,304			51,078			29,802
Total fixed-rate originated		612,066			561,331			553,193
Total loans originated		803,450			811,246			867,522
Purchases and Participations:
Real estate - one- to four-family		129,335			329,319			857,207
- multi-family		--			--			--
- commercial		15,000			--			--
Non-real estate – consumer		--			--			--
Total purchases and participations		144,335			329,319			857,207
Sales, Swaps and Repayments:
Sales of real estate - one- to four-family		--			--			--
Principal balance of loans related to loan
swap transaction		--			(404,819	)		--
Principal repayments		(855,980	)		(973,054	)		(1,026,175	)
Total reductions		(855,980	)		(1,377,873	)		(1,026,175	)
Change in other items, net		(2,652	)		394			1,391
Net increase (decrease)	$	89,153		$	(236,914	)	$	699,945

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Asset Quality

When a borrower fails to make a loan payment 15 days after the due date, a late charge is assessed and a late charge notice is mailed.  All delinquent accounts are reviewed by collection personnel, who attempt to cure the delinquency by contacting the borrower.  If the loan becomes 60 days delinquent, the collection personnel generally will send a personal letter to the borrower requesting payment of the delinquent amount in full, or the establishment of an acceptable repayment plan to bring the loan current, within the next 90 days.  If the account becomes 90 days delinquent, and an acceptable repayment plan has not been agreed upon, the collection personnel generally will refer the account to legal counsel, with instructions to prepare a notice of intent to foreclose.  The notice of intent to foreclose allows the borrower up to 30 days to bring the account current.  During this 30 day period a written repayment plan from the borrower which would bring the account current within the next 90 days may be approved by a designated Bank officer.  Once the loan becomes 120 days delinquent, and an acceptable repayment plan has not been agreed upon, the collection officer, after receiving approval from the appropriate Bank officer as designated by our board of directors, will turn over the account to our legal counsel with instructions to initiate foreclosure.

The risk that our non-performing and other delinquent loans may increase is primarily driven by the state of the local economies in which we lend.  Since the loans we originate in our market areas are geographically concentrated, we attempt to mitigate the risks of this concentration by purchasing loans from outside our market areas.  In most of our market areas, the economy has continued to be generally stable.

During the second quarter of fiscal year 2007, the methodology for calculating the number of days delinquent changed with the replacement of the Bank’s core information processing system.  For mortgage loans, the new system utilizes a 30/360 calculation, which is consistent with industry standards.  The former core information processing system calculated days delinquent based upon actual days.  The method of calculating days delinquent for home equity loans did not change with the core information processing system replacement.

Delinquent Loans.  The following tables set forth our loans 30 - 89 delinquent days by type, number and amount as of the periods presented.

Loans Delinquent for 30 - 89 Days
	2007				2006				2005
	Number		Amount		Number		Amount		Number		Amount
					(Dollars in thousands)
One- to four-family	175	$	16,971		256	$	19,612		267	$	25,111
Multi-family	--		--		1		222		--
Consumer	57		761		34		644		35		407
Total	232	$	17,732		291	$	20,478		302	$	25,518
Loans 30-89 days
delinquent to total loans			0.34	%			0.39	%			0.47%

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Non-performing Assets.  The table below sets forth the amounts and categories of non-performing assets.  Loans are placed on non-accrual status when the loan is greater than 90 days delinquent.  At all dates presented, we had no troubled debt restructurings which involve forgiving a portion of interest or principal on any loans or making loans at a rate materially less than prevailing market rates, and no accruing loans more than 90 days delinquent.  Real estate owned includes assets acquired in settlement of loans.  The balance of one- to four-family real estate owned at September 30, 2007 is represented by 27 properties totaling $2.1 million, or an average balance of less than $78 thousand per property.

	September 30,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Non-accruing loans:
One- to four-family	$	7,104		$	5,391		$	5,034		$	5,761		$	8,686
Consumer		248			218			124			310			258
Total non-accruing loans		7,352			5,609			5,158			6,071			8,944
Real estate owned:
One- to four-family		2,097			2,401			1,613			3,976			3,773
Construction		--			--			--			273			273
Consumer		--			8			40			--			--
Total real estate owned		2,097			2,409			1,653			4,249			4,046
Total non-performing assets	$	9,449		$	8,018		$	6,811		$	10,320		$	12,990
Non-performing assets as a percentage of total assets		0.12	%		0.10	%		0.08	%		0.12	%		0.15	%
Non-performing loans as a percentage of total loans		0.14	%		0.11	%		0.09	%		0.13	%		0.21	%

At September 30, 2007, we had $7.4 million in non-accruing loans (these loans also may be referred to as “non-performing”), which constituted 0.14% of our total loan portfolio.  The year-over-year increase in non-accruing loans is primarily in our originated loan portfolio.  Of the $7.4 million of non-accruing loans, $5.2 million, or 70.6%, were secured by property located in our market areas and there were no non-accruing loans to any one borrower or group of related borrowers that exceeded $1.0 million, either individually or in the aggregate.  For the year ended September 30, 2007, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $77 thousand.  The amount that was included in interest income on these loans, before non-accruing status, was immaterial for the year ended September 30, 2007.

Classified Assets.  Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the OTS to be of lesser quality, as “special mention”, “substandard”, “doubtful” or “loss”.  Assets classified as “special mention” are performing loans on which known information about the collateral pledged or the possible credit problems of the borrowers have caused management to have doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such assets in the non-performing asset categories.  An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected.  Assets classified as “doubtful” have all of the weaknesses inherent as those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values “highly questionable and improbable.”  Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

When an insured institution classifies problem assets as either special mention, substandard or doubtful, it may establish valuation allowances in an amount deemed prudent by management and approved by the board of directors.  General allowances may be established to recognize the inherent risk associated with lending activities, but unlike

16

specific allowances, have not been allocated to specific problem assets within a portfolio of similar assets.  When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount.  An institution’s determination as to the classification of its assets and the amount of its allowance for loan losses is subject to review by the OTS and the FDIC, which may order the establishment of additional loss allowances.

In connection with the filing of the Bank’s periodic reports with the OTS and in accordance with our asset classification policy, we regularly review the problem assets in our portfolio to determine whether any assets require classification in accordance with applicable regulations.  The following table sets forth the carrying amounts of our assets, exclusive of general valuation and specific allowances, classified as special mention, substandard or doubtful at September 30, 2007.

	Special Mention		Substandard		Doubtful
	Number	Amount	Number	Amount	Number	Amount
	(Dollars in thousands)
One- to four-family real estate	3	$           285	103	$         7,415	--	$                 --
Real estate owned	--	--	31	2,097	--	--
Total classified assets	3	$          285	134	$        9,512	--	$                 --

Provision for Loan Losses.  In fiscal year 2007, we recorded a recovery of loan losses of $225 thousand.  The recovery was primarily a result of changes during the first quarter of fiscal year 2007 to the risk assessments of certain categories of loans in the general valuation model to better reflect the inherent risk of those categories.  We recorded a provision for loan losses in fiscal years 2006 and 2005 of $247 thousand and $215 thousand, respectively.  The provision/recovery for loan losses is recorded on the consolidated statement of income to bring our allowance for loan losses to a level deemed appropriate by management based on the factors discussed below under “Allowance for Loan Losses.”

Allowance for Loan Losses.  At September 30, 2007, our allowance for loan losses was $4.2 million or 0.08% of the total loan portfolio and 57% of total non-accruing loans.  This compares with an allowance for loan losses of $4.4 million or 0.08% of the total loan portfolio and 79% of total non-accruing loans as of September 30, 2006.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K for a full discussion of the allowance for loan losses.

Historical net charge-offs are not necessarily indicative of the amount of net charge-offs that the Bank will realize in the future resulting from an increase in the one- to four-family mortgage loan portfolio.  The following table provides a recap of our allowance for loan loss activity for the periods presented.

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	Year Ended September 30,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Balance at beginning of period	$	4,433		$	4,598		$	4,495		$	4,550		$	4,825
Charge-offs:
One- to four-family		9			95			91			84			153
Consumer		18			37			56			77			144
Total charge-offs		27			132			147			161			297
Recoveries		--			1			35			42			22
Net charge-offs		27			131			112			119			275
Allowance on loans in the loan swap transaction		--			(281	)		--			--			--
(Recovery) provision charged to expense		(225	)		247			215			64			--
Balance at end of period	$	4,181		$	4,433		$	4,598		$	4,495		$	4,550
Ratio of net charge-offs during the period to average
loans outstanding during the period (1)		--	%		--	%		--	%		--	%		--	%
Ratio of net charge-offs during the period to average
non-performing assets		0.31	%		1.77	%		1.31	%		1.02	%		2.31	%
Allowance as a percentage of non-accruing loans		56.87	%		79.03	%		89.14	%		74.04	%		50.87	%
Allowance as a percentage of total loans (end of period)		0.08	%		0.08	%		0.08	%		0.09	%		0.11	%

⁽¹⁾ Ratios calculate to be less than 0.01%.

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The distribution of our allowance for loan losses at the dates indicated is summarized as follows:

September 30,
	2007					2006					2005					2004					2003
			% of Loans					% of Loans					% of Loans					% of Loans					% of Loans
	Amount of		in Each			Amount of		in Each			Amount of		in Each			Amount of		in Each			Amount of		in Each
	Loan Loss		Category to			Loan Loss		Category to			Loan Loss		Category to			Loan Loss		Category to			Loan Loss		Category to
	Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans
(Dollars in thousands)
One- to four-family	$	3,735		94.11	%	$	3,796		94.18	%	$	3,866		94.78	%	$	3,561		94.19	%	$	3,468		93.99	%
Multi-family		48		0.95			46		0.92			203		0.74			177		0.74			272		0.89
Commercial real estate		9		0.19			8		0.16			67		0.16			65		0.18			59		0.18
Construction		69		0.61			258		0.46			129		0.47			197		0.60			143		0.52
Consumer		317		4.14			321		4.28			333		3.85			488		4.29			412		4.42
Commercial business		3		--			4		--			--		--			7		--			11		--
Unallocated		--		--			--		--			--		--			--		--			185		--
Total	$	4,181		100.00	%	$	4,433		100.00	%	$	4,598		100.00	%	$	4,495		100.00	%	$	4,550		100.00	%

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Investment Activities

Federally chartered savings institutions have the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, government-sponsored enterprises, including callable agency securities, municipal bonds, certain certificates of deposit of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets in investment grade commercial paper, corporate debt securities, and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly.  As a member of the FHLB of Topeka, the Bank is required to maintain a specified investment in the capital stock of the FHLB.  See “Regulation - Federal Home Loan Bank System,” “Capitol Federal Savings Bank,” and“Qualified Thrift Lender Test” for a discussion of additional restrictions on our investment activities.

The Chief Financial Officer has the primary responsibility for the management of the Bank’s investment portfolio, subject to the direction and guidance of the ALCO.  The Chief Financial Officer considers various factors when making decisions, including the marketability, maturity and tax consequences of the proposed investment.  The maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of net deposit flows, the volume of loan sales and the anticipated demand for funds via withdrawals, repayments of borrowings, and  loan originations and purchases.

The general objectives of our investment portfolio are to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low and to maximize earnings while satisfactorily managing risk, including liquidity risk, interest rate risk, reinvestment risk and credit risk.  Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans.  Cash flow projections are reviewed regularly and updated to assure that adequate liquidity is maintained.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

We classify securities as trading, available-for-sale or held-to-maturity at the date of purchase.  Securities that are purchased and held principally for resale in the near future are classified as trading securities and are reported at fair value, with unrealized gains and losses reported in the consolidated statements of income.  Available-for-sale securities are reported at fair market value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity, net of deferred income taxes.  Management regularly reviews the available-for-sale portfolio for other-than-temporary impairment and records any such impairment in the consolidated statements of income.  Held-to-maturity securities are reported at cost, adjusted for amortization of premium and accretion of discount.  We have both the ability and intent to hold the held-to-maturity securities to maturity.

Investment Securities.  Our investment securities portfolio consists of U.S. Government and agency notes, including those issued by government-sponsored enterprises such as FNMA and FHLMC, and municipal bonds.  At September 30, 2007, our investment securities portfolio totaled $524.2 million.  The portfolio consists of securities classified as held-to-maturity and available-for-sale.  See “Notes to Consolidated Financial Statements—Note 2” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

During fiscal year 2007, our investment securities portfolio increased $94.7 million from $429.5 million at September 30, 2006 to $524.2 million at September 30, 2007.  Securities purchased totaled $691.0 during fiscal year 2007 which were partially offset by $600.5 million of maturities and repayments.  All of the purchases made during fiscal year 2007 were fixed-rate and had a weighted average yield of 5.19% and weighted average life of less than 1 year.  See “Notes to Consolidated Financial Statements – Note 2” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Mortgage-Related Securities.  Our mortgage-related securities portfolio consists primarily of securities issued by government-sponsored enterprises.  At September 30, 2007, our mortgage-related securities portfolio totaled $1.41 billion. A small portion of the mortgage-related securities portfolio consists of collateralized mortgage obligations (“CMOs”).  CMOs are special types of pass-through debt securities in which the stream of principal and interest payments on the underlying mortgages or mortgage-related securities are used to create investment classes with different maturities and, in some cases, different amortization schedules, as well as a residual interest, with each such

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class possessing different risk characteristics.  At September 30, 2007, we held CMOs totaling $8.5 million, none of which qualified as high risk mortgage securities as defined under OTS regulations.  Our CMOs are currently classified as both held-to-maturity and available-for-sale.  We do not purchase residual interest bonds.

During fiscal year 2007, our mortgage-related securities portfolio decreased $670.5 million from $2.08 billion at September 30, 2006 to $1.41 billion at September 30, 2007.  The decrease in the portfolio was primarily a result of the sale of trading securities in the first quarter of fiscal year 2007.  These securities were received in a loan swap transaction with FHLMC in the quarter ended September 30, 2006, and sold in the first quarter of fiscal year 2007.  Proceeds of $389.2 million from the sale of the trading securities were reinvested in investment securities.  The decrease was also due to $494.7 million in principal repayments which were not entirely reinvested in mortgage-related securities.

Of the $228.1 million of mortgage-related securities purchased, $75.3 million were fixed-rate with a weighted average life of 4.74 years and a weighted average yield of 5.78% and $152.8 million were adjustable-rate with a weighted average yield of 5.00% and an average of 1.61 years until their first repricing opportunity.  See “ Notes to Consolidated Financial Statements – Note 3”  in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Mortgage-related securities generally yield less than the loans that underlie such securities because of the servicing fee retained by the servicer and the cost of payment guarantees or credit enhancements that reduce credit risk.  However, mortgage-related securities are generally more liquid than individual mortgage loans and may be used to collateralize certain borrowings and public unit depositors of the Bank.  In general, mortgage-related securities issued or guaranteed by FNMA or FHLMC are weighted at no more than 20% for risk-based capital purposes compared to the 50% risk-weighting assigned to most non-securitized mortgage loans.

When securities are purchased for a price other than par, the difference between the price paid and par is accreted to or amortized against the interest earned over the life of the security, depending on whether a discount or premium to par is paid.  Movements in interest rates affect prepayment rates which, in turn, affect the average lives of mortgage-related securities and the speed at which the discount or premium is accreted to or amortized against earnings.

While mortgage-related securities, such as CMOs and Real Estate Mortgage Investment Conduits (“REMICs”), carry a reduced credit risk compared to whole loans, these securities remain subject to the risk that a fluctuating interest rate environment, along with other factors such as the geographic distribution of the underlying mortgage loans, may alter the prepayment rate of the underlying mortgage loans and so affect both the prepayment speed, and value, of the securities.  As noted above, the Bank, on some transactions, pays a premium over par value for mortgage-related securities purchased.  These premiums may be significant and may cause significant negative yield adjustments due to accelerated prepayments on the underlying mortgages.

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The following table sets forth the composition of our investment and mortgage-related securities portfolio, excluding FHLB stock, at the dates indicated.  Our investment securities portfolio at September 30, 2007 did not contain securities of any issuer with an aggregate book value in excess of 10% of our stockholders’ equity, excluding those issued by the government or its agencies.  At September 30, 2007, 2006 and 2005, the carrying value of FHLB stock was $139.7 million, $165.1million, and $182.3 million, respectively, which was in excess of 10% of our stockholders’ equity.  The carrying value of our investment in FHLB stock approximates its fair value.

		September 30,
		2007					2006					2005
		Carrying	% of		Fair		Carrying	% of			Fair		Carrying	% of	Fair
		Value	Total		Value		Value	Total			Value		Value	Total	Value
		(Dollars in thousands)
Trading Securities	$	--	--	$	--	$	396,904	100.00	%	$	396,904	$	--	--	$                --
Securities available-for-sale:
Mortgage-related securities	$	402,686	79.72%	$	402,686	$	556,248	74.59	%	$	556,248	$	737,638	100.00%	$       737,638
U.S. government and    agency securities		99,705	19.74		99,705		188,264	25.25			188,264		--	--	--
Municipal investments		2,719	0.54		2,719		1,216	0.16			1,216		--	--	--
Total securities available-    for-sale	$	505,110	100.00%	$	505,110	$	745,728	100.00	%	$	745,728	$	737,638	100.00%	$      737,638
Securities held-to-maturity:
Mortgage-related securities	$	1,011,585	70.58%	$	995,415	$	1,131,634	82.50	%	$	1,101,159	$	1,407,616	76.58%	$   1,383,268
U.S. government and agency securities		401,431	28.00		398,598		240,000	17.50			233,525		430,499	23.42	424,952
Municipal investments		20,313	1.42		20,342		--	--			--		--	--	--
Total securities held-to-maturity	$	1,433,329	100.00%	$	1,414,355	$	1,371,634	100.00	%	$	1,334,684	$	1,838,115	100.00%	$  1,808,220
Total securities	$	1,938,439		$	1,919,465	$	2,514,266			$	2,477,316	$	2,575,753		$  2,545,858

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The composition and maturities of the investment and mortgage-related securities portfolio, excluding FHLB stock, are indicated in the following table.  Yields on tax-exempt investments are not calculated on a taxable equivalent basis.

	September 30, 2007
	Less than 1 year			1 to 5 years			5 to 10 years			Over 10 years			Total Securities
		Weighted			Weighted			Weighted			Weighted			Weighted
	Carrying	Average		Carrying	Average		Carrying	Average		Carrying	Average		Carrying	Average		Fair
	Value	Yield		Value	Yield		Value	Yield		Value	Yield		Value	Yield		Value
	(Dollars in thousands)
Securities available-for-sale:
Mortgage-related securities	$           3,201	6.00	%	$         4,756	6.52	%	$          8,659	6.00	%	$          386,070	5.58	%	$          402,686	5.60	%	$          402,686
U.S. government and agency securities	99,705	4.81		--	--		--	--		--	--		99,705	4.81		99,705
Municipal investments	--	--		182	4.60		1,332	4.05		1,205	5.25		2,719	4.62		2,719
Total securities available-for-sale	102,906	4.85	%	4,938	6.45	%	9,991	5.74	%	387,275	5.58	%	505,110	5.44	%	505,110
Securities held-to-maturity:
Mortgage-related securities	$         45,044	3.50	%	$               --	--	%	$                --	--	%	$          966,541	4.43	%	$       1,011,585	4.39	%	$          995,415
U.S. government and agency securities	223,960	3.47		127,470	5.28		--	--		50,000	5.83		401,430	4.35		418,940
Municipal investments	--	--		2,922	4.27		11,885	4.26		5,507	5.09		20,314	4.49		20,342
Total securities held-to-maturity	269,004	3.48	%	130,392	5.26	%	11,885	4.26	%	1,022,048	4.50	%	1,433,329	4.38	%	1,434,697
Total securities	$      371,910	3.86	%	$    135,330	5.30	%	$        21,876	4.94	%	$       1,409,323	4.80	%	$       1,938,439	4.66	%	$       1,939,807

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Sources of Funds

General.  Our sources of funds are deposits, borrowings, repayment of principal and interest on loans and mortgage-related securities, interest earned on or maturities and calls of investment securities and funds provided from operations.

Deposits.  We offer a variety of deposit accounts having a wide range of interest rates and terms.  Our deposits consist of savings accounts, money market accounts, interest-bearing and non-interest bearing checking accounts, and certificates of deposit.  We rely primarily upon competitive pricing policies, marketing, and customer service to attract and retain deposits.  The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates, and competition.

The variety of deposit accounts we offer has allowed us to utilize strategic pricing to obtain funds and to respond with flexibility to changes in consumer demand.  We endeavor to manage the pricing of our deposits in keeping with our asset and liability management, liquidity and profitability objectives.  Based on our experience, we believe that our deposits are stable sources of funds.  Despite this stability, our ability to attract and maintain these deposits and the rates paid on them has been, and will continue to be, significantly affected by market conditions.

The following table sets forth our deposit flows during the periods indicated.  Included in the table are brokered and public unit deposits which totaled $193.0 million, $233.5 million, and $213.6 million at September 30, 2007, 2006 and 2005, respectively.

	Year Ended September 30,
	2007			2006			2005
	(Dollars in thousands)
Opening balance	$	3,900,431		$	3,960,297		$	4,127,774
Deposits		7,223,216			7,422,474			6,935,934
Withdrawals		7,349,023			7,594,727			7,190,694
Interest credited		148,158			112,387			87,283
Ending balance	$	3,922,782		$	3,900,431		$	3,960,297
Net increase (decrease)	$	22,351		$	(59,866	)	$	(167,477	)
Percent increase (decrease)		0.06	%		(1.51	)%		(4.06	)%

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The following table sets forth the dollar amount of deposits in the various types of deposit programs we offered for the periods indicated.

	Year Ended September 30,
	2007			2006			2005
		Percent			Percent			Percent
	Amount	of Total		Amount	of Total		Amount	of Total
	(Dollars in thousands)
Transactions and Savings
Deposits:
Checking	$     394,109	10.05	%	$     402,898	10.33	%	$   398,490	10.06	%
Savings(1)	237,148	6.04		106,347	2.73		121,133	3.06
Money market	790,277	20.15		808,910	20.74		873,570	22.06
Total non-certificates	1,421,534	36.24		1,318,155	33.80		1,393,193	35.18
Certificates (by rate):
0.00 - 0.99%	134	--		125	--		123	--
1.00 - 1.99%	--	--		--	--		137,442	3.47
2.00 - 2.99%	35,815	0.91		215,891	5.53		863,948	21.82
3.00 - 3.99%	225,162	5.74		541,236	13.88		905,058	22.85
4.00 - 4.99%	746,707	19.04		1,323,434	33.93		600,367	15.16
5.00 - 5.99%	1,489,706	37.98		497,453	12.75		2,611	0.07
6.00 - 6.99%	3,724	0.09		4,137	0.11		57,555	1.45
Total certificates(1)	2,501,248	63.76		2,582,276	66.20		2,567,104	64.82
Total deposits	$  3,922,782	100.00	%	$  3,900,431	100.00	%	$  3,960,297	100.00	%

⁽¹⁾During the second quarter of fiscal year 2007, variable-rate retirement certificates of deposit were reclassified to “Savings” as the new classifications for these accounts did not have a stated maturity date as a result of changes required by the Bank’s new core information technology processing system.  The amount of the retirement savings included in “Savings” at September 30, 2007 was $136.6 million.  The amount of variable-rate certificates of deposit included in “Certificates” at September 30, 2006 and 2005 was $153.0 million and $128.1 million, respectively.

The following table sets forth the rate and maturity information for our certificate of deposit portfolio as of September 30, 2007.

	Amount	Rate
Certificates maturing:	(Dollars in thousands)
Within three months	$              358,141	4.55	%
Over three to six months	507,072	4.77
Over six months to one year	881,810	4.88
Over one to two years	400,859	4.66
Over two to three years	282,857	4.96
Over three to four years	44,946	4.42
Over four to five years	23,698	4.41
Thereafter	1,865	4.57
	$           2,501,248	4.77	%

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The following table sets forth the maturity periods of our certificates of deposit in amounts of $100 thousand or more at September 30, 2007.

	Amount	Rate
	(Dollars in thousands)
Certificates maturing:
Three months or less	$          72,203	4.67	%
Over three months through six months	113,630	4.88
Over six months through twelve months	174,954	4.97
Over twelve months	289,884	5.02
	$       650,671	4.94	%

The board of directors has authorized the utilization of brokers to obtain deposits as a source of funds.  The Bank has entered into several relationships with nationally recognized wholesale deposit brokerage firms to accept deposits from these firms.  Depending on market conditions, the Bank may use brokered deposits from time to time to fund asset growth and gather deposits that may help to manage interest rate risk.  The Bank’s policies limit the amount of brokered deposits that it may have at any time to 15% of total deposits.  The rates paid on brokered deposits plus fees are generally equivalent to rates offered by FHLB on advances and comparable to some rates paid on retail deposits.  At September 30, 2007 and 2006, the balance of brokered deposits was $181.0 million and $4.3 million, respectively.

The board of directors also has authorized the utilization of public unit deposits as a source of funds.  The Bank’s policies limit the amount of public unit deposits that it may have at any time to 10% of total deposits.  In order to qualify to obtain such deposits, the Bank must have a branch in each county in which it collects public unit deposits.  At September 30, 2007 and 2006, the balance of public unit deposits was $12.0 million and $229.2 million, respectively.

During fiscal year 2007, the Bank did not pursue public unit deposits as the average term to maturity on those funds was generally less than one year.  Instead, the Bank increased the balance of brokered deposits as the term to maturity on those funds was in excess of one year.

Borrowings.  Although deposits are our main source of funds, we may utilize borrowings when, at the time of the borrowing, they can be invested at a positive rate spread, when we desire additional capacity to fund loan demand or when they help us meet our asset and liability management objectives.  Historically, our borrowings primarily have consisted of advances from FHLB and occasionally repurchase agreements.  During the year, from time to time, we utilized our line-of-credit that we maintain at FHLB.  At September 30, 2007, we did not have any borrowings on our line-of-credit.  See “Notes to Consolidated Financial Statements—Note 8” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

The Bank has interest rate swaps with a notional amount of $800.0 million to hedge an equal amount of FHLB advances.  The interest rate swaps are designated as fair value hedges and the Bank accounts for the hedges using the shortcut method.  Unrealized gains (losses) in the fair value of the interest rate swaps are offset by an unrealized gain (loss) on the hedged FHLB advances.  At September 30, 2007, the net fair value adjustment on the interest rate swaps was an unrealized loss of $13.8 million.  The carrying amount of the FHLB advances was reduced by an identical amount.

We may obtain advances from FHLB upon the security of our blanket pledge agreement.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Commitments” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.  Such advances may be made pursuant to several different credit programs, each of which has its own interest rate, maturity, repayment, and convertible features, if any.  At September 30, 2007, we had $2.75 billion in FHLB advances outstanding.

In 2004, the Company formed Capitol Federal Financial Trust I (the “Trust”), which issued $52.0 million of variable rate cumulative trust preferred securities in a private transaction exempt from registration under the Securities Act of 1933.  The Trust used the proceeds from the sale of its trust preferred securities and from the sale of $1.6 million of its common securities to the Company to purchase $53.6 million of Junior Subordinated Deferrable Interest Debentures (the “Debentures”) which are the sole assets of the Trust.  See “Notes to Consolidated Financial Statements—Note 10” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

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Interest on the Debentures is due quarterly in January, April, July and October until the maturity date of April 7, 2034.  The interest rate on the Debentures, which is identical to the distribution rate paid on the trust securities and resets at each interest payment, is based upon the three month LIBOR rate plus 275 basis points.  Principal is due at maturity.  The Debentures are callable, in part or whole, beginning on April 7, 2009, at par, at the option of the Company.  Redemption of the Debentures by the Company will result in redemption of a like amount of trust preferred securities by the Trust.  There are certain covenants that the Company is required to comply with regarding the Debentures.  These covenants include a prohibition on cash dividends in the event of default or deferral of interest on the Debentures, annual certifications to the Trust and other covenants related to the payment of interest and principal and maintenance of the Trust.  The Company was in compliance with all the covenants at September 30, 2007.

The following table sets forth certain information relating to each category of borrowings for which the average balance outstanding during the period was more than 30% of stockholders’ equity at the end of the period.  The maximum balance, average balance, and weighted average interest rate during fiscal year 2007 and 2006 reflect all FHLB advances, including the FHLB line of credit, that were scheduled to mature within one year at any month-end during fiscal year 2007 and 2006.

	At or for the Year Ended September 30,
	2007		2006
Balance at September 30	$   1,125,000		$    750,000
Maximum balance outstanding at any month-end during fiscal year	1,275,000		1,019,000
Average balance outstanding during fiscal year	1,118,907		817,332
Weighted average interest rate during fiscal year	3.95	%	3.56	%
Weighted average interest rate at September 30	4.23	%	3.52	%

Subsidiary and Other Activities

As a federally chartered savings bank, we are permitted by OTS regulations to invest up to 2% of our assets, or $154.0 million at September 30, 2007, in the stock of, or as unsecured loans to, service corporation subsidiaries.  We may invest an additional 1% of our assets in service corporations where such additional funds are used for inner-city or community development purposes.  At September 30, 2007, the Bank had one subsidiary, Capitol Funds, Inc.  As of September 30, 2007, our total investment in this subsidiary was $3.4 million.  Capitol Funds, Inc. has a wholly owned subsidiary, Capitol Federal Mortgage Reinsurance Company (“CFMRC”).  CFMRC serves as a reinsurance company for the private mortgage insurance companies the Bank uses in its normal course of operations.  CFMRC assumes the risk of default on loans exceeding a five percent loss and less than a ten percent loss.  During fiscal 2007, Capitol Funds, Inc. reported consolidated net income of $440 thousand which included net income of $444 thousand from CFMRC.

REGULATION

General

The Bank, as a federally chartered savings institution, is subject to federal regulation and oversight by the OTS extending to all aspects of its operations.  The Bank is also subject to regulation by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law, and to requirements established by the Federal Reserve Board.  Such regulation and supervision primarily is intended for the protection of depositors and borrowers and not for the purpose of protecting stockholders.  The investment and lending authority of savings institutions is prescribed by federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations.

The OTS regularly examines the Bank and prepares reports on the Bank’s operations, including any deficiencies.  These reports are presented to the Bank’s board of directors.  The FDIC also has the authority to examine the Bank in its role as the administrator of the Deposit Insurance Fund (“DIF”) which is the fund established upon the merger of the Savings Association Insurance Fund (“SAIF”) and the Bank Insurance Fund (“BIF”) in March 2006.  The Bank’s relationship with its depositors and borrowers is also regulated to a great extent by both federal and state laws, especially in such matters as the ownership of savings accounts and the form and content of the Bank’s mortgage

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requirements.  Any material change in such regulations, whether by the FDIC, the OTS, the Federal Reserve Board, Congress or states in which we do business, could have a material adverse impact on MHC, the Company and the Bank and their operations.

Capitol Federal Savings Bank MHC

MHC is a federal mutual holding company within the meaning of Section 10(o) of the Home Owners’ Loan Act. As such, MHC is required to register with and be subject to examination and supervision of the OTS as well as certain reporting requirements. In addition, the OTS has enforcement authority over MHC and its non-savings institution subsidiaries, if any. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of the Bank.

A mutual holding company is permitted to, among other things:

· invest in the stock of a savings institution;

· acquire a mutual institution through the merger of such institution into a savings institution subsidiary of such mutual holding company;

· merge with or acquire another mutual holding company of a savings institution;

· acquire non-controlling amounts of the stock of savings institutions and savings institution holding companies, subject to certain restrictions;

· invest in a corporation the capital stock of which is available for purchase by a savings institution under Federal law or under the law of any state where a subsidiary savings institution has its home office;

· furnish or perform management services for a savings institution subsidiary of such company;

· hold, manage or liquidate assets owned or acquired from a savings institution subsidiary of such company;

· hold or manage properties used or occupied by a savings institution subsidiary of such company; and

· act as a trustee under deed or trust.

In addition, a mutual holding company may engage in the activities of a multiple savings and loan holding company which are permissible by statute and the activities of financial holding companies under the Bank Holding Company Act of 1956, as amended, subject to prior approval by the OTS.

Capitol Federal Financial

The purpose and powers of the Company are to pursue any or all of the lawful objectives of a federal mutual holding company and to exercise any of the powers accorded to a mutual holding company.

If the Bank fails the qualified thrift lender test, within one year of such failure MHC and the Company must register as, and will become subject to, the restrictions applicable to bank holding companies.  The activities authorized for a bank holding company are more limited than are the activities authorized for a savings and loan holding company.  If the Bank fails the test a second time, MHC and the Company must immediately register as, and become subject to, the restrictions applicable to a bank holding company.  See “Qualified Thrift Lender Test.”

MHC and the Company must obtain approval from the OTS before acquiring control of any other savings institution.  Interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings institution.

Capitol Federal Savings Bank

The OTS has extensive authority over the operations of savings institutions.  As part of this authority, the Bank is required to file periodic reports with the OTS, is subject to periodic examinations by the OTS, and also may be examined by the FDIC.  The last regular OTS examination of the Bank was as of March 31, 2007.  All savings institutions are subject to a semi-annual assessment, based upon the savings institution’s total assets, to fund the operations of the OTS.  The Bank’s OTS assessment for the fiscal year ended September 30, 2007 was $1.3 million.

The OTS also has extensive enforcement authority over all savings institutions and their holding companies, including the Bank, the Company and MHC.  This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions.  In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.  Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OTS.  Except under certain circumstances, public disclosure of final enforcement actions by the OTS is required.

In addition, the investment, lending and branching authority of the Bank is prescribed by federal laws and the Bank is prohibited from engaging in any activities not permitted by such laws.  For instance, no savings institution may invest

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in non-investment grade corporate debt securities.  In addition, the permissible level of investment by federal institutions in loans secured by non-residential real property may not exceed 400% of total capital, except with approval of the OTS.  Federal savings institutions also generally are authorized to branch nationwide.  The Bank is in compliance with the noted restrictions.

The Bank’s general permissible lending limit for loans-to-one-borrower is equal to 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus).  At September 30, 2007, the Bank’s lending limit under this restriction was $118.9 million. The Bank is in compliance with the loans-to-one-borrower limitation.

The OTS, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as information systems, loan underwriting and documentation, asset growth and quality, earnings, internal controls and audit systems, interest rate risk exposure, and excessive compensation and benefits.  Any institution that fails to comply with these standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

The Bank is a member of the DIF, which is administered by the FDIC.  Deposits are insured up to the applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.  As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.  It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the DIF.  The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The FDIC merged the BIF and the SAIF to form the DIF on March 31, 2006 in accordance with the Federal Deposit Insurance Reform Act of 2005.  FDIC maintains the DIF by assessing depository institutions an insurance premium. The FDIC Board approved a new risk-based premium system in November 2006 which was effective January 1, 2007.  The FDIC’s new regulations for risk-based deposit insurance assessments establish four Risk Categories.  Risk Category I, for well-capitalized institutions that are financially sound with only a few minor weaknesses, includes approximately 95% of FDIC-insured institutions.  Risk Categories II, III, and IV present progressively greater risks to the deposit insurance fund.  Effective January 1, 2007, Risk Category I institutions pay quarterly assessments for deposit insurance at annual rates of five to seven basis points.  The rates for Risk Categories II, III, and IV are seven, 28, and 43 basis points, respectively.  Rates are subject to change with advance notice to insured institutions.

Within Risk Category I, the precise rate for an individual institution with less than $10 billion in assets is generally determined by a formula using CAMELS ratings which are assigned in examinations, and financial ratios.  A different method applies for larger institutions.  The rate for an individual institution is applied to its assessment base, which is generally its deposit liabilities subject to certain adjustments.  An institution (or its successor) insured by the FDIC on December 31, 1996 which had previously paid assessments is eligible for certain credit against deposit insurance assessments.  Due to this credit, we do not anticipate FDIC premium expense for fiscal year 2008.

The Bank, like other former SAIF insured institutions and BIF insured institutions, is required to pay a Financing Corporation (“FICO”) assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s.  For the first quarter of fiscal year 2008, the annual rate for this assessment is 1.14 basis points for each $100 in domestic deposits.   These assessments, which may be revised based upon the level of BIF and former SAIF classified insured institution’s deposits, will continue until the bonds mature in 2017 through 2019.

Regulatory Capital Requirements

Federally insured savings institutions, such as the Bank, are required to maintain a minimum level of regulatory capital.  The OTS has established capital standards, including a tangible capital requirement, a leverage ratio or core capital requirement and a risk-based capital requirement applicable to such savings institutions.  These capital requirements must be generally as stringent as the comparable capital requirements for national banks.  The OTS is also authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.

As a result of the prompt corrective action regulations, to be adequately capitalized, a savings institution must have a ratio of core capital to total assets of at least 4% (unless its supervisory condition permits 3%), a ratio of core capital to risk-weighted assets of at least 4% and a ratio of total capital to risk-weighted assets of at least 8%.  To be well capitalized, these ratios must be at least 5%, 6% and 10%, respectively.  On September 30, 2007, the Bank had core capital of $788.6 million, total risk-based capital of $784.7 million and risk-weighted assets of $3.44 billion.  It had a

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core capital ratio of 10.3%, a core capital to risk-weighted assets ratio of 22.9% and a total risk weighted capital ratio of 22.8%.

Core capital generally consists of common stockholders’ equity and retained earnings, and noncumulative perpetual preferred stock and related surplus, adjusted for such items as certain intangible assets, disallowed servicing assets and accumulated gains/losses on available-for-sale securities.  At September 30, 2007, the Bank had $3.2 million of technology based intangible assets, $1.3 million of accumulated gains on available-for-sale securities, net of taxes and $561 thousand of disallowed servicing assets which were all deducted from core capital.

Total risk-based capital consists of core capital, as defined above, plus supplementary capital, less certain assets including equity investments.  Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and allowances for loan and lease losses up to a maximum of 1.25% of risk-weighted assets.  Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital.  The OTS is also authorized to require a savings institution to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non-traditional activities.  At September 30, 2007, the Bank had $4.2 million of allowances for loan losses, which was less than 1.25% of risk-weighted assets.  At September 30, 2007, the Bank had $8.1 million of equity investments deducted from total capital.

In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, are multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset.  For example, the OTS has assigned a risk weight of 50% for prudently underwritten permanent one- to four-family first lien mortgage loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at origination unless insured to such ratio by an approved insurer.

Under the prompt corrective action regulations, the OTS and the FDIC are authorized and, under certain circumstances required, to take certain actions against savings institutions that fail to meet their capital requirements.  The OTS generally is required to take action to restrict the activities of any institution that is less than adequately capitalized.  Any such institution must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.  The OTS may also impose additional restrictions to significantly undercapitalized institutions.

As a condition to the approval of the capital restoration plan, any company controlling an undercapitalized institution must agree that it will enter into a limited capital maintenance guarantee with respect to the institution’s achievement of its capital requirements.

Any savings institution that fails to comply with its capital plan or has core capital or core capital to risk-weighted assets ratios of less than 3% or a total capital to risk-weighted assets ratio of less than 6% and is considered “significantly undercapitalized” must be made subject to one or more additional specified actions and operating restrictions which may cover all aspects of its operations and may include a forced merger or acquisition of the institution.  An institution that becomes “critically undercapitalized” because it has a tangible equity to total assets ratio of 2% or less is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized institutions.  In addition, the OTS must appoint a receiver, or conservator with the concurrence of the FDIC, for a savings institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized.

The OTS generally is authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The imposition by the OTS or the FDIC of any of these measures on the Bank may have a substantial adverse effect on its operations and profitability.

Limitations on Dividends and Other Capital Distributions

OTS regulations impose various restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

Generally under OTS regulations, savings institutions, such as the Bank, may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings.  It is generally required under OTS regulations that the Bank remain well-capitalized before and after the proposed distribution.

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However, an institution deemed to be in need of more than normal supervision by the OTS may have its dividend authority restricted by the OTS.  Savings institutions proposing to make any capital distribution within these limits need only submit written notice to the OTS 30 days prior to such distribution.  The OTS may object to the distribution during that 30-day period based on safety and soundness concerns.  Savings institutions that desire to make a larger capital distribution, or are under special restrictions, or are not, or would not be, well-capitalized following a proposed capital distribution, however, must obtain OTS approval prior to making such distribution.  See “Regulatory Capital Requirements.”

Due to the impact that refinancing FHLB advances had on earnings in 2004, the Bank cannot distribute capital to the Company unless it receives waivers of the safe harbor regulation from the OTS during the current waiver period.  The Bank had previously reported that a waiver would be required for capital distributions through at least December 31, 2007.  As a result of net interest margin compression, earnings have not been at the levels originally forecasted, which will likely result in a waiver being required through December 31, 2008.  Currently, the Bank has authorization from the OTS to distribute capital from the Bank to the Company through the quarter ending June 30, 2008.  So long as the Bank continues to maintain excess capital, operate in a safe and sound manner and comply with the interest rate risk management guidelines of the OTS, it is management’s belief that we will be able to continue to receive waivers to distribute, from the Bank to the Company, capital equal to the earnings of the Bank.

Anti-Money Laundering and Customer Identification

The Bank is subject to OTS regulations implementing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act.  The USA PATRIOT Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements.  By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.  Title III of the USA PATRIOT Act and the related OTS regulations impose the following requirements with respect to financial institutions:

· establishment of anti-money laundering programs;

· establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time;

· establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering;

· prohibitions on correspondent accounts for foreign shell banks and compliance with record keeping obligations with respect to correspondent accounts of foreign banks.

Privacy Standards

The Bank is subject to OTS regulations implementing the privacy protection provisions of the Gramm-Leach-Bliley Act.  These regulations require the Bank to disclose its privacy policy, including identifying with whom it shares “non-public personal information” to customers at the time of establishing the customer relationship and annually thereafter.

The regulations also require the Bank to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices.  In addition, the Bank is required to provide its customers with the ability to “opt-out” of having the Bank share their non-public personal information with unaffiliated third parties, subject to certain exceptions.

The Bank is subject to regulatory guidelines establishing standards for safeguarding customer information.  The guidelines describe the agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities.  The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

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Qualified Thrift Lender Test

All savings associations, including the Bank, are required to meet a qualified thrift lender test to avoid certain restrictions on their operations.  This test requires a savings institution to have at least 65% of its portfolio assets in qualified thrift investments (primarily residential housing related loans and investments) on a monthly average for nine out of every 12 months on a rolling basis.  As an alternative, the savings institution may maintain 60% of its total assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code.  At September 30, 2007, the Bank met the test and has always met the test.

Any savings association that fails to meet the qualified thrift lender test must convert to a national bank charter, unless it requalifies as a qualified thrift lender and thereafter remains a qualified thrift lender.  If such an institution has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings institution and a national bank.  Such institution is limited to national bank branching and it is subject to national bank limits for payment of dividends.  If such an institution has not requalified or converted to a national bank within three years after the failure, it must divest all investments and cease all activities not permissible for a national bank.  If any institution that fails the qualified thrift lender test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies.  See “Regulation - Capitol Federal Financial.”

Community Reinvestment Act

Under the Community Reinvestment Act (“CRA”), as implemented by OTS regulations, any federally chartered savings bank, including the Bank, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.  The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community.  The OTS must assess the Bank’s record of meeting the credit needs of its community and take such record into account in its evaluation of certain applications by the Bank.

Current CRA regulations rate an institution based on its actual performance in meeting community needs. In particular, the evaluation system focuses on three tests:

· a lending test, to evaluate the institution’s record of making loans in its service areas;

· an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and

· a service test, to evaluate the institution’s delivery of services through its branches, ATMs and other offices.

The CRA also requires that CRA evaluations be public.  The Bank has received a “satisfactory” rating in its most recent CRA examination.  All insured depository institutions must publicly disclose certain agreements that are in fulfillment of the CRA.  The Bank has no such agreements in place at this time.

Transactions with Affiliates

Generally, transactions between a savings institution or its subsidiaries and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates.  In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the institution’s capital.  Affiliates of the Bank include MHC, the Company, and any company which is under common control with the Bank.  In addition, a savings institution may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates.  The OTS has the discretion to treat subsidiaries of savings institutions as affiliates on a case-by-case basis.

Certain transactions with directors, officers or controlling persons are also subject to restrictions under regulations enforced by the OTS.  These regulations also impose restrictions on loans to such persons and their related interests.  Among other things, such loans must generally be made on terms and conditions substantially the same as for loans to unaffiliated individuals.  As of September 30, 2007 management believes such loans were made under terms and conditions substantially the same as loans made to unaffiliated individuals and otherwise complied with applicable regulations.

Federal Securities Law

The common stock of the Company is registered with the SEC under the Securities Exchange Act of 1934, as amended.  The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the

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SEC under the Securities Exchange Act of 1934.

The Company stock held by persons who are affiliates of the Company may not be resold without registration or unless sold in accordance with certain resale restrictions.  Affiliates are generally considered to be officers, directors and principal stockholders.  If the Company meets specified current public information requirements, each affiliate of the Company will be able to sell in the public market, without registration, a limited number of shares in any three-month period.

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), which was signed into law in July 2002, impacts all companies with securities registered under the Securities Exchange Act of 1934, including the Company.  Sarbanes-Oxley created new requirements in the areas of corporate governance and financial disclosure including, among other things:

· increased responsibility for Chief Executive Officers and Chief Financial Officers with respect to the content of filings with the SEC;

· enhanced requirements for audit committees, including independence and disclosure of expertise;

· enhanced requirements for auditor independence and the types of non-audit services that auditors can provide;

· enhanced requirements for controls and procedures;

· accelerated filing requirements for SEC reports;

· disclosure of a code of ethics; and

· increased disclosure and reporting obligations for companies, their directors and their executive officers.

Certifications of the Chief Executive Officer and the Chief Financial Officer as required by Sarbanes-Oxley and the resulting SEC rules can be found in the “Exhibits” section of this Form 10-K.

Federal Reserve System

The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts, primarily checking accounts.  At September 30, 2007, the Bank was in compliance with these reserve requirements.

Savings institutions are authorized to borrow from the Federal Reserve Bank “discount window,” but Federal Reserve Board regulations require institutions to exhaust other reasonable alternative sources of funds, including FHLB borrowings, before borrowing from the Federal Reserve Bank.  The Bank has not established the required relationship with the Federal Reserve Bank to borrow from the discount window.

Federal Home Loan Bank System

The Bank is a member of FHLB Topeka, which is one of 12 regional Federal Home Loan Banks that administers the home financing credit function of financial institutions.  Each FHLB serves as a reserve or central bank for its members within its assigned region and is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System.  It makes loans or advances to members in accordance with policies and procedures, established by the board of directors of FHLB, which are subject to the oversight of the Federal Housing Finance Board.  All advances from FHLB are required to be fully secured by sufficient collateral as determined by FHLB.  In addition, all long-term advances are required to provide funds for residential home financing.

As a member, the Bank is required to purchase and maintain stock in FHLB.  The minimum required FHLB stock amount is 5% of the Bank’s FHLB advances and outstanding balance on the FHLB line of credit.  For the year ended September 30, 2007, the Bank had a balance of $153.5 million in FHLB stock, which was in compliance with this requirement.  In past years, the Bank has received substantial dividends on its FHLB stock, although no assurance can be given that these dividends will continue.  The average yield on FHLB stock was 6.53% for fiscal year 2007 and 5.69% for fiscal year 2006.  For the year ended September 30, 2007, dividends paid by FHLB to the Bank totaled $10.0 million.

Under federal law FHLBs are required to provide funds for the resolution of troubled financial institutions and for community investment and low- and moderate-income housing.  These contributions have adversely affected the level of FHLB dividends paid and could continue to do so in the future.  A reduction in value of the Bank’s FHLB stock may result in a corresponding reduction in the Bank’s capital.

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Federal Savings and Loan Holding Company Regulation

MHC and the Company are unitary savings and loan holding companies within the meaning of the Home Owners’ Loan Act (“HOLA”).  As such, MHC and the Company are registered with the OTS and are subject to the OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over MHC, the Company and the Bank. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the Bank.

The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association or holding company thereof without prior written approval of the OTS; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured.  In evaluating applications by holding companies to acquire savings associations, the OTS must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

TAXATION

Federal Taxation

General.  We are subject to federal income taxation in the same general manner as other corporations with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company or the Bank.

Bad Debt Reserves. Prior to the Small Business Job Protection Act, the Bank was permitted to establish a reserve for bad debts and to make annual additions to the reserve.  These additions could, within specified formula limits, be deducted in arriving at taxable income. As a result of the Small Business Job Protection Act, savings associations must now use the specific charge-off method in computing bad debt deductions beginning with their 1996 federal tax return.  In addition, federal legislation required the Bank to recapture, over a six-year period, the excess of tax bad debt reserves at September 30, 1997 over those established as of the base year reserve balance as of September 30, 1989. The full amount of such reserve has been recaptured for the Bank.  The Bank continues to utilize the reserve method in determining its privilege tax obligations to the State of Kansas.  Prior to the Small Business Job Protection Act, bad debt reserves created prior to the year ended September 30, 1997 were subject to recapture into taxable income should the Bank fail to meet certain thrift asset and definitional tests.  New federal legislation eliminated these thrift related recapture rules.  However, under current law, pre-1988 reserves remain subject to recapture should the Bank make certain non-dividend distributions or cease to qualify as a Bank as defined in Code section 581.

State Taxation

The earnings/losses of MHC are combined with Capitol Funds, Inc. and the Company for purposes of filing a consolidated Kansas corporate tax return.  The Kansas corporate tax rate is 4.0%, plus a surcharge of 3.35% on earnings greater than $50,000.  At September 30, 2007, the consolidated entities had a net taxable operating loss carryforward of $231 thousand (tax effected at 4.0%).  At September 30, 2007, the Company recorded a tax valuation allowance of $231 thousand to offset the $231 thousand net operating loss deferred tax asset.

The Bank files a Kansas privilege tax return.  For Kansas privilege tax purposes, for taxable years beginning after 1997, the minimum tax rate is 4.5% of earnings, which is calculated based on federal taxable income, subject to certain adjustments.

Employees

At September 30, 2007, we had a total of 758 employees, including 139 part-time employees.  Our employees are not represented by any collective bargaining group.  Management considers its employee relations to be good.

Executive Officers of the Registrant

John C. Dicus. Age 74 years.  Mr. Dicus is Chairman of the Board of Directors.  He has served the Bank in various capacities since 1959.  He served as President of the Bank from 1969 until 1996.  He has served as Chairman of the Bank since 1989 and of the Company since its inception in March 1999.  He also served as Chief Executive Officer of the Bank from 1989 to January 2003, and of the Company from March 1999 until January 2003.  He is the father of Mr. John B. Dicus.

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John B. Dicus. Age 46 years.  Mr. Dicus is Chief Executive Officer and President of the Bank and the Company.  He took over the responsibilities of Chief Executive Officer effective January 1, 2003.  He has served as President of the Bank since 1996 and of the Company since its inception in March 1999.  Prior to accepting the responsibilities of CEO he served as Chief Operating Officer of the Bank and the Company.  Prior to that, he served as the Executive Vice President of Corporate Services for the Bank for four years.  He has been with the Bank in various other positions since 1985.  He is the son of Mr. John C. Dicus.

M. Jack Huey. Age 58 years. Mr. Huey has served as Executive Vice President and Chief Lending Officer of the Bank since June 2002.  Since June 2002 he has also served as President of Capitol Funds Inc., a subsidiary of the Bank.  Since August 2002, he has served as President of CFMRC.  Prior to that, he served as the Central Region Lending Officer since joining the Bank in 1991.

Larry K. Brubaker.  Age 60 years.  Mr. Brubaker has been employed with the Bank since 1971 and currently serves as Executive Vice President for Corporate Services, a position he has held since 1997.  Prior to that, he was employed by the Bank as the Eastern Region Manager for seven years.

R. Joe Aleshire. Age 60 years. Mr. Aleshire has been employed with the Bank since 1973 and currently serves as Executive Vice President for Retail Operations, a position he has held since 1997.  Prior to that, he was employed by the Bank as the Wichita Area Manager for 17 years.

Kent G. Townsend. Age 46 years. Mr. Townsend serves as Executive Vice President, Chief Financial Officer and Treasurer of the Bank, its subsidiaries, and the Company.  Mr. Townsend was promoted to Executive Vice President, Chief Financial Officer and Treasurer on September 1, 2005.  Prior to that, he served as Senior Vice President, a position he held since April 1999, and Controller of the Company, a position he held since March 1999.  He has served in similar positions with the Bank since September 1995.  He served as the Financial Planning and Analysis Officer with the Bank for three years and other financial related positions since joining the Bank in 1984.

Tara D. Van Houweling.  Age 34 years.  Ms. Van Houweling has been employed with the Bank and Company since May 2003 and currently serves as First Vice President, Principal Accounting Officer and Reporting Director.  She has held the position of Reporting Director since May 2003.  Prior to being employed by the Bank and Company, Ms. Van Houweling was the Assistant Controller for First Specialty Insurance Corporation, a subsidiary of Employers Reinsurance Corporation, from August 2002 to May 2003.  Prior to that, Ms. Van Houweling was employed by Deloitte & Touche, LLP in the Audit Services Department as an Audit Senior and then Audit Manager from June 1999 to August 2002.

Item 1A.  Risk Factors

The following is a summary of risk factors relating to the operations of the Bank and the Company.  These risk factors are not necessarily presented in order of significance.

Changes in interest rates could have an adverse impact on our results of operations and financial condition.

The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, mortgage-related securities, and investment securities, and the interest paid on deposits and borrowings.  Changes in interest rates could have an adverse impact on our results of operations and financial condition because the majority of our interest-earning assets are long-term, fixed-rate loans, while the majority of our interest-bearing liabilities are shorter term, and therefore subject to a greater degree of fluctuation.  This type of risk is known as interest rate risk, and is affected by prevailing economic and competitive conditions.

The impact of changes in interest rates on assets is generally observed on the balance sheet and income statement in later periods than the impact of changes on liabilities due to the duration of assets vs. liabilities, and also to the time lag between our commitment to originate or purchase a loan and the time we fund the loan, during which time interest rates may change.  Interest-bearing liabilities tend to reflect changes in interest rates closer to the time of market rate changes, so the difference in timing may have an adverse effect on our net interest income.

Changes in interest rates can also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates.  We increase or decrease our stockholders’ equity by the amount of change in the estimated fair value of the available-for-sale securities, net of deferred taxes.

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Changes in interest rates, as they relate to customers, can also have an adverse impact on our financial condition and results of operations.  In times of rising interest rates, default risk may increase among customers with adjustable-rate loans.   Rising interest rate environments also entice customers with adjustable-rate loans to refinance into fixed-rate loans which further exposes the Bank to interest rate risk (if refinanced internally).  If the loan is refinanced externally, the Bank could be unable to reinvest cash received from the resulting prepayments at rates comparable to existing loans, which subjects the Bank to reinvestment risk.  In decreasing interest rate environments, payments received will likely be invested at the prevailing (decreased) market rate. An influx of prepayments can result in an excess of liquidity, which could impact our net interest income if profitable reinvestment opportunities are not immediately available.  Prepayment rates are based on demographics, local economic factors, and seasonality, with the main factors affecting prepayment rates being prevailing interest rates and competition.   Fluctuations in interest rates also affect customer demand for deposit products.  Local competition for deposit dollars could affect our ability to attract deposits, or could result in us paying more for deposits.

Our mix of assets and liabilities, as well as the total amount of each, directly impacts the calculation of capital for the purposes of regulation by the OTS.  The OTS Thrift Bulletin 13a provides guidance on the management of interest rate risk through analysis of the change in net portfolio value.  Net portfolio value is defined as the net present value of the expected future cash flows of an entity’s assets and liabilities.  The OTS oversees the general safety and soundness of savings associations, and therefore retains the right to impose minimum capital requirements on institutions based upon the institutions compliance with written standards concerning net portfolio value analysis.

For additional information about interest rate risk, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our strategies to modify our interest rate risk profile may be difficult to implement.  We are currently undertaking asset management strategies designed to decrease our interest rate risk sensitivity.  One such strategy is increasing the amount of adjustable-rate and/or short-term assets.  We believe that the market anticipates the yield curve to continue to shift down and to maintain its positive shape, primarily between the two year and ten year maturity points, with additional interest rate cuts by the Federal Open Market Committee during fiscal year 2008.  These attributes of general market interest rates would generally create a decrease in borrower demand for adjustable-rate assets.   Additionally, there is no guarantee that any adjustable-rate assets obtained will not prepay.

We are also managing our liabilities to moderate our interest rate risk sensitivity.  Customer demand is primarily for short-term maturity certificates of deposit.  Using short-term liabilities to fund long-term fixed rate assets will increase the interest rate sensitivity of any financial institution.  We are using our maturing FHLB advances to mitigate the impact of the customer demand by repaying or lengthening the maturities of these advances, depending on liquidity or investment opportunities at the time of maturity.  The FHLB advances will be entered into as liquidity is needed or to fund the purchase of short-duration assets that provide for a positive spread considered sufficient by management.  The Company will consider the use of structured borrowings when it believes the risk of these funding sources provide adequate reward in both increased earnings and adequately addresses our interest rate risk exposure.

If we are unable to originate or purchase adjustable-rate assets at favorable rates or fund loan originations or securities purchases with long-term advances or structured borrowings, we may have difficulty executing this asset management strategy and/or it may result in a reduction in profitability.

Changes in laws, government regulation, and monetary policy may have a material effect on our results of operations.  The Bank, as a federally chartered savings institution, is subject to federal regulation, and as a thrift institution, is subject to oversight by the OTS extending to all aspects of its operations.  The Bank is also subject to regulation by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law, and to requirements established by the Federal Reserve Board.  Proposals for further regulation of the financial services industry are continually being introduced in Congress and various state legislatures.  The Bank’s ability to lend funds or pay dividends is contingent upon satisfaction of certain regulatory criteria and standards, such as capital levels, classification of assets, and establishment of loan loss reserves.  Such regulation and supervision is intended to protect depositors and not necessarily for the purpose of protecting stockholders.  The investment and lending authority of savings institutions are prescribed by federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations.  Government agencies have substantial discretion to impose significant monetary penalties upon institutions who do not comply with regulations.  Any change in such regulations, or violation of such regulations, whether by the FDIC, the OTS, the Federal Reserve Board, Congress or states in which we do business, could have a material adverse impact on MHC, the Company and the Bank and their operations.

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The Company’s ability to pay dividends is subject to the ability of the Bank to make capital distributions to the Company and the waiver of dividends by MHC.  The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company, and also on the availability of distributable capital at the holding company level in the event earnings are not sufficient to pay dividends according to the cash dividend payout policy. Under OTS safe harbor regulations, the Bank may distribute to the Company capital not exceeding net income for the current calendar year and the prior two calendar years.  Due to earnings compression as a result of the current interest rate environment, the Bank cannot distribute capital to the Company unless it receives waivers of the safe harbor regulation from the OTS during the current waiver period.  We believe the Bank will be required to receive a waiver for capital distributions through at least December 31, 2008.  This date may change depending on the Bank’s earnings.  Currently, the Bank has authorization from the OTS to distribute capital from the Bank to the Company through the quarter ending June 30, 2008.  So long as the Bank continues to maintain excess capital, operate in a safe and sound manner, and comply with the interest rate risk management guidelines of the OTS, it is management’s belief that the Bank will continue to receive waivers allowing it to distribute the net income of the Bank to the Company, although no assurance can be given in this regard.

MHC owns approximately 70% of the Company’s outstanding stock.  MHC waives its right to dividends on the shares that it owns, which means the amount of dividends paid to public shareholders is significantly higher than it would be if MHC accepted dividends.  MHC is not required to waive dividends, but the Company expects this practice to continue indefinitely.  As such, MHC is required to obtain a waiver from the OTS allowing it to waive its right to dividends. The current waiver is effective through June 2008.  It is expected that MHC will continue to waive future dividends except to the extent dividends are needed to fund its continuing operations.

The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the local economy. We are currently one of the largest mortgage loan originators in the State of Kansas.  Approximately 80% of our loan portfolio is comprised of loans secured by property located in the market areas in which we do business.  This makes us vulnerable to a downturn in the local economy and real estate markets.  Adverse conditions in the local economy such as inflation, unemployment, recession, or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income.  Decreases in local real estate values could adversely affect the value of the property used as collateral for our loans, which could cause the Bank to realize a loss in the event of a foreclosure.  Currently there is not a single employer or industry in the area on which the majority of our customers are dependent.  For additional information on the local economy, see “Item 1. Business – Market Area and Competition.”

Strong competition may limit growth and profitability.  As previously discussed, we are one of the largest loan originators in the State of Kansas, but we compete in the same market areas as local, regional, and national banks, commercial banks, credit unions, mortgage brokerage firms, investment banking firms, investment brokerage firms, and savings institutions.  We must also compete with online investment and mortgage brokerages and online banks that are not confined to any specific market area.  Many of these competitors operate on a national or regional level, are a conglomerate of various financial services housed under one corporation, or otherwise have substantially greater financial or technological resources than the Company.  We compete primarily on the basis of the interest rates offered to depositors and the terms of loans offered to borrowers.  Should we face competitive pressure to increase deposit rates or decrease loan rates, our net interest income could be adversely affected.  Additionally, our competitors may offer products and services that we do not or cannot provide, as certain deposit and loan products fall outside of our accepted level of risk.  The Company’s profitability depends upon its ability to compete in its market areas.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

At September 30, 2007, we had 29 traditional branch offices and nine in-store branch offices.  The Bank owns the office building in which its home office and executive offices are located, and 24 of its other branch offices. The remaining 13 branch offices, including nine in-store locations, were leased.

For additional information regarding our lease obligations, see “Notes to Consolidated Financial Statements—Note 6” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Management believes that our current facilities are adequate to meet the present and immediately foreseeable needs of the Bank and the Company.   However, we will continue to monitor customer growth and expand our branching network, if necessary, to serve our customers’ needs.

Item 3.   Legal Proceedings

The Company and the Bank are involved as plaintiff or defendant in various legal actions arising in the normal course of business.  In our opinion, after consultation with legal counsel, we believe it unlikely that such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.

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Item 4.   Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended September 30, 2007.

PART II

Item 5.   Market for the Registrant’s Common Stock, Related Security Holder Matters and Issuer Purchases of Equity Securities

The sections entitled “Stockholder Information” and “Stockholder Return Performance Presentation” of the attached Annual Report to Stockholders for the year ended September 30, 2007 is incorporated herein by reference.

See “Notes to Consolidated Financial Statements—Note 1” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Capital” of the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K regarding the OTS restrictions on dividends from the Bank to the Company.

The following table summarizes our share repurchase activity during the three months ended September 30, 2007 and additional information regarding our share repurchase program.   On May 26, 2006, the board of directors approved a new stock repurchase program.  Under the new plan, the Company may repurchase up to 500,000 shares from time to time, depending on market conditions and other factors, in open-market and other transactions.  The shares would be held as treasury stock for general corporate use.  The plan has no expiration date and had 411,473 shares remaining as of September 30, 2007.

	Total Number of	Average	Total Number of Shares Purchased	Maximum Number of  Shares that May
	Shares	Price  Paid	As Part of Publicly	Yet Be Purchased
Period	Purchased	per Share(1)	Announced Plans	Under the Plan
July 1, 2007 through
July 31, 2007	--	$          --	--	461,316
August 1, 2007 through
August 31, 2007	9,843	32.38	9,843	451,473
September 1, 2007 through
September 30, 2007	40,000	34.10	40,000	411,473
Total	49,843	$    33.76	49,843	411,473

⁽¹⁾  Reflects the average price paid per share to purchase the shares acquired in the open market.

Item 6.   Selected Financial Data

The section entitled “Selected Consolidated Financial Data” of the attached Annual Report to Stockholders for the fiscal years ended September 30, 2003 through September 30, 2007 is incorporated herein by reference.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the attached Annual Report to Stockholders for the year ended September 30, 2007 is incorporated herein by reference.

Item 7A.   Quantitative and Qualitative Disclosure About Market Risk

The section entitled “Management Discussion of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” of the attached Annual Report to Stockholders for the year ended September 30, 2007 is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data

The section entitled “Consolidated Financial Statements” of the attached Annual Report to Stockholders for the fiscal year ended September 30, 2007 is incorporated herein by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

John B. Dicus, the Company’s President and Chief Executive Officer, and Kent G. Townsend, the Company’s Executive Vice President, Chief Financial Officer and Treasurer, have evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended, the “Act”) as of September 30, 2007.  Based upon their evaluation, they have concluded that as of September 30, 2007, such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Act is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s report on our internal control over financial reporting and the report thereon of our independent registered public accounting firm are contained in the attached Annual Report to Stockholders for the fiscal year ended September 30, 2007 and incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Act that occurred during the Company’s last fiscal quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.  Other Information

None.

PART III

Item 10.  Directors, Executive Officers, and Corporate Governance

Information required by this item concerning the Company’s directors and compliance with section 16(a) of the Act is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Pursuant to General Instruction G(3), information concerning executive officers of the Company is included in Part I, under the caption “Executive Officers” of this Form 10-K.

Information required by this item regarding the audit committee of the Company’s board of directors, including information regarding the audit committee financial expert serving on the audit committee, is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Code of Ethics

We have adopted a written code of ethics within the meaning of Item 406 of SEC Regulation S-K that applies to our principal executive officer and senior financial officers, and to all of our other employees and our directors, a copy of which is available free of charge by contacting Jim Wempe, our Investor Relations Officer, at (785) 270-6055 or from our Internet website (www.capfed.com).

Item 11.  Executive Compensation

Information required by this item concerning compensation is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, a copy of which will be filed not

39

later than 120 days after the close of the fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, a copy of which will be filed not later than 120 days after the close of the fiscal year.

The following table sets forth information as of September 30, 2007 with respect to compensation plans under which shares of our common stock may be issued:

Equity Compensation Plan Information
			Number of Shares
			Remaining Available
			for Future Issuance
	Number of Shares		Under Equity
	to be issued upon	Weighted Average	Compensation Plans
	Exercise of	Exercise Price of	(Excluding Shares
	Outstanding Options,	Outstanding Options,	Reflected in the
Plan Category	Warrants and Rights	Warrants and Rights	First Column)
Equity compensation plans approved
by stockholders	382,855	$  28.13	533,672 (1)
Equity compensation plans not approved
by stockholders	N/A	N/A	N/A
Total	382,855	$  28.13	533,672

⁽¹⁾ This amount includes 175,987 shares issuable under the Company's Recognition and Retention Plan.

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Information required by this item concerning certain relationships, related transactions and director independence is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, except for information contained under the heading “Compensation Discussion and Analysis Report” and  “Report of the Audit Committee of the Board of Directors”, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 14.  Principal Accounting Fees and Services

Information required by this item concerning principal accountant fees and services is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held in January 2008, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)     The following is a list of documents filed as part of this report:

(1)  Financial Statements:

The following financial statements are included under Part II, Item 8 of this Form 10-K:

1.    Report of Independent Registered Public Accounting Firm.

2.    Consolidated Balance Sheets as of September 30, 2007 and 2006.

3.    Consolidated Statements of Income for the Years Ended September 30, 2007, 2006 and 2005.

4.    Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2007, 2006 and 2005.

5.    Consolidated Statements of Cash Flows for the Years Ended September 30, 2007, 2006 and 2005.

6.    Notes to Consolidated Financial Statements for the Years Ended September 30, 2007, 2006 and 2005.

(2)  Financial Statement Schedules:

All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.

(3)  Exhibits:

See Index to Exhibits.

41

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPITOL FEDERAL FINANCIAL
	Date:  November 29, 2007	By:	/s/ John B. Dicus
			John B. Dicus, President and
			Chief Executive Officer
			(Principal Executive Officer)

	Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
By:	/s/ John B. Dicus	By:	/s/ B. B. Andersen
	John B. Dicus, President		B. B. Andersen, Director
	and Chief Executive Officer		Date:  November 29, 2007
	(Principal Executive Officer)
	Date:  November 29, 2007
By:	/s/ John C. Dicus	By:	/s/ Michael T. McCoy, M.D.
	John C. Dicus, Chairman of the Board		Michael T. McCoy, M.D., Director
	Date:  November 29, 2007		Date:  November 29, 2007
By:	/s/ Kent G. Townsend	By:	/s/ Marilyn S. Ward
	Kent G. Townsend, Executive Vice President,		Marilyn S. Ward, Director
	Chief Financial Officer and Treasurer		Date:  November 29, 2007
	(Principal Financial Officer)
	Date:  November 29, 2007
By:	/s/ Jeffrey R. Thompson	By:	/s/ Tara D. Van Houweling
	Jeffrey R. Thompson, Director		Tara D. Van Houweling, First Vice President
	Date:  November 29, 2007		and Reporting Director
			(Principal Accounting Officer)
By:	/s/ Jeffrey M. Johnson		Date:  November 29, 2007
	Jeffrey M. Johnson, Director
	Date:  November 29, 2007

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INDEX TO EXHIBITS

Exhibit Number	Document
2.0	Plan of Reorganization and Stock Issuance Plan*
3(i)	Federal Stock Charter of Capitol Federal Financial*
3(ii)	Bylaws of Capitol Federal Financial
4(i)	Form of Stock Certificate of Capitol Federal Financial*
4(ii)	The Registrant agrees to furnish to the Securities and Exchange Commission, upon request, the instruments defining the rights of the holders
	of the Registrant’s long-term debt.
10.1(i)	Registrant’s Thrift Plan
10.1(ii)	Registrant’s Stock Ownership Plan
10.2	Registrant’s 2000 Stock Option and Incentive Plan (the “Stock Option Plan”) filed on April 13,
	2000 as Appendix A to Registrant’s Revised Proxy Statement (File No. 000-25391)
10.3	Registrant’s 2000 Recognition and Retention Plan (the “RRP”) filed on April 13, 2000 as
	Appendix B to Registrant’s Revised Proxy Statement (File No. 000-25391)
10.4	Capitol Federal Financial Deferred Incentive Bonus Plan filed on December 14, 2006 as Exhibit 10.4 to the Annual Report on Form 10-K and incorporated herein by reference
10.5	Form of Incentive Stock Option Agreement under the Stock Option Plan filed on February 4, 2005
	as Exhibit 10.5 to the December 31, 2004 Form 10-Q
10.6	Form of Non-Qualified Stock Option Agreement under the Stock Option Plan filed on February 4,
	2005 as Exhibit 10.6 to the December 31, 2004 Form 10-Q
10.7	Form of Restricted Stock Agreement under the RRP filed on February 4, 2005 as Exhibit 10.7 to the
	December 31, 2004 Form 10-Q
10.8	Description of Named Executive Officer Salary and Bonus Arrangements
10.9	Description of Director Fee Arrangements filed on February 5, 2007 as Exhibit 10.9 to the
	December 31, 2006 Form 10-Q
10.10	Short-term Performance Plan filed on December 14, 2005 as Exhibit 10.10 to the Annual
	Report on Form 10-K for the fiscal year ended September 30, 2005
11	Statement re: computation of earnings per share**
13	Annual Report to Stockholders
14	Code of Ethics***
21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm
31.1	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, President and Chief Executive Officer
31.2	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
32	Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chief Executive Officer and President, and Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer

   *Incorporated by reference from Capitol Federal Financial’s Registration Statement on Form S-1 (File No. 333-68363) filed on February 11, 2000, as amended and declared effective on the same date.

  **No statement is provided because the computation of per share earnings on both a basic and fully diluted basis can be clearly determined from the Financial Statements included in the 2007 Annual Report to Stockholders, filed herewith.

 ***May be obtained free of charge from the Registrant’s Investor Relations Officer by calling (785) 270-6055 or from the Registrant’s internet website at www.capfed.com.

EX-3.(II)

Dated: October 19, 2007

AMENDED AND RESTATED

BYLAWS  OF CAPITOL FEDERAL FINANCIAL

ARTICLE I

HOME OFFICE

The home office of Capitol Federal Financial (the “MHC subsidiary holding company”) shall be in the City of Topeka, in the State of Kansas.

ARTICLE II

SHAREHOLDERS

Section 1.  Place of Meetings.  All annual and special meetings of shareholders shall be held at the home office of the MHC subsidiary holding company or at such other convenient place as the board of directors may determine.

Section 2.  Annual Meeting.  A meeting of the shareholders of the MHC subsidiary holding company for the election of directors and for the transaction of any other business of the MHC subsidiary holding company shall be held annually within 150 days after the end of the MHC subsidiary holding company’s fiscal year.

Section 3.  Special Meetings.   Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision ("Office"), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the MHC subsidiary holding company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the MHC subsidiary holding company addressed to the chairman of the board, the president, or the secretary.

Section 4.  Conduct of Meetings.  Annual and special meetings shall be conducted in accordance with the most current edition of Robert’s Rules of Order unless otherwise prescribed by regulations of the Office or these bylaws or the board of directors adopts another written procedure for the conduct of meetings.  The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.

Section 5.  Notice of Meetings.  Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the MHC subsidiary holding company as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.  Compliance with the provisions of this Section 5 shall not be applicable for so long as the MHC subsidiary holding company is a wholly-owned institution.

Section 6.  Fixing of Record Date.  For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken.  When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.

Section 7.  Voting Lists.  At least 20 days before each meeting of the shareholders, the  officer or agent having charge of the stock transfer books for shares of the MHC subsidiary holding company shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the MHC subsidiary holding company and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of 20 days prior to such meeting.  Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting.  The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders.  In lieu of making the shareholder list available for inspection by shareholders as provided in this paragraph, the board of directors may elect to follow the procedures prescribed in §552.6(d) of the Office’s regulations as now or hereafter in effect.  Compliance with the provisions of this Section 7 shall not be applicable for so long as the MHC subsidiary holding company is a wholly-owned institution.

Section 8.  Quorum.  A majority of the outstanding shares of the MHC subsidiary holding company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.  The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to constitute less than a quorum.  If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter.  Directors, however, are elected by a plurality of the votes cast at an election of directors.

Section 9.  Proxies.  At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact.  Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder.  A proxy may designate as holder a corporation, partnership or company as prescribed in §552.6(f) of the Office’s regulations, or other person. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors.  No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.

Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the MHC subsidiary holding company to the contrary, at any meeting of the shareholders of the MHC subsidiary holding company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled.  In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

Section 11.  Voting of Shares by Certain Holders.  Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.  Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name.  Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.  Shares held in trust in an IRA or Keogh Account, however, may be voted by the MHC subsidiary holding company if no other instructions are received.  Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither treasury shares of its own stock held by the MHC subsidiary holding company nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the MHC subsidiary holding company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12.  Inspectors of Election.  In advance of any meeting of shareholders, the board of directors may appoint any person other than nominees for office as inspectors of election to act at such meeting or any adjournment.  The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president.

Unless otherwise prescribed by regulations of the Office, the duties of such inspectors shall include:  determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 13.  New Business.  Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the MHC subsidiary holding company at least five days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting.  Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter.  This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Section 14.  Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action that may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.

ARTICLE III

BOARD OF DIRECTORS

Section 1.  General Powers.  The business and affairs of the MHC subsidiary holding company shall be under the direction of its board of directors.  The board of directors shall annually elect a chairman of the board and a president from among its members and shall designate, when present, either the chairman of the board or the president to preside at its meetings.

Section 2.  Number and Term.  The board of directors shall consist of seven members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.  Directors may be elected for a term of office to expire earlier than the third succeeding annual meeting of stockholders after their election if necessary to balance the classes of directors.

Section 3.  Regular Meetings.  A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders.  The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution.  Directors may participate in a meeting by means of a conference telephone or similar communications device through which all persons participating can hear each other at the same time.  Participation by such means shall constitute presence in person for all purposes.

Section 4.  Qualification.  Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the MHC subsidiary holding company unless the MHC subsidiary holding company is a wholly owned subsidiary of a holding company.  No person who has reached 75 years of age shall be eligible for election, reelection, appointment or reappointment to the board of directors.

Section 5.  Special Meetings.  Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors.  The persons authorized to call special meetings of the board of directors may fix any place, within the MHC subsidiary holding company’s normal business area, as the place for holding any special meeting of the board of directors called by such persons.

Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear and speak to each other.  Such participation shall constitute presence in person for all purposes.

Section 6.  Notice.  Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram, facsimile machine or other electronic transmission or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached.  Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, when transmitted, if such transmission is electronically confirmed, if by facsimile machine or when sent if the MHC subsidiary holding company does not receive notice of failure of delivery if electronically transmitted.  Any director may waive notice of any meeting by a writing filed with the secretary.  The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

Section 7.  Quorum.  A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time.  Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 5 of this Article III.

Section 8.  Manner of Acting.  The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the Office or by these bylaws.

Section 9.  Action Without a Meeting.  Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

Section 10.  Resignation.  Any director may resign at any time by sending a written notice of such resignation to the home office of the MHC subsidiary holding company addressed to the chairman of the board or the president.  Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president.  More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

Section 11.  Vacancies.  Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors.  A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders.  Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

Section 12.  Compensation.  Directors, as such, may receive a stated salary for their services.  By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board of directors.  Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the board of directors may determine.

Section 13.  Presumption of Assent.  A director of the MHC subsidiary holding company who is present at a meeting of the board of directors at which action on any MHC subsidiary holding company matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the MHC subsidiary holding company within five days after the date a copy of the minutes of the meeting is received.  Such right to dissent shall not apply to a director who voted in favor of such action.

Section 14.  Removal of Directors.  At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.  Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

ARTICLE IV

COMMITTEES

Section 1.  Committees of the Board of Directors.  The board of directors may appoint from among its members an Executive Committee and other committees composed of one or more directors and delegate to these committees any of the powers of the board of directors, except  powers with reference to: the declaration of dividends; the amendment of the charter or bylaws of the MHC subsidiary holding company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the MHC subsidiary holding company otherwise than in the usual and regular course of its business; a voluntary dissolution of the MHC subsidiary holding company; or a revocation of any of the foregoing.  Any committee so designated may exercise the power and authority of the board of directors if the resolution which established the committee or any supplemental resolution of the board of directors or any committee charter shall so provide.  The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation.

Section 2.  Vacancies.  The board of directors shall have the power at any time to change the membership of any committee and to fill vacancies, subject to receiving the recommendation of any nominating committee, if required.

Section 3.  Committee Duties, Responsibilities and Process.  Any board committee will cause to be kept adequate minutes of all its proceedings, and will report its actions at the next meeting of the board of directors.  Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous written consent.  Committees will be governed by the same rules regarding meetings (including meeting by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice and quorum and voting requirements as are applicable to the board.  Each committee is authorized and empowered to adopt its own rules of procedure not inconsistent with (a) any provision of its charter, if any; (b) any provision of these bylaws; and (c) the laws of its jurisdiction of incorporation.

ARTICLE V

OFFICERS

Section 1.  Positions.  The officers of the MHC subsidiary holding company shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the board of directors.  The board of directors may also designate the chairman of the board as an officer.  The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller.  The board of directors may designate one or more vice presidents as executive vice president or senior vice president.  The board of directors may also elect or authorize the appointment of such other officers as the business of the MHC subsidiary holding company may require.  The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine.  In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

Section 2.  Election and Term of Office.  The officers of the MHC subsidiary holding company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders.  If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible.  Each officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided.  Election or appointment of an officer, employee or agent shall not of itself create contractual rights.  The board of directors may authorize the MHC subsidiary holding company to enter into an employment contract with any officer in accordance with regulations of the Office; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V.

Section 3.  Removal.  Any officer may be removed by the board of directors whenever in its judgment the best interests of the MHC subsidiary holding company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed.

Section 4.  Vacancies.  A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5.  Remuneration.  The remuneration of the officers shall be fixed from time to time by the board of directors or any committee of the board of directors so designated.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1.  Contracts.  To the extent permitted by regulations of the Office, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the MHC subsidiary holding company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the MHC subsidiary holding company.  Such authority may be general or confined to specific instances.

Section 2.  Loans.  No loans shall be contracted on behalf of the MHC subsidiary holding company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors.  Such authority may be general or confined to specific instances.

Section 3.  Checks, Drafts, Etc.  All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the MHC subsidiary holding company shall be signed by one or more officers, employees or agents of the MHC subsidiary holding company in such manner as shall from time to time be determined by the board of directors.

Section 4.  Deposits.  All funds of the MHC subsidiary holding company not otherwise employed shall be deposited from time to time to the credit of the MHC subsidiary holding company in any duly authorized depositories as the board of directors may select.

ARTICLE VII

CERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1.  Certificates for Shares.  The board of directors may determine to issue certificated or uncertificated shares of capital stock of the MHC subsidiary holding company.  Certificates representing shares of capital stock of the MHC subsidiary holding company shall be in such form as shall be determined by the board of directors and approved by the Office.  Such certificates shall be signed by the chief executive officer or by any other officer of the MHC subsidiary holding company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof.  The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the MHC subsidiary holding company itself or one of its employees.  Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified.  The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the MHC subsidiary holding company.  All certificates surrendered to the MHC subsidiary holding company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the MHC subsidiary holding company as the board of directors may prescribe.

Section 2.  Transfer of Shares.  Transfer of shares of capital stock of the MHC subsidiary holding company shall be made only on its stock transfer books.  Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the MHC subsidiary holding company.  Such transfer shall be made only on surrender for cancellation of the certificate for such shares, if such shares are held in certificated form, or the receipt of proper transfer instructions from the holder of record or his or her legal representative, if such shares are held in uncertificated form.  The person in whose name shares of capital stock stand on the books of the MHC subsidiary holding company shall be deemed by the MHC subsidiary holding company to be the owner for all purposes.

ARTICLE VIII

FISCAL YEAR; APPOINTMENT OF ACCOUNTANTS

The fiscal year of the MHC subsidiary holding company shall end on September 30 of each year.  The appointment of accountants shall be subject to annual ratification by the shareholders.

ARTICLE IX

DIVIDENDS

Subject to the terms of the MHC subsidiary holding company’s charter and the regulations and orders of the Office, the board of directors may, from time to time, declare, and the MHC subsidiary holding company may pay, dividends on its outstanding shares of capital stock.

ARTICLE X

CORPORATE SEAL

The board of directors shall provide a corporate seal which shall be two concentric circles between which shall be the name of the MHC subsidiary holding company.  The year of incorporation or an emblem may appear in the center.

ARTICLE XI

AMENDMENTS

These bylaws may be amended in a manner consistent with regulations of the Office and shall be effective after:  (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the MHC subsidiary holding company at any legal meeting, and (ii) receipt of any applicable regulatory approval.  When the MHC subsidiary holding company fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

EX-10.1(I)

CAPITOL FEDERAL FINANCIAL

PARTNERS IN THRIFT PLAN

Plan CL2006

Restated October 1, 2007

TABLE OF CONTENTS

				Page Number
INTRODUCTION				1
ARTICLE I		FORMAT AND DEFINITIONS
	Section  1.01	-----	Format	2
	Section  1.02	-----	Definitions	2
ARTICLE II		PARTICIPATION
	Section  2.01	-----	Active Participant	17
	Section  2.02	-----	Inactive Participant	18
	Section  2.03	-----	Cessation of Participation	18
ARTICLE III		CONTRIBUTIONS
	Section  3.01	-----	Employer Contributions	19
	Section  3.01A	-----	Thrift Contributions by Participants	19
	Section  3.01B	-----	Voluntary Contributions by Participants	20
	Section  3.02	-----	Forfeitures	20
	Section  3.03	-----	Allocation	21
	Section  3.04	-----	Contribution Limitation	21
	Section  3.05	-----	Excess Amounts	26
ARTICLE IV		INVESTMENT OF CONTRIBUTIONS
	Section  4.01	-----	Investment and Timing of Contributions	37
ARTICLE V		BENEFITS
	Section  5.01	-----	Retirement Benefits	38
	Section  5.02	-----	Death Benefits	38
	Section  5.03	-----	Vested Benefits	38
	Section  5.04	-----	When Benefits Start	38
	Section  5.05	-----	Loans to Participants	39
	Section  5.06	-----	Distributions Under Qualified Domestic Relations Orders	42
ARTICLE VI		DISTRIBUTION OF BENEFITS
	Section  6.01	-----	Form of Distribution	43
	Section  6.02	-----	Election Procedures	43
	Section  6.03	-----	Notice Requirements	44
ARTICLE VII		REQUIRED MINIMUM DISTRIBUTIONS
	Section  7.01	-----	Application	45
	Section  7.02	-----	Definitions	45
	Section  7.03	-----	Required Minimum Distributions	46

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ARTICLE VIII			TERMINATION OF THE PLAN				51
ARTICLE IX			ADMINISTRATION OF THE PLAN
		Section  9.01	-----			Administration	52
		Section  9.02	-----			Expenses	52
		Section  9.03	-----			Records	52
		Section  9.04	-----			Information Available	53
		Section  9.05	-----			Claim Procedures	53
		Section  9.06	-----			Delegation of Authority	54
		Section  9.07	-----			Exercise of Discretionary Authority	54
		Section  9.08	-----			Transaction Processing	55
ARTICLE X			GENERAL PROVISIONS
	Section 10.01		-----		Amendments		56
	Section 10.02		-----		Direct Rollovers		57
	Section 10.03		-----		Mergers and Direct Transfers		57
	Section 10.04		-----		Provisions Relating to the Insurer and Other Parties		58
	Section 10.05		-----		Employment Status		59
	Section 10.06		-----		Rights to Plan Assets		59
	Section 10.07		-----		Beneficiary		59
	Section 10.08		-----		Nonalienation of Benefits		60
	Section 10.09		-----		Construction		60
	Section 10.10		-----		Legal Actions		60
	Section 10.11		-----		Small Amounts		61
	Section 10.12		-----		Word Usage		61
	Section 10.13		-----		Change in Service Method		61
	Section 10.14		-----		Military Service		63
ARTICLE XI			TOP-HEAVY PLAN REQUIREMENTS
	Section 11.01		-----	Application			64
	Section 11.02		-----	Definitions			64
	Section 11.03		-----	Modification of Vesting Requirements			67
	Section 11.04		-----	Modification of Contributions			67
PLAN EXECUTION

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INTRODUCTION

The Primary Employer previously established a thrift and profit sharing plan on October 1, 1969.

The Primary Employer is of the opinion that the plan should be changed. It believes that the best means to accomplish these changes is to completely restate the plan's terms, provisions and conditions. The restatement, effective October 1, 2007, is set forth in this document and is substituted in lieu of the prior document with the exception of any good faith compliance amendment and any model amendment. Such amendment(s) shall continue to apply to this restated plan until such provisions are integrated into the plan or such amendment(s) are superseded by another amendment.

The restated plan continues to be for the exclusive benefit of employees of the Employer. All persons covered under the plan on September 30, 2007, shall continue to be covered under the restated plan with no loss of benefits.

It is intended that the plan, as restated, shall qualify as a profit sharing plan under the Internal Revenue Code of 1986, including any later amendments to the Code.

This plan includes the statutory, regulatory, and guidance changes specified in the 2006 Cumulative List of Changes in Plan Qualification Requirements (2006 Cumulative List) contained in Internal Revenue Service Notice 2007-3 and the qualification requirements and guidance published before the issuance of such list. The provisions of this plan apply as of the effective date of the restatement unless otherwise specified.

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ARTICLE I

FORMAT AND DEFINITIONS

SECTION 1.01--FORMAT.

Words and phrases defined in the DEFINITIONS SECTION of Article I shall have that defined meaning when used in this Plan, unless the context clearly indicates otherwise.

These words and phrases have an initial capital letter to aid in identifying them as defined terms.

SECTION 1.02--DEFINITIONS.

Account means, for a Participant, his share of the Plan Fund. Separate accounting records are kept for those parts of his Account that result from:

(a)Thrift Contributions

(b)Voluntary Contributions

(c)Matching Contributions

(d)Profit Sharing Contributions

(e)Rollover Contributions from Capitol Federal Savings Employee’s Pension Plan

A Participant's Account shall be reduced by any distribution of his Vested Account and by any Forfeitures. A Participant's Account shall participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund. His Account is subject to any gains, losses or expenses associated therewith.

Accounts and sub-accounts in addition to those specified above, may also be maintained if considered appropriate in the administration of the Plan.

ACP Test means the nondiscrimination test described in Code Section 401(m)(2) as provided for in subparagraph (d) of the EXCESS AMOUNTS SECTION of Article III.

Active Participant means an Eligible Employee who is actively participating in the Plan according to the provisions in the ACTIVE PARTICIPANT SECTION of Article II.

Adopting Employer means an employer which is a Controlled Group member and which has adopted this plan.

Affiliated Service Group means any group of corporations, partnerships or other organizations of which the Employer is a part and which is affiliated within the meaning of Code Section 414(m) and the regulations thereunder. Such a group includes at least two organizations one of which is either a service organization (that is, an organization the principal business of which is performing services), or an organization the principal business of which is performing management functions on a regular and continuing basis. Such service is of a type historically performed by employees. In the case of a management organization, the Affiliated Service Group shall include organizations related, within the meaning of Code Section 144(a)(3), to either the

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management organization or the organization for which it performs management functions. The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group.

Alternate Payee means any spouse, former spouse, child, or other dependent of a Participant who is recognized by a qualified domestic relations order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to such Participant.

Annual Compensation means, for a Plan Year, the Employee’s Compensation for the Compensation Year ending with or within the consecutive 12-month period ending on the last day of the Plan Year.

Annual Compensation shall only include Compensation received while an Active Participant.

For Plan Years beginning on or after July 1, 2007, Annual Compensation shall include amounts earned but not paid during the Compensation Year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next Compensation Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees, and no Compensation is included in more than one Compensation Year.

Annuity Contract means the annuity contract or contracts into which the Trustee or the Primary Employer enters with the Insurer for guaranteed benefits, for the investment of Contributions in separate accounts, and for the payment of benefits under this Plan.

Beneficiary means the person or persons named by a Participant to receive any benefits under the Plan when the Participant dies. See the BENEFICIARY SECTION of Article X.

Benefit Commencement Date means, for a Participant, the first day of the first period for which an amount is payable.

Claimant means any person who makes a claim for benefits under this Plan. See the CLAIM PROCEDURES SECTION of Article IX.

Code means the Internal Revenue Code of 1986, as amended.

Compensation shall be as defined as follows:

(1)   Generally. Compensation shall mean the compensation paid to an Employee by the Employer for services rendered to the Employer during a Plan Year, after the date on which the Employee becomes a Participant, as defined in Code Section 3401(a) (for purposes of income tax withholding at the source) plus amounts that would be required to be included as wages but for an election under Codes Sections 125(a), 132 (f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Code, plus all other payments of compensation to an employee by his employer (in the course of the employer’s trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. Notwithstanding the following, for purposes of this Section 1.1 (j)(1), the following items shall not constitute Compensation: reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation welfare benefits, amounts paid by the Employer or accrued with respect to this Plan or any other qualified or non-qualified unfunded plan of deferred compensation or other employee welfare plan to which the Employer contributes, payments for group insurance, medical benefits, expense reimbursements, including moving expenses, bonuses, excess commissions as described in certain employment contracts, overtime pay, incentive pay, employee referral payments and income reportable on Form W-2 in connection with the Employer’s recognition and retention plan and stock option plans. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the

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remuneration 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).

(2)   Compensation for purposes of applying the limitations of Code Section 415. For purposes of applying the limitations of Code Section 415, the term “Compensation” shall mean wages within the meaning of Code Section 3401(a)(for purposes of income tax withholding at the source), plus amounts that would be included in wages but for an election under Code Section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b), plus all other payments of compensation to an employee by his employer (in the course of the employer’s trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. See §§1.6041-1(a), but excluding amounts paid or reimbursed by the Employer for moving expenses incurred by the Participant, but only to the extent that, at the time of the payment, it is reasonable to believe that these amounts are deductible by the Participant under Code Section 217. Any rules that limit the remuneration 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)) are disregarded for this purpose.

(3   General timing rule. In order to be taken into account for a Plan Year with respect to (1) above, or a Limitation Year with respect to (2) above, Compensation must be actually paid or made available to a Participant (or, if earlier, includible in the gross income of the Participant) within the Plan Year or Limitation Year, as the case may be. For this purpose, compensation is treated as paid on a date if it is actually paid on that date or it would have been paid on that date but for an election under Code Section 125, 132(f)(4), 401(k), 403(b), 408(k), 408(p)(2)(A)(i), or 457(b).

(4)   Special rules regarding severance compensation. For purposes of applying the definitions in (1) and (2) above, in order to be taken into account for a Plan Year or Limitation Year, Compensation must be paid or treated as paid to the Participant prior to the Participant’s severance from employment with the Employer maintaining the plan. For this purpose, severance from employment is determined in the same manner as under Treasury Regulation Section 1.401(k)-1(d)(2) except that, for purposes of determining the employer of an employee, the modification provided under Code Section 415(h) to the employer aggregation rules apply. This paragraph shall be interpreted in a manner consistent with the Regulations under Code Section 415.

(5)   Dollar Limitation. Notwithstanding anything herein to the contrary, the Annual Compensation of each Participant taken into account under the Plan for any purpose during any Plan Year shall not exceed $200,000. The $200,000 dollar amount shall be adjusted from time to time in accordance with Section 415(d) of the Code.

Compensation Year means the consecutive 12-month period ending on the last day of each Plan Year, including corresponding periods before October 1, 1969.

Contributions means

Thrift Contributions

Matching Contributions

Voluntary Contributions

Profit Sharing Contributions

as set out in Article III, unless the context clearly indicates only specific contributions are meant.

Controlled Group means any group of corporations, trades, or businesses of which the Employer is a part that is under common control. A Controlled Group includes any group of corporations, trades, or businesses,

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whether or not incorporated, which is either a parent-subsidiary group, a brother-sister group, or a combined group within the meaning of Code Section 414(b), Code Section 414(c) and the regulations thereunder and, for purposes of determining contribution limitations under the CONTRIBUTION LIMITATION SECTION of Article III, as modified by Code Section 415(h). The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group and any other employer required to be aggregated with the Employer under Code Section 414(o) and the regulations thereunder.

Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

Distributee means an Employee or former Employee. In addition, the Employee's (or former Employee's) surviving spouse and the Employee's (or former Employee's) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse.

Eligibility Break in Service means an Eligibility Computation Period in which an Employee is credited with 500 or fewer Hours of Service. An Employee incurs an Eligibility Break in Service on the last day of an Eligibility Computation Period in which he has an Eligibility Break in Service.

Eligibility Computation Period means a consecutive 12-month period. The first Eligibility Computation Period begins on an Employee's Employment Commencement Date. Later Eligibility Computation Periods shall be consecutive 12-month periods ending on the last day of each Plan Year that begins after his Employment Commencement Date.

To determine an Eligibility Computation Period after an Eligibility Break in Service, the Plan shall use the consecutive 12-month period beginning on an Employee's Reemployment Commencement Date as if his Reemployment Commencement Date were his Employment Commencement Date.

Eligibility Service means one year of service for each Eligibility Computation Period that has ended and in which an Employee is credited with at least 1,000 Hours of Service.

However, Eligibility Service is modified as follows:

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Service with a Predecessor Employer that did not maintain this Plan included:

An Employee's service with a Predecessor Employer that did not maintain this Plan shall be included as service with the Employer. An Employee's service with such Predecessor Employer shall be counted only if service continued with the Employer without interruption. This service includes service performed while a proprietor or partner.

Period of Military Duty included:

A Period of Military Duty shall be included as service with the Employer to the extent it has not already been credited. For purposes of crediting Hours of Service during the Period of Military Duty, an Hour of Service shall be credited (without regard to the 501 Hour of Service limitation) for each hour an Employee would normally have been scheduled to work for the Employer during such period.

Controlled Group service included:

An Employee's service with a member firm of a Controlled Group while both that firm and the Employer were members of the Controlled Group shall be included as service with the Employer.

Eligible Employee means an Employee who has met all of the eligibility requirements of the Plan and who is currently included in the Plan as provided in Article II hereof; provided, however, that the term “Participant” shall not include (1) Leased Employees, (2) any individual who is employed by a Related Employer that has not adopted the Plan in accordance with Section 1.1(u) hereof, (3) any Employee who is regularly employed outside the Employer’s own offices in connection with the operation and maintenance of buildings or other properties acquired through foreclosure or deed, (4) any Employee who is a non-resident alien individual and who has no earned income from sources within the United States, or (5) any Employee who is included in a unit of Employees covered by a collective-bargaining agreement with the Employer or a Related Employer that does not expressly provide for participation of such Employees in the Plan, where there has been good-faith bargaining between the Employer or a Related Employer and Employees’ representatives on the subject of retirement benefits. To the extent required by the Code or the Act, or appropriate based on the context, references herein to Participant shall include Former Participant.

Eligible Retirement Plan means an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, 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), an annuity contract described in Code Section 403(b), or a qualified plan described in Code Section 401(a), that accepts the Distributee's Eligible Rollover Distribution. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a qualified domestic relations order, as defined in Code Section 414(p).

If any portion of an Eligible Rollover Distribution is attributable to payments or distributions from a designated Roth account, an Eligible Retirement Plan with respect to such portion shall include only another designated Roth account of the individual from whose Account the payments or distributions were made under an annuity plan described in Code Section 403(a) or a qualified plan described in Code Section 401(a), or a Roth IRA described in Code Section 408A of such individual.

Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, 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

6

expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee'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) any hardship distribution; (iv) the portion of any other distribution(s) that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and (v) any other distribution(s) that is reasonably expected to total less than $200 during a year.

A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of the portion of a designated Roth account that is not includible in a Participant’s gross income. However, such portion may be transferred only to a Roth IRA described in Code Section 408A or to a designated Roth account under a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

If the distribution includes any portion of a designated Roth account, in determining if (v) above applies: (i) any portion of the distribution from the designated Roth account shall not be treated as an Eligible Rollover Distribution if it is reasonably expected to total less than $200 during a year and (ii) the balance of the distribution, if any, shall not be treated as an Eligible Rollover Distribution if it is reasonably expected to total less than $200 during a year. However, all Eligible Rollover Distributions are combined in determining a mandatory distribution of an Eligible Rollover Distribution greater than $1,000 in the DIRECT ROLLOVERS SECTION of Article X.

Employee means an individual who is employed by the Employer or any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o). A Controlled Group member is required to be aggregated with the Employer.

The term Employee shall include any Self-employed Individual treated as an employee of any employer described in the preceding paragraph as provided in Code Section 401(c)(1). The term Employee shall also include any Leased Employee deemed to be an employee of any employer described in the preceding paragraph as provided in Code Section 414(n) or (o).

Employer means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III, the Primary Employer. This will also include any successor corporation or firm of the Employer which shall, by written agreement, assume the obligations of this Plan or any Predecessor Employer that maintained this Plan.

Employer Contributionsmeans

Matching Contributions

Profit Sharing Contributions

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as set out in Article III and contributions made by the Employer to fund this Plan in accordance with the provisions of the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI, unless the context clearly indicates only specific contributions are meant.

Employment Commencement Date means the date an Employee first performs an Hour of Service.

Entry Date means the date an Employee first enters the Plan as an Active Participant. See the ACTIVE PARTICIPANT SECTION of Article II.

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

Fiscal Year means the Primary Employer's taxable year. The last day of the Fiscal Year is September 30.

Forfeiture means the part, if any, of a Participant's Account that is forfeited. See the FORFEITURES SECTION of Article III.

Forfeiture Date means, as to a Participant, the date the Participant ceases employment with the Employer or any Controlled Group member.

Highly Compensated Employee means any Employee who:

(a)was a 5-percent owner at any time during the year or the preceding year, or

(b)for the preceding year had compensation from the Employer in excess of $80,000 and, if the Employer so elects, was in the top-paid group for the preceding year. The $80,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period is the calendar quarter ending September 30, 1996.

For this purpose the applicable year of the plan for which a determination is being made is called a determination year and the preceding 12-month period is called a look-back year. If the Employer makes a calendar year data election, the look-back year shall be the calendar year beginning with or within the look-back year. The Plan may not use such election to determine whether Employees are Highly Compensated Employees on account of being a 5-percent owner.

In determining who is a Highly Compensated Employee, the Employer makes a top-paid group election. The effect of this election is that an Employee (who is not a 5-percent owner at any time during the determination year or the look-back year) with compensation in excess of $80,000 (as adjusted) for the look-back year is a Highly Compensated Employee only if the Employee was in the top-paid group for the look-back year. In determining who is a Highly Compensated Employee, the Employer does not make a calendar year data election.

Calendar year data elections and top-paid group elections, once made, apply for all subsequent years unless changed by the Employer. If the Employer makes one election, the Employer is not required to make the other. If both elections are made, the look-back year in determining the top-paid group must be the calendar year beginning with or within the look-back year. These elections must apply consistently to the determination years of all plans maintained by the Employer which reference the highly compensated employee definition in Code Section 414(q), except as provided in Internal Revenue Service Notice 97-45 (or superseding guidance).

The determination of who is a highly compensated former Employee is based on the rules applicable to determining Highly Compensated Employee status as in effect for that determination year, in accordance

8

with section 1.414(q)-1T, A-4 of the temporary Income Tax Regulations and Internal Revenue Service Notice 97-45.

The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the compensation that is considered, and the identity of the 5-percent owners, shall be made in accordance with Code Section 414(q) and the regulations thereunder.

Hour of Service means, for the elapsed time method of crediting service in this Plan, each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer. Hour of Service means, for the hours method of crediting service in this Plan, the following:

(a)Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period.

(b)Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time in 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. Notwithstanding the preceding provisions of this subparagraph (b), no credit will be given to the Employee:

(1)for more than 501 Hours of Service under this subparagraph (b) on account of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period); or

(2)for an Hour of Service for which the Employee is directly or indirectly paid, or entitled to payment, on account of a period in which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker's or workmen's compensation, or unemployment compensation, or disability insurance laws; or

(3)for an Hour of Service for a payment which solely reimburses the Employee for medical or medically related expenses incurred by him.

For purposes of this subparagraph (b), a payment shall be deemed to be made by, or due from the Employer, regardless of whether such payment is made by, or due from the Employer, directly or indirectly through, among others, a trust fund or insurer, to which the Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.

(c)Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be credited both under subparagraph (a) or subparagraph (b) above (as the case may be) and under this subparagraph (c). Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in subparagraph (b) above will be subject to the limitations set forth in that subparagraph.

The crediting of Hours of Service above shall be applied under the rules of paragraphs (b) and (c) of the Department of Labor Regulation 2530.200b-2 (including any interpretations or opinions implementing such rules); which rules, by this reference, are specifically incorporated in full within this Plan. The reference to paragraph (b) applies to the special rule for determining hours of service for reasons other than the performance of duties such as payments calculated (or not calculated) on the basis of units of time and the rule against double credit. The reference to paragraph (c) applies to the crediting of hours of service to computation periods.

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Actual hours shall be tracked for purposes of crediting Hours-of-Service. In the event actual hours are not tracked, an Employee will be credited with 45 hours for each portion of a week worked.

Hours of Service shall be credited for employment with any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o) and the regulations thereunder for purposes of eligibility and vesting. Hours of Service shall also be credited for any individual who is considered an employee for purposes of this Plan pursuant to Code Section 414(n) or (o) and the regulations thereunder.

Solely for purposes of determining whether a one-year break in service has occurred for eligibility or vesting purposes, during a Parental Absence an Employee shall be credited with the Hours of Service which would otherwise have been credited to the Employee but for such absence, or in any case in which such hours cannot be determined, eight Hours of Service per day of such absence. The Hours of Service credited under this paragraph shall be credited in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period; or in all other cases, in the following computation period.

Inactive Participant means a former Active Participant who has an Account. See the INACTIVE PARTICIPANT SECTION of Article II.

Insurer means Principal Life Insurance Company or the insurance company or companies named by (i) the Primary Employer or (ii) the Trustee in its discretion or as directed under the Trust Agreement.

Investment Fund means the total of Plan assets, excluding the guaranteed benefit policy portion of any Annuity Contract. All or a portion of these assets may be held under, or invested pursuant to, the terms of a Trust Agreement.

The Investment Fund shall be valued at current fair market value as of the Valuation Date. The valuation shall take into consideration investment earnings credited, expenses charged, payments made, and changes in the values of the assets held in the Investment Fund.

The Investment Fund shall be allocated at all times to Participants, except as otherwise expressly provided in the Plan. The Account of a Participant shall be credited with its share of the gains and losses of the Investment Fund. That part of a Participant’s Account invested in a funding arrangement that establishes one or more accounts or investment vehicles for such Participant thereunder shall be credited with the gain or loss from such accounts or investment vehicles. The part of a Participant’s Account that is invested in other funding arrangements shall be credited with a proportionate share of the gain or loss of such investments. The share shall be determined by multiplying the gain or loss of the investment by the ratio of the part of the Participant’s Account invested in such funding arrangement to the total of the Investment Fund invested in such funding arrangement.

Investment Manager means any fiduciary (other than a trustee or Named Fiduciary)

(a)who has the power to manage, acquire, or dispose of any assets of the Plan;

(b)who (i) is registered as an investment adviser under the Investment Advisers Act of 1940; (ii) is not registered as an investment adviser under such Act by reason of paragraph (1) of section 203A(a) of such Act, is registered as an investment adviser under the laws of the state (referred to in such paragraph (1)) in which it maintains its principal office and place of business, and, at the time it last filed the registration form most recently filed by it with such state in order to maintain its registration under the laws of such state, also filed a copy of such form with the Secretary of Labor; (iii) is a bank, as defined in

10

that Act; or (iv) is an insurance company qualified to perform services described in subparagraph (a) above under the laws of more than one state; and

(c)who has acknowledged in writing being a fiduciary with respect to the Plan.

Late Retirement Date means the first day of any month that is after a Participant's Normal Retirement Date and on which retirement benefits begin. If a Participant continues to work for the Employer after his Normal Retirement Date, his Late Retirement Date shall be the earliest first day of the month on or after the date he has a Severance from Employment. An earlier Retirement Date may apply if the Participant so elects. A later Retirement Date may apply if the Participant so elects. See the WHEN BENEFITS START SECTION of Article V.

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 Code Section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided by the leasing organization to a Leased Employee, which are attributable to service performed for the recipient employer, shall be treated as provided by the recipient employer.

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A Leased Employee shall not be considered an employee of the recipient if:

(a)such employee is covered by a money purchase pension plan providing (i) a nonintegrated employer contribution rate of at least 10 percent 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 percent of the recipient's nonhighly compensated work force.

Loan Administrator means the person(s) or position(s) authorized to administer the Participant loan program.

The Loan Administrator is the Director of Human Resources.

Matching Contributions means contributions made by the Employer to fund this Plan that are contingent on a Participant’s Thrift Contributions. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Monthly Date means each Yearly Date and the same day of each following month during the Plan Year beginning on such Yearly Date.

Named Fiduciary means the person or persons who have authority to control and manage the operation and administration of the Plan.

The Named Fiduciaries are the Employer, the Trustee and the Investment Manager.

Nonhighly Compensated Employee means an Employee of the Employer who is not a Highly Compensated Employee.

Normal Retirement Age means the age at which the Participant's normal retirement benefit becomes nonforfeitable if he is an Employee. A Participant's Normal Retirement Age is 65.

Normal Retirement Date means the earliest first day of the month on or after the date the Participant reaches his Normal Retirement Age. Unless otherwise provided in this Plan, a Participant's retirement benefits shall begin on a Participant's Normal Retirement Date if he has had a Severance from Employment on such date and has a Vested Account.

Parental Absence means an Employee's absence from work:

(a)by reason of pregnancy of the Employee,

(b)by reason of birth of a child of the Employee,

(c)by reason of the placement of a child with the Employee in connection with adoption of such child by such Employee, or

(d)for purposes of caring for such child for a period beginning immediately following such birth or placement.

Participant means an Employee who has met all of the eligibility requirements of the Plan and is currently included in the Plan as provided in Article II hereof.

Participant Contributions means Thrift and Voluntary Contributions as set out in Article III.

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Period of Military Duty means, for an Employee

(a)who served as a member of the armed forces of the United States, and

(b)who was reemployed by the Employer at a time when the Employee had a right to reemployment in accordance with seniority rights as protected under Chapter 43 of Title 38 of the U.S. Code,

the period of time from the date the Employee was first absent from active work for the Employer because of such military duty to the date the Employee was reemployed.

Period of Service means a period of time beginning on an Employee's Employment Commencement Date or Reemployment Commencement Date (whichever applies) and ending on his Severance Date.

Period of Severance means a period of time beginning on an Employee's Severance Date and ending on the date he again performs an Hour of Service.

A one-year Period of Severance means a Period of Severance of 12 consecutive months.

Solely for purposes of determining whether a one-year Period of Severance has occurred for eligibility or vesting purposes, the consecutive 12-month period beginning on the first anniversary of the first date of a Parental Absence shall not be a one-year Period of Severance.

Plan means the thrift and profit sharing plan of the Employer set forth in this document, including any later amendments to it.

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Plan Administrator means the person or persons who administer the Plan.

The Plan Administrator is the Employer.

Plan Fund means the total of the Investment Fund and the guaranteed benefit policy portion of any Annuity Contract. The Investment Fund shall be valued as stated in its definition. The guaranteed benefit policy portion of any Annuity Contract shall be determined in accordance with the terms of the Annuity Contract and, to the extent that such Annuity Contract allocates contract values to Participants, allocated to Participants in accordance with its terms. The total value of all amounts held under the Plan Fund shall equal the value of the aggregate Participants’ Accounts under the Plan.

Plan Year means a period beginning on October 1 and ending on September 30.

Predecessor Employer means a firm of which the Employer was once a part (e.g., due to a spinoff or change of corporate status) or a firm absorbed by the Employer because of a merger or acquisition (stock or asset, including a division or an operation of such company) that maintained this Plan or that maintained another qualified pension or profit sharing plan or is named below:

Capitol Federal Savings & Loan Association

Primary Employer means Capitol Federal Financial.

Profit Sharing Contributions means discretionary contributions made by the Employer or a Controlled Group Member in cash to the Plan. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Reemployment Commencement Date means the date an Employee first performs an Hour of Service following an Eligibility Break in Service.

Reentry Date means the date a former Active Participant reenters the Plan. See the ACTIVE PARTICIPANT SECTION of Article II.

Retirement Date means the date a retirement benefit will begin and is a Participant's Normal or Late Retirement Date, as the case may be.

Semi-yearly Date means each October 1 and April 1 that is within the same Plan Year.

Severance Date means the earlier of:

(a)the date on which an Employee quits, retires, dies, or is discharged, or

(b)the first anniversary of the date an Employee begins a one-year absence from service (with or without pay). This absence may be the result of any combination of vacation, holiday, sickness, disability, leave of absence, or layoff.

Solely to determine whether a one-year Period of Severance has occurred for eligibility or vesting purposes for an Employee who is absent from service beyond the first anniversary of the first day of a Parental Absence, Severance Date is the second anniversary of the first day of the Parental Absence. The period between the first and second anniversaries of the first day of the Parental Absence is not a Period of Service and is not a Period of Severance.

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Severance from Employment means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III, an Employee has ceased to be an Employee. The Plan Administrator shall determine if a Severance from Employment has occurred in accordance with section 1.401(k)-1(d)(2) of the regulations.

Thrift Contributions means contributions by a Participant that are not required as a condition of employment, of participation, but are required for obtaining additional benefits from the Employer Matching Contributions. See the THRIFT CONTRIBUTIONS BY PARTICIPANTS SECTION of Article III.

Trust Agreement means an agreement or agreements of trust between the Primary Employer and Trustee established for the purpose of holding and distributing the Trust Fund under the provisions of the Plan. The Trust Agreement may provide for the investment of all or any portion of the Trust Fund in the Annuity Contract or any other investment arrangement.

Trust Fund means the total funds held under an applicable Trust Agreement. The term Trust Fund when used within a Trust Agreement shall mean only the funds held under that Trust Agreement.

Trustee means the party or parties named in the applicable Trust Agreement.

Valuation Date means the date on which the value of the assets of the Investment Fund is determined. The value of each Account that is maintained under this Plan shall be determined on the Valuation Date. In each Plan Year, the Valuation Date shall be the last day of the Plan Year. At the discretion of the Plan Administrator, Trustee, or Insurer (whichever applies) and in a nondiscriminatory manner, assets of the Investment Fund may be valued more frequently. These dates shall also be Valuation Dates.

Vested Account means the vested part of a Participant's Account. The Participant's Vested Account is equal to his Account.

Voluntary Contributions means contributions by a Participant that are 100% vested when made to the Plan and are not required as a condition of employment or participation, or for obtaining additional benefits from the Employer Contributions. See the VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS SECTION of Article III.

Yearly Date means October 1, 1969, and the same day of each following year.

Years of Service means an Employee’s Period of Service. Years of Service shall be measured from his Employment Commencement Date to his most recent Severance Date. Years of Service shall be reduced by any Period of Severance that occurred prior to his most recent Severance Date, unless such Period of Severance is included under the service spanning rule below. This period of Years of Service shall be expressed as years and fractional parts of a year (to four decimal places) on the basis that 365 days equal one year.

15

However, Years of Service is modified as follows:

Period of Military Duty included:

A Period of Military Duty shall be included as service with the Employer to the extent it has not already been credited.

Period of Severance included (service spanning rule):

A Period of Severance shall be deemed to be a Period of Service under either of the following conditions:

(a)the Period of Severance immediately follows a period during which an Employee is not absent from work and ends within 12 months; or

(b)the Period of Severance immediately follows a period during which an Employee is absent from work for any reason other than quitting, being discharged, or retiring (such as a leave of absence or layoff) and ends within 12 months of the date he was first absent.

Controlled Group service included:

An Employee's service with a member firm of a Controlled Group while both that firm and the Employer were members of the Controlled Group shall be included as service with the Employer.

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ARTICLE II

PARTICIPATION

SECTION 2.01--ACTIVE PARTICIPANT.

(a)An Employee shall first become an Active Participant (begin active participation in the Plan) on the earliest Semi-yearly Date on which he is an Eligible Employee and has met both of the eligibility requirements set forth below. This date is his Entry Date.

(1) He has completed one year of Eligibility Service before his Entry Date.

(2)He is age 21 or older.

Each Employee who was an Active Participant on September 30, 2007, shall continue to be an Active Participant if he is still an Eligible Employee on October 1, 2007, and his Entry Date shall not change.

If service with a Predecessor Employer is counted for purposes of Eligibility Service, an Employee shall be credited with such service on the date he becomes an Employee and shall become an Active Participant on the earliest Semi-yearly Date on which he is an Eligible Employee and has met all of the eligibility requirements above. This date is his Entry Date.

If a person has been an Eligible Employee who has met all of the eligibility requirements above, but is not an Eligible Employee on the date that would have been his Entry Date, he shall become an Active Participant on the date he again becomes an Eligible Employee. This date is his Entry Date.

In the event an Employee who is not an Eligible Employee becomes an Eligible Employee, such Eligible Employee shall become an Active Participant immediately if such Eligible Employee has satisfied the eligibility requirements above and would have otherwise previously become an Active Participant had he met the definition of Eligible Employee. This date is his Entry Date.

(b)An Inactive Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour of Service as an Eligible Employee. This date is his Reentry Date.

Upon again becoming an Active Participant, he shall cease to be an Inactive Participant.

(c)A former Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour of Service as an Eligible Employee. This date is his Reentry Date.

There shall be no duplication of benefits for a Participant under this Plan because of more than one period as an Active Participant.

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SECTION 2.02--INACTIVE PARTICIPANT.

An Active Participant shall become an Inactive Participant (stop accruing benefits under the Plan) on the earlier of the following:

(a)the date the Participant ceases to be an Eligible Employee, or

(b)the effective date of complete termination of the Plan under Article VIII.

An Employee or former Employee who was an Inactive Participant under the Plan on September 30, 2007, shall continue to be an Inactive Participant on October 1, 2007. Eligibility for any benefits payable to the Participant or on his behalf and the amount of the benefits shall be determined according to the provisions of the prior document, unless otherwise stated in this document.

SECTION 2.03--CESSATION OF PARTICIPATION.

A Participant shall cease to be a Participant on the date he is no longer an Eligible Employee and his Account is zero.

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ARTICLE III

CONTRIBUTIONS

SECTION 3.01--EMPLOYER CONTRIBUTIONS.

Employer Contributions shall be made without regard to current or accumulated net income, earnings, or profits of the Employer. Notwithstanding the foregoing, the Plan shall continue to be designed to qualify as a profit sharing plan for purposes of Code Sections 401(a), 402, 412, and 417. Such Contributions shall be equal to the Employer Contributions as described below:

(a)The Employer may make discretionary Matching Contributions. The percentage of Thrift Contributions matched shall be a percentage as determined by the Employer.

Matching Contributions are calculated based on Thrift Contributions and Compensation for the Plan Year. Matching Contributions are made for all persons who meet the allocation requirements of the ALLOCATION SECTION of this article.

Any percentage determined by the Employer shall apply to all eligible persons for the portion of the Plan Year that they are eligible.

Matching Contributions are 100% vested when made.

(b)Profit Sharing Contributions may be made for each Plan Year in an amount determined by the Employer.

Profit Sharing Contributions are 100% vested when made.

Employer Contributions are allocated according to the provisions of the ALLOCATION SECTION of this article.

A portion of the Plan assets resulting from Employer Contributions (but not more than the original amount of those Contributions) may be returned if the Employer Contributions are made because of a mistake of fact or are more than the amount deductible under Code Section 404 (excluding any amount which is not deductible because the Plan is disqualified). The amount involved must be returned to the Employer within one year after the date the Employer Contributions are made by mistake of fact or the date the deduction is disallowed, whichever applies. Except as provided under this paragraph and Article VIII, the assets of the Plan shall never be used for the benefit of the Employer and are held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for defraying reasonable expenses of administering the Plan.

SECTION 3.01A--THRIFT CONTRIBUTIONS BY PARTICIPANTS.

An Active Participant may make Thrift Contributions in accordance with nondiscriminatory procedures set up by the Plan Administrator. Thrift Contributions must equal or exceed at least 50% of the Matching Contribution as determined by the Employer in (a) above.

A Participant's participation in the Plan is not affected by stopping or changing Thrift Contributions. An Active Participant's request to start, change or stop his Thrift Contributions must be made in such manner and in accordance with such rules as the Employer may prescribe (including by means of voice response or other electronic system under circumstances the Employer permits).

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Thrift Contributions shall be credited to the Participant’s Account as of the end of the Plan Year for which the Thrift Contribution is made as that is the time it may be determined that the Participant is eligible to make Thrift Contributions to the Plan in accordance with Section 3.03. Until that time, the amounts set aside for the purpose of ultimately being contributed to the Plan (pending satisfaction of the allocation conditions) shall be treated as an asset of the Participant and not the Plan, and available for use by the Participant in accordance with procedures set forth by the Employer. Such assets shall not be treated as assets of the Plan until such time as the allocation conditions are satisfied), at which time the withheld amounts shall be contributed to the Plan as soon as reasonably practicable, subject to the requirements of ERISA and the applicable regulations thereunder.

The part of the Participant's Account resulting from Thrift Contributions is 100% vested and nonforfeitable at all times.

SECTION 3.01B--VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS.

An Active Participant may make Voluntary Contributions in accordance with nondiscriminatory procedures set up by the Plan Administrator.

A Participant's participation in the Plan is not affected by stopping or changing Voluntary Contributions. An Active Participant's request to start, change or stop his Voluntary Contributions must be made in such manner and in accordance with such rules as the Employer may prescribe (including by means of voice response or other electronic system under circumstances the Employer permits).

Voluntary Contributions shall be credited to the Participant’s Account as of the end of the Plan Year for which the Voluntary Contribution is made as that is the time it may be determined that the Participant is eligible to make Voluntary Contributions to the Plan in accordance with Section 3.03. Until that time, the amounts set aside for the purpose of ultimately being contributed to the Plan (pending satisfaction of the allocation conditions) shall be treated as an asset of the Participant and not the Plan, and available for use by the Participant in accordance with procedures set forth by the Employer. Such assets shall not be treated as assets of the Plan until such time as the allocation conditions are satisfied), at which time the withheld amounts shall be contributed to the Plan as soon as reasonably practicable, subject to the requirements of ERISA and the applicable regulations thereunder.

The part of the Participant's Account resulting from Voluntary Contributions is 100% vested and nonforfeitable at all times.

SECTION 3.02--FORFEITURES.

A Forfeiture shall also occur as provided in the EXCESS AMOUNTS SECTION of this article.

Forfeitures shall be determined at least once during each Plan Year. Forfeitures of Matching Contributions that relate to excess amounts as provided in the EXCESS AMOUNTS SECTION of this article, that have not been used to pay administrative expenses, shall be applied to reduce the earliest Employer Contributions made after the Forfeitures are determined.

SECTION 3.03--ALLOCATION.

A person meets the allocation requirements of this section if he is an Active Participant on the last day of the Plan Year and has at least 1,000 Hours of Service during the latest Accrual Computation Period ending on or before that date. If a Participant is on an approved leave of absence on the last day of the Plan Year, such Participant shall be considered an Active Participant on the last day of the Plan Year.

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Thrift and Voluntary Contributions shall be allocated to the Participants who meet the allocation requirements for this section and for whom such Contributions are made under the THRIFT AND VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS SECTION of this article. Such Contributions shall be allocated when made and credited to the Participant’s Account no later than required by ERISA or the Department of Labor regulations thereunder.

Matching Contributions, if any, shall be allocated to the persons who meet the allocation requirements of this section and for whom such Contributions are made under the EMPLOYER CONTRIBUTIONS SECTION of this article. Such Contributions shall be based on the Thrift Contributions and Compensation, while an Active Participant, for the Plan Year and shall be allocated as of the last day of the Plan Year and credited to the person’s Account attributable to Matching Contributions.

Profit Sharing Contributions for the Plan Year (if any) shall be allocated as of the last day of the Plan Year to each person who meets the allocation requirements of this section using Annual Compensation for the Plan Year. The amount allocated to such person shall be equal to the Profit Sharing Contributions multiplied by the ratio of such person’s Annual Compensation to the total Annual Compensation of all such persons. The amount shall be credited to the person’s Account attributable to Profit Sharing Contributions.

SECTION 3.04--CONTRIBUTION LIMITATION.

Contributions to the Plan shall be limited in accordance with Code Section 415 and the regulations thereunder. The limitations of this section shall apply to Limitation Years beginning on or after July 1, 2007, except as otherwise provided herein.

(a)Definitions. For the purpose of determining the contribution limitation set forth in this section, the following terms are defined.

Annual Additions means the sum of the following amounts credited to a Participant’s account for the Limitation Year:

(1)employer contributions;

(2)employee contributions (including Thrift Contributions and Voluntary Contributions); and

(3)forfeitures.

Annual Additions to a defined contribution plan, as defined in section 1.415(c)-1(a)(2)(i) of the regulations, shall also include the following:

(4)mandatory employee contributions, as defined in Code Section 411(c)(2)(C) and section 1.411(c)-1(c)(4) of the regulations, to a defined benefit plan;

(5)contributions allocated to any individual medical benefit account, as defined in Code Section 415(l)(2), which is part of a pension or annuity plan maintained by the Employer;

(6)amounts attributable to post-retirement medical benefits, allocated to the separate account of a key employee, as defined in Code Section 419A(d)(3), under a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer; and

(7)annual additions under an annuity contract described in Code Section 403(b).

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Compensation shall be as defined as follows:

(1)   Generally. Compensation shall mean the compensation paid to an Employee by the Employer for services rendered to the Employer during a Plan Year, after the date on which the Employee becomes a Participant, as defined in Code Section 3401(a) (for purposes of income tax withholding at the source) plus amounts that would be required to be included as wages but for an election under Codes Sections 125(a), 132 (f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Code, plus all other payments of compensation to an employee by his employer (in the course of the employer’s trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. Notwithstanding the following, for purposes of this Section 1.1 (j)(1), the following items shall not constitute Compensation: reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation welfare benefits, amounts paid by the Employer or accrued with respect to this Plan or any other qualified or non-qualified unfunded plan of deferred compensation or other employee welfare plan to which the Employer contributes, payments for group insurance, medical benefits, expense reimbursements, including moving expenses, bonuses, excess commissions as described in certain employment contracts, overtime pay, incentive pay, employee referral payments and income reportable on Form W-2 in connection with the Employer’s recognition and retention plan and stock option plans. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration 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).

(2)   Compensation for purposes of applying the limitations of Code Section 415. For purposes of applying the limitations of Code Section 415, the term “Compensation” shall mean wages within the meaning of Code Section 3401(a)(for purposes of income tax withholding at the source), plus amounts that would be included in wages but for an election under Code Section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b), plus all other payments of compensation to an employee by his employer (in the course of the employer’s trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. See §§1.6041-1(a), but excluding amounts paid or reimbursed by the Employer for moving expenses incurred by the Participant, but only to the extent that, at the time of the payment, it is reasonable to believe that these amounts are deductible by the Participant under Code Section 217. Any rules that limit the remuneration 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)) are disregarded for this purpose.

(3)   General timing rule. In order to be taken into account for a Plan Year with respect to (1) above, or a Limitation Year with respect to (2) above, Compensation must be actually paid or made available to a Participant (or, if earlier, includible in the gross income of the Participant) within the Plan Year or Limitation Year, as the case may be. For this purpose, compensation is treated as paid on a date if it is actually paid on that date or it would have been paid on that date but for an election under Code Section 125, 132(f)(4), 401(k), 403(b), 408(k), 408(p)(2)(A)(i), or 457(b).

(4)   Special rules regarding severance compensation. For purposes of applying the definitions in (1) and (2) above, in order to be taken into account for a Plan Year or Limitation Year, Compensation must be paid or treated as paid to the Participant prior to the Participant’s severance from employment with the Employer maintaining the plan. For this purpose, severance from employment is determined in the same manner as under Treasury Regulation Section 1.401(k)-1(d)(2) except that, for purposes of determining the employer of an employee, the modification provided under

Code Section 415(h) to the employer aggregation rules apply. This paragraph shall be interpreted in a manner consistent with the Regulations under Code Section 415.

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(5)   Dollar Limitation. Notwithstanding anything herein to the contrary, the Annual Compensation of each Participant taken into account under the Plan for any purpose during any Plan Year shall not exceed $200,000. The $200,000 dollar amount shall be adjusted from time to time in accordance with Section 415(d) of the Code.

Defined Contribution Dollar Limitation means, effective for Limitation Years beginning after December 31, 2001, $40,000, automatically adjusted under Code Section 415(d), effective January 1 of each year, as published in the Internal Revenue Bulletin. The new limitation shall apply to Limitation Years ending with or within the calendar year of the date of the adjustment, but a Participant’s Annual Additions for a Limitation Year cannot exceed the currently applicable dollar limitation (as in effect before the January 1 adjustment) prior to January 1. However, after a January 1 adjustment is made, Annual Additions for the entire Limitation Year are permitted to reflect the dollar limitation as adjusted on January 1.

Employer means the employer that adopts this Plan, and all members of a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), all commonly controlled trades or businesses (as defined in Code Section 414(c) as modified by Code Section 415(h)) or affiliated service groups (as defined in Code Section 414(m)) of which the adopting employer is a part, and any other entity required to be aggregated with the employer pursuant to regulations under Code Section 414(o).

Excess Amount means the excess of the Participant’s Annual Additions for the Limitation Year over the Maximum Annual Addition.

Limitation Year means the consecutive 12-month period ending on the last day of each Plan Year, including corresponding consecutive 12-month periods before October 1, 1969. If the Limitation Year is other than the calendar year, execution of this Plan (or any amendment to this Plan changing the Limitation Year) constitutes the Employer’s adoption of a written resolution electing the Limitation Year. If the Limitation Year is amended to a different consecutive 12-month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

Maximum Annual Addition means, for Limitation Years beginning on or after January 1, 2002, except for catch-up contributions described in Code Section 414(v), the Annual Addition that may be contributed or allocated to a Participant’s Account under the Plan for any Limitation Year. This amount shall not exceed the lesser of:

(1)The Defined Contribution Dollar Limitation, or

(2)100 percent of the Participant’s Compensation for the Limitation Year.

A Participant’s Compensation for a Limitation Year shall not include Compensation in excess of the limitation under Code Section 401(a)(17) that is in effect for the calendar year in which the Limitation Year begins.

The compensation limitation referred to in (2) shall not apply to an individual medical benefit account (as defined in Code Section 415(l); or a post-retirement medical benefits account for a key employee (as defined in Code Section 419A(d)(1)).

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If a short Limitation Year is created because of an amendment changing the Limitation Year to a different consecutive 12-month period, the Maximum Annual Addition will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction:

Number of months (including any fractional parts of a month)

in the short Limitation Year

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If the Plan is terminated as of a date other than the last day of the Limitation Year, the Plan is treated as if the Plan was amended to change the Limitation Year and create a short Limitation Year ending on the date the Plan is terminated.

If a short Limitation Year is created, the limitation under Code Section 401(a)(17) shall be prorated in the same manner as the Defined Contribution Dollar Limitation.

Predecessor Employer means, with respect to a Participant, a former employer if the Employer maintains a plan that provides a benefit which the Participant accrued while performing services for the former employer. Predecessor Employer also means, with respect to a Participant, a former entity that antedates the Employer if, under the facts and circumstances, the Employer constitutes a continuation of all or a portion of the trade or business of the former entity.

Severance from Employment means an employee has ceased to be am employee of the Employer maintaining the plan. An employee does not have a Severance from Employment if, in connection with a change of employment, the employee’s new employer maintains the plan with respect to the employee.

(b) If the Participant does not participate in, and has never participated in, another qualified plan maintained by the Employer or a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer, or an individual medical account, as defined in Code Section 415(l)(2), maintained by the Employer, or a simplified employee pension, as defined in Code Section 408(k), maintained by the Employer, which provides an Annual Addition, the amount of Annual Additions which may be credited to the Participant’s Account for any Limitation Year shall not exceed the lesser of the Maximum Annual Addition or any other limitation contained in this Plan. If the Employer Contribution that would otherwise be contributed or allocated to the Participant’s Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Annual Addition, the amount contributed or allocated shall be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Annual Addition.

(c) This (c) applies if, in addition to this Plan, the Participant is covered under another defined contribution plan, as defined in section 1.415(c)-1(a)(2)(i) of the regulations, (without regard to whether the plan(s) have been terminated) maintained by the Employer which provides an Annual Addition during any Limitation Year. The Annual Additions which may be credited to a Participant’s Account under this Plan for any such Limitation Year will not exceed the Maximum Annual Addition, reduced by the Annual Additions credited to a Participant’s account under the other defined contribution plan(s) for the same Limitation Year. If the Annual Additions with respect to the Participant under the other defined contribution plan(s) maintained by the Employer are less than the Maximum Annual Addition, and the Employer Contribution that would otherwise be contributed or allocated to the Participant’s Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Limitation Year will equal the Maximum Annual Addition. If the Annual Additions with respect to the Participant under the other defined contribution plan(s) in the aggregate are equal to or

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greater than the Maximum Annual Addition, no amount will be contributed or allocated to the Participant’s Account under this Plan for the Limitation Year.

(d) The limitation of this section shall be determined and applied taking into account the rules in subparagraph (e) below.

(e) Other Rules

(1) Aggregating Plans. For purposes of applying the limitations of this section for a Limitation Year, all defined contribution plans (as defined in section 1.415(c)-1(a)(2)(i) of the regulations and without regard to whether the plan(s) have been terminated) ever maintained by the Employer and all defined contribution plans of a Predecessor Employer (in the Limitation Year in which such Predecessor Employer is created) under which a Participant receives Annual Additions are treated as one defined contribution plan.

(2) Break-up of Affiliated Employers. The Annual Additions under a formerly affiliated plan (as defined in section 1.415(f)-1(b)(2)(ii) of the regulations) of the Employer are taken into account for purposes of applying the limitations of this section for the Limitation Year in which the cessation of affiliation took place.

(3) Previously Unaggregated Plans. The limitations of this section are not exceeded for the first Limitation Year in which two or more existing plans, which previously were not required to be aggregated pursuant to section 1.415(f) of the regulations, are aggregated, provided that no Annual Additions are credited to a Participant after the date on which the plans are required to be aggregated if the Annual Additions already credited to the Participant in the existing plans equal or exceed the Maximum Annual Addition.

(4) Aggregation with Multiemployer Plan. If the Employer maintains a multiemployer plan, as defined in Code Section 414(f), and the multiemployer plan so provides, only the Annual Additions under the multiemployer plan that are provided by the Employer shall be treated as Annual Additions provided under a plan maintained by the Employer for purposes of this section.

SECTION 3.05--EXCESS AMOUNTS.

(a)Definitions. For purposes of this section, the following terms are defined:

ACP means, for a specified group of Participants (either Highly Compensated Employees or Nonhighly Compensated Employees) for a Plan Year, the average (expressed as a percentage) of the Contribution Percentages of the Eligible Participants in the group.

ADP means, for a specified group of Participants (either Highly Compensated Employees or Nonhighly Compensated Employees) for a Plan Year, the average (expressed as a percentage) of the Deferral Percentages of the Eligible Participants in the group.

Catch-up Contributions means Elective Deferral Contributions made to a plan that are in excess of an otherwise applicable plan limit and that are made by participants who are age 50 or older by the end of the taxable year. An otherwise applicable plan limit is a limit in the plan that applies to Elective Deferral Contributions without regard to Catch-up Contributions, such as the limits on the maximum annual additions under Code Section 415, the dollar limitation on Elective Deferral Contributions under Code Section 402(g) (not counting Catch-up Contributions), and the limit imposed by the nondiscrimination test described in Code Section 401(k)(3).

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Contribution Percentage means the ratio (expressed as a percentage) of the Eligible Participant’s Contribution Percentage Amounts to the Eligible Participant’s Compensation for the Plan Year (whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). In modification of the foregoing, Compensation shall be limited to the Compensation received while an Eligible Participant. For an Eligible Participant for whom such Contribution Percentage Amounts for the Plan Year are zero, the percentage is zero.

Contribution Percentage Amounts means the sum of the Participant Contributions and Matching Contributions (that are not Qualified Matching Contributions taken into account for purposes of the ADP Test) made under the plan on behalf of the Eligible Participant for the plan year. For plan years beginning on or after January 1, 2006, Matching Contributions cannot be taken into account for a plan year for a Nonhighly Compensated Employee to the extent they are disproportionate matching contributions as defined in section 1.401(m)-2(a)(5)(ii) of the regulations. Such Contribution Percentage Amounts shall not include Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they relate are Excess Elective Deferrals, Excess Contributions, or Excess Aggregate Contributions. Under such rules as the Secretary of the Treasury shall prescribe, in determining the Contribution Percentage the Employer may elect to include Qualified Nonelective Contributions under this Plan that were not used in computing the Deferral Percentage. For plan years beginning on or after January 1, 2006, Qualified Nonelective Contributions cannot be taken into account for a plan year for a Nonhighly Compensated Employee to the extent they are disproportionate contributions as defined in section 1.401(m)-2(a)(6)(v) of the regulations. The Employer may also elect to use Elective Deferral Contributions in computing the Contribution Percentage so long as the ADP Test is met before the Elective Deferral Contributions are used in the ACP Test and continues to be met following the exclusion of those Elective Deferral Contributions that are used to meet the ACP Test.

DeferralPercentage means the ratio (expressed as a percentage) of Elective Deferral Contributions (other than Catch-up Contributions) under this Plan on behalf of the Eligible Participant for the Plan Year to the Eligible Participant’s Compensation for the Plan Year (whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). In modification of the foregoing, Compensation shall be limited to the Compensation received while an Eligible Participant. The Elective Deferral Contributions used to determine the Deferral Percentage shall include Excess Elective Deferrals (other than Excess Elective Deferrals of Nonhighly Compensated Employees that arise solely from Elective Deferral Contributions made under this Plan or any other plans of the Employer or a Controlled Group member), but shall exclude Elective Deferral Contributions that are used in computing the Contribution Percentage (provided the ADP Test is satisfied both with and without exclusion of these Elective Deferral Contributions). Under such rules as the Secretary of the Treasury shall prescribe, the Employer may elect to include Qualified Nonelective Contributions and Qualified Matching Contributions under this Plan in computing the Deferral Percentage. For Plan Years beginning on or after January 1, 2006, Qualified Matching Contributions cannot be taken into account for a Plan Year for a Nonhighly Compensated Employee to the extent they are disproportionate matching contributions as defined in section 1.401(m)-2(a)(5)(ii) of the regulations. For Plan Years beginning on or after January 1, 2006, Qualified Nonelective Contributions cannot be taken into account for a Plan Year for a Nonhighly Compensated Employee to the extent they are disproportionate contributions as defined in section 1.401(k)-2(a)(6)(iv) of the regulations. For an Eligible Participant for whom such contributions on his behalf for the Plan Year are zero, the percentage is zero.

Elective Deferral Contributions means any employer contributions made to a plan at the election of a participant in lieu of cash compensation. With respect to any taxable year, a participant’s Elective Deferral Contributions are the sum of all employer contributions made on behalf of such participant

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pursuant to an election to defer under any qualified cash or deferred arrangement described in Code Section 401(k), any salary reduction simplified employee pension plan described in Code Section 408(k)(6), any SIMPLE IRA plan described in Code Section 408(p), any plan described under Code Section 501(c)(18), and any employer contributions made on behalf of a participant for the purchase of an annuity contract under Code Section 403(b) pursuant to a salary reduction agreement. For taxable years beginning after December 31, 2005, Elective Deferral Contributions include Pre-tax Elective Deferral Contributions and Roth Elective Deferral Contributions. Elective Deferral Contributions shall not include any deferrals properly distributed as excess annual additions.

EligibleParticipant means, for purposes of determining the Deferral Percentage, any Employee who is otherwise entitled to make Elective Deferral Contributions under the terms of the plan for the plan year. Eligible Participant means, for purposes of determining the Contribution Percentage, any Employee who is eligible (i) to make a Participant Contribution or an Elective Deferral Contribution (if the Employer takes such contributions into account in the calculation of the Contribution Percentage), or (ii) to receive a Matching Contribution (including forfeitures) or a Qualified Matching Contribution. If a Participant Contribution is required as a condition of participation in the plan, any Employee who would be a participant in the plan if such Employee made such a contribution shall be treated as an Eligible Participant on behalf of whom no Participant Contributions are made.

ExcessAggregateContributions means, with respect to any Plan Year, the excess of:

(1)The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over

(2)The maximum Contribution Percentage Amounts permitted by the ACP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages).

Such determination shall be made after first determining Excess Elective Deferrals and then determining Excess Contributions.

ExcessContributions means, with respect to any Plan Year, the excess of:

(1)The aggregate amount of employer contributions actually taken into account in computing the Deferral Percentage of Highly Compensated Employees for such Plan Year, over

(2)The maximum amount of such contributions permitted by the ADP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in the order of the Deferral Percentages, beginning with the highest of such percentages).

Such determination shall be made after first determining Excess Elective Deferrals.

Excess Elective Deferrals means those Elective Deferral Contributions of a Participant that either (i) are made during the Participant’s taxable year and exceed the dollar limitation under Code Section 402(g) or (ii) are made during a calendar year and exceed the dollar limitation under Code Section 402(g) for the Participant’s taxable year beginning in such calendar year, counting only Elective Deferral Contributions made under this Plan and any other plan, contract, or arrangement maintained by the Employer. The dollar limitation shall be increased by the dollar limit on Catch-up Contributions under Code Section 414(v), if applicable.

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Excess Elective Deferrals shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant’s taxable year.

MatchingContributions means employer contributions made to this or any other defined contribution plan, or to a contract described in Code Section 403(b), on behalf of a participant on account of a Participant Contribution made by such participant, or on account of a participant’s Elective Deferral Contributions, under a plan maintained by the Employer or a Controlled Group member.

ParticipantContributions means contributions (other than Roth Elective Deferral Contributions) made to the plan by or on behalf of a participant that are included in the participant’s gross income in the year in which made and that are maintained under a separate account to which the earnings and losses are allocated.

Pre-tax Elective Deferral Contributions means a participant’s Elective Deferral Contributions that are not includible in the participant’s gross income at the time deferred.

Qualified Matching Contributions means Matching Contributions that are nonforfeitable when made to the plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions.

Qualified Nonelective Contributions means any employer contributions (other than Matching Contributions) that an Employee may not elect to have paid to him in cash instead of being contributed to the plan and that are nonforfeitable when made to the plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions.

Roth Elective Deferral Contributions means a participant’s Elective Deferral Contributions that are includible in the participant’s gross income at the time deferred and have been irrevocably designated as Roth Elective Deferral Contributions by the participant in his elective deferral agreement.

(b)Excess Elective Deferrals. A Participant may assign to this Plan any Excess Elective Deferrals made during a taxable year of the Participant by notifying the Plan Administrator in writing on or before the first following March 1 of the amount of the Excess Elective Deferrals to be assigned to the Plan. A Participant is deemed to notify the Plan Administrator of any Excess Elective Deferrals that arise by taking into account only those Elective Deferral Contributions made to this Plan and any other plan, contract, or arrangement of the Employer or a Controlled Group member. The Participant’s claim for Excess Elective Deferrals shall be accompanied by the Participant’s written statement that if such amounts are not distributed, such Excess Elective Deferrals will exceed the limit imposed on the Participant by Code Section 402(g) (including, if applicable, the dollar limitation on Catch-up Contributions under Code Section 414(v)) for the year in which the deferral occurred. The Excess Elective Deferrals assigned to this Plan cannot exceed the Elective Deferral Contributions allocated under this Plan for such taxable year.

Notwithstanding any other provisions of the Plan, Elective Deferral Contributions in an amount equal to the Excess Elective Deferrals assigned to this Plan, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Elective Deferrals for such taxable year or calendar year.

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The Excess Elective Deferrals shall be adjusted for any income or loss. The income or loss allocable to such Excess Elective Deferrals shall be equal to the income or loss allocable to the Participant’s Elective Deferral Contributions for the taxable year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Elective Deferrals. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such taxable year (as of the end of such taxable year) of the Participant’s Account resulting from Elective Deferral Contributions.

For purposes of determining income or loss on Excess Elective Deferrals for taxable years beginning on or after January 1, 2006, any Excess Elective Deferrals, in addition to any adjustment for income or loss for the taxable year in which the excess occurred, shall be adjusted for income or loss for the gap period between the end of such taxable year and the date of distribution. Such income or loss allocable to the gap period shall be equal to 10% of the income or loss allocable to the Excess Elective Deferrals for the taxable year multiplied by the number of complete months (counting 16 days or more as a complete month) in the gap period.

Any Matching Contributions that were based on the Elective Deferral Contributions distributed as Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be forfeited whether or not such amounts are distributed as Excess Elective Deferrals.

(c) ADP Test. As of the end of each Plan Year after Excess Elective Deferrals have been determined, the Plan must satisfy the ADP Test. The ADP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1)Prior Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

(i)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 1.25; or

(ii)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2, and

B.the difference between such ADPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Elective Deferral Contributions, for purposes of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ADP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ADP for these Eligible Participants.

(2)Current Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

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(i)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or

(ii)The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and

B.the difference between such ADP’s is not more than 2.

If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) if as a result of a merger or acquisition described in Code Section 410(b)(6)(C)(i), the Employer maintains both a plan using the prior year testing method and a plan using the current year testing method and the change is made within the transition period described in Code Section 410(b)(6)(C)(ii).

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

The Deferral Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferral Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if treated as Elective Deferral Contributions for purposes of the ADP Test) allocated to his account under two or more arrangements described in Code Section 401(k) that are maintained by the Employer or a Controlled Group member shall be determined as if such Elective Deferral Contributions (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single arrangement. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more cash or deferred arrangements of the Employer or of a Controlled Group member that have different plan years, all Elective Deferral Contributions made during the Plan Year shall be aggregated. For Plan Years beginning before January 1, 2006, all such cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. The foregoing notwithstanding, certain plans shall be treated as separate if mandatorily disaggregated under the regulations of Code Section 401(k).

In the event this Plan satisfies the requirements of Code Section 401(k), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by determining the Deferral Percentage of Employees as if all such plans were a single plan. If more than 10 percent of the Employer’s Nonhighly Compensated Employees are involved in a plan coverage change as defined in section 1.401(k)-2(c)(4) of the regulations, then any adjustments to the Nonhighly Compensated Employee ADP for the prior year shall be made in accordance with such regulations, unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401(k) only if they have the same plan year and use the same testing method for the ADP Test.

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For purposes of the ADP Test, Elective Deferral Contributions, Qualified Nonelective Contributions, and Qualified Matching Contributions must be made before the end of the 12-month period immediately following the Plan Year to which the contributions relate.

If the Plan Administrator should determine during the Plan Year that the ADP Test is not being met, the Plan Administrator may limit the amount of future Elective Deferral Contributions of the Highly Compensated Employees.

Notwithstanding any other provisions of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than 12 months after the last day of a Plan Year to Participants to whose Accounts such Excess Contributions were allocated for such Plan Year, except to the extent such Excess Contributions are classified as Catch-up Contributions. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of employer contributions taken into account in calculating the ADP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all of the Excess Contributions have been allocated. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more cash or deferred arrangements of the Employer or of a Controlled Group member, the amount distributed shall not exceed the amount of the employer contributions taken into account in calculating the ADP test and made to this Plan for the year in which the excess arose. If Catch-up Contributions are allowed for the Plan Year being tested, to the extent a Highly Compensated Employee has not reached his Catch-up Contribution limit under the Plan for such year, Excess Contributions allocated to such Highly Compensated Employee are Catch-up Contributions and will not be treated as Excess Contributions. If such excess amounts (other than Catch-up Contributions) are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

Excess Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, even if distributed.

The Excess Contributions shall be adjusted for any income or loss. The income or loss allocable to such Excess Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Elective Deferral Contributions (and, if applicable, Qualified Nonelective Contributions or Qualified Matching Contributions, or both) for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Elective Deferral Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if such contributions are included in the ADP Test).

For purposes of determining income or loss on Excess Contributions beginning with the 2006 Plan Year, any Excess Contributions, in addition to any adjustment for income or loss for the Plan Year in which the excess occurred, shall be adjusted for income or loss for the gap period between the end of such Plan Year and the date of distribution. Such income or loss allocable to the gap period shall be equal to 10% of the income or loss allocable to the Excess Contributions for the Plan Year multiplied by the number of complete months (counting 16 days or moreas a complete month) in the gap period.

Excess Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Elective Deferral Contributions. If such Excess Contributions exceed the amount of Excess Contributions in the Participant’s Account resulting from Elective Deferral Contributions, the

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balance shall be distributed from the Participant’s Account resulting from Qualified Matching Contributions (if applicable) and Qualified Nonelective Contributions, respectively.

Any Matching Contributions that were based on the Elective Deferral Contributions distributed as Excess Contributions, plus any income and minus any loss allocable thereto, shall be forfeited whether or not such amounts are distributed as Excess Contributions.

(d)ACP Test. As of the end of each Plan Year, the Plan must satisfy the ACP Test. The ACP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1)Prior Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

(i)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 1.25; or

(ii)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2, and

B.the difference between such ACPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Participant Contributions, provides for Matching Contributions, or both, for purposes of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ACP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ACP for these Eligible Participants.

(2)Current Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

(i)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or

(ii)The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and

B.the difference between such ACPs is not more than 2.

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If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) if as a result of a merger or acquisition described in Code Section 410(b)(6)(C)(i), the Employer maintains both a plan using the prior year testing method and a plan using the current year testing method and the change is made within the transition period described in Code Section 410(b)(6)(C)(ii).

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

The Contribution Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in Code Section 401(a) or arrangements described in Code Section 401(k) that are maintained by the Employer or a Controlled Group member shall be determined as if the total of such Contribution Percentage Amounts was made under each plan and arrangement. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more such plans or arrangements that have different plan years, all Contribution Percentage Amounts made during the Plan Year shall be aggregated. For Plan Years beginning before January 1, 2006, all such plans and arrangements ending with or within the same calendar year shall be treated as a single plan or arrangement. The foregoing notwithstanding, certain plans shall be treated as separate if mandatorily disaggregated under the regulations of Code Section 401(m).

In the event this Plan satisfies the requirements of Code Section 401(m), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. If more than 10 percent of the Employer’s Nonhighly Compensated Employees are involved in a plan coverage change as defined in section 1.401(m)-2(c)(4) of the regulations, then any adjustments to the Nonhighly Compensated Employee ACP for the prior year shall be made in accordance with such regulations, unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401(m) only if they have the same plan year and use the same testing method for the ACP Test.

For purposes of the ACP Test, Participant Contributions are considered to have been made in the Plan Year in which contributed to the Plan. Matching Contributions and Qualified Nonelective Contributions will be considered to have been made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year.

Notwithstanding any other provisions of this Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if not vested, or distributed, if vested, no later than 12 months after the last day of a Plan Year to Participants to whose Accounts such Excess Aggregate Contributions were allocated for such Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest Contribution Percentage Amounts taken into account in calculating the ACP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all of the Excess Aggregate Contributions have been allocated. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more plans or arrangements of the Employer or of a Controlled Group member that include

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Contribution Percentage Amounts, the amount distributed shall not exceed the Contribution Percentage Amounts taken into account in calculating the ACP Test and made to this Plan for the year in which the excess arose. If such Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

Excess Aggregate Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, even if distributed.

The Excess Aggregate Contributions shall be adjusted for any income or loss. The income or loss allocable to such Excess Aggregate Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Contribution Percentage Amounts for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Aggregate Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Contribution Percentage Amounts.

For purposes of determining income or loss on Excess Aggregate Contributions beginning with the 2006 Plan Year, any Excess Aggregate Contributions, in addition to any adjustment for income or loss for the Plan Year in which the excess occurred, shall be adjusted for income or loss for the gap period between the end of such Plan Year and the date of distribution. Such income or loss allocable to the gap period shall be equal to 10% of the income or loss allocable to the Excess Aggregate Contributions for the Plan Year multiplied by the number of complete months (counting 16 days or more as a complete month) in the gap period.

Excess Aggregate Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Participant Contributions that are not required as a condition of employment or participation or for obtaining additional benefits from Employer Contributions. If such Excess Aggregate Contributions exceed the balance in the Participant’s Account resulting from such Participant Contributions, the balance shall be forfeited, if not vested, or distributed, if vested, on a pro rata basis from the Participant’s Account resulting from Contribution Percentage Amounts.

(e) Employer Elections. The Employer has made an election to use the prior year testing method.

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ARTICLE IV

INVESTMENT OF CONTRIBUTIONS

SECTION 4.01--INVESTMENT AND TIMING OF CONTRIBUTIONS.

The handling of Contributions is governed by the provisions of the Trust Agreement, the Annuity Contract and any other funding arrangement in which the Plan Fund is or may be held or invested. To the extent permitted by the Trust Agreement, Annuity Contract, or other funding arrangement, the appointed committee or the Investment Manager shall direct the Contributions to any of the investment options available under the Annuity Contract or any of the investment vehicles available under the Trust Agreement and may request the transfer of amounts resulting from those Contributions between such investment options and investment vehicles or the transfer of amounts between such investment options and investment vehicles. Participants are not permitted to direct the investment of their Accounts.

At least annually, the Named Fiduciary shall review all pertinent Employee information and Plan data in order to establish the funding policy of the Plan and to determine appropriate methods of carrying out the Plan's objectives. The Named Fiduciary shall inform the Trustee and any Investment Manager of the Plan's short-term and long-term financial needs so the investment policy can be coordinated with the Plan's financial requirements.

The Named Fiduciary may delegate to the Investment Manager investment direction for Contributions and amounts that are not subject to Participant direction.

All Contributions are forwarded by the Employer to the Trustee to be deposited in the Trust Fund or to the Insurer to be deposited under the Annuity Contract, as applicable. Contributions that are accumulated through payroll deduction shall be paid to the Trustee or Insurer, as applicable, by the earlier of (i) the date the Contributions can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which the Contributions would otherwise have been paid in cash to the Participant.

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ARTICLE V

BENEFITS

SECTION 5.01--RETIREMENT BENEFITS.

On a Participant's Retirement Date, his Vested Account shall be distributed to him according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.02--DEATH BENEFITS.

If a Participant dies before his Benefit Commencement Date, his Vested Account shall be distributed according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.03--VESTED BENEFITS.

If an Inactive Participant’s Vested Account is not payable under the SMALL AMOUNTS SECTION of Article X, he may elect, but is not required, to receive a distribution of any part of his Vested Account after he has a Severance from Employment. A distribution under this paragraph shall be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI.

A Participant may not elect to receive a distribution under the provisions of this section after he again becomes an Employee until he subsequently has a Severance from Employment and meets the requirements of this section.

If an Inactive Participant does not receive an earlier distribution, upon his Retirement Date or death, his Vested Account shall be distributed according to the provisions of the RETIREMENT BENEFITS SECTION or the DEATH BENEFITS SECTION of this article.

SECTION 5.04--WHEN BENEFITS START.

(a)Unless otherwise elected, benefits shall begin before the 60th day following the close of the Plan Year in which the latest date below occurs:

(1)The date the Participant attains age 65 (or Normal Retirement Age, if earlier).

(2)The 10th anniversary of the Participant’s earliest Entry Date.

(3)The date the Participant terminates service with the Employer.

Notwithstanding the foregoing, the failure of a Participant to consent to a distribution while a benefit is immediately distributable, within the meaning of the ELECTION PROCEDURES SECTION of Article VI, shall be deemed to be an election to defer the start of benefits sufficient to satisfy this section.

The Participant may elect to have benefits begin after the latest date for beginning benefits described above, subject to the following provisions of this section. The Participant shall make the election in writing. Such election must be made before his Normal Retirement Date or the date he has a Severance from Employment, if later. The Participant shall not elect a date for beginning benefits or a

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form of distribution that would result in a benefit payable when he dies which would be more than incidental within the meaning of governmental regulations.

Benefits shall begin on an earlier date if otherwise provided in the Plan. For example, the Participant’s Retirement Date or Required Beginning Date, as defined in the DEFINITIONS SECTION of Article VII.

SECTION 5.05--LOANS TO PARTICIPANTS.

Loans shall be made available to all Participants on a reasonably equivalent basis. For purposes of this section, and unless otherwise specified, Participant means any Participant or Beneficiary who is a party-in-interest as defined in ERISA. Loans shall not be made to Highly Compensated Employees in an amount greater than the amount made available to other Participants.

A loan to a Participant shall be a Participant-directed investment of his Account. The loan is a Trust Fund investment but no Account other than the borrowing Participant’s Account shall share in the interest paid on the loan or bear any expense or loss incurred because of the loan.

The amount of the loan will be made from the Participant’s Vested Account which results from the following Contributions in the following order:

(1)   Voluntary Contributions

(2)   Thrift Contributions

(3)   Matching Contributions

(4)   Profit Sharing Contributions

The number of outstanding loans shall be limited to one. The maximum amount of any loan is the lesser of $50,000 or 50% of the vested portion of the Participant’s Account attributable to the above named Contributions. The minimum amount of any loan shall be $1,000.

Loans must be adequately secured and bear a reasonable rate of interest.

The amount of the loan shall not exceed the maximum amount that may be treated as a loan under Code Section 72(p) (rather than a distribution) to the Participant and shall be equal to the lesser of (a) or (b) below:

(a)$50,000, reduced by the highest outstanding loan balance of loans during the one-year period ending on the day before the new loan is made.

(b)The greater of (1) or (2), reduced by (3) below:

(1)One-half of the Participant's Vested Account.

(2)$10,000.

(3)Any outstanding loan balance on the date the new loan is made.

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For purposes of this maximum, a Participant's Vested Account does not include any accumulated deductible employee contributions, as defined in Code Section 72(o)(5)(B), and all qualified employer plans, as defined in Code Section 72(p)(4), of the Employer and any Controlled Group member shall be treated as one plan.

No collateral other than a portion of the Participant’s Vested Account (as limited above) shall be accepted. The Loan Administrator shall determine if the collateral is adequate for the amount of the loan requested.

Each loan shall bear a reasonable fixed rate of interest to be determined by the Loan Administrator. The interest rate will be the Prime Rate plus 1%.

The loan shall by its terms require that repayment (principal and interest) be amortized in level payments, not less frequently than quarterly, over a period not extending beyond five years from the date of the loan. If the loan is used to acquire a dwelling unit, which within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant, the repayment period may extend beyond five years from the date of the loan. The period of repayment for any loan shall be arrived at by mutual agreement between the Loan Administrator and the Participant and if the loan is for a principal residence, shall not be made for a period longer than ten years.

The Participant shall make an application for a loan in such manner and in accordance with such rules as the Loan Administrator shall prescribe for this purpose (including by means of voice response or other electronic means under circumstances the Employer permits). The application must specify the amount and duration requested.

The Loan Administrator may pursue the information contained in the application for the loan concerning the income, liabilities, and assets of the Participant will be evaluated to determine whether there is a reasonable expectation that the Participant will be able to satisfy payments on the loan as due. Additionally, the Loan Administrator may also pursue any appropriate further investigations concerning the creditworthiness and credit history of the Participant to determine whether a loan should be approved.

Each loan shall be fully documented in the form of a promissory note signed by the Participant for the face amount of the loan, together with interest determined as specified above.

There will be an assignment of collateral to the Plan executed at the time the loan is made.

In those cases where repayment through payroll deduction is available, installments are so payable, and a payroll deduction agreement shall be executed by the Participant at the time the loan is made. Loan repayments that are accumulated through payroll deduction shall be paid to the Trustee by the earlier of (i) the date the loan repayments can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which such amounts would otherwise have been paid in cash to the Participant.

Where payroll deduction is not available, payments in cash are to be timely made. Any payment that is not by payroll deduction shall be made payable to the Employer or the Trustee, as specified in the promissory note, and delivered to the Loan Administrator, including prepayments, service fees and penalties, if any, and other amounts due under the note. The Loan Administrator shall deposit such amounts into the Plan as soon as administratively practicable after they are received, but in no event later than the 15th business day of the month after they are received.

The promissory note may provide for reasonable late payment penalties and service fees. Any penalties or service fees shall be applied to all Participants in a nondiscriminatory manner. If the promissory note so provides, such amounts may be assessed and collected from the Account of the Participant as part of the loan balance.

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Each loan may be paid prior to maturity, in part or in full, without penalty or service fee, except as may be set out in the promissory note.

The Plan may suspend loan payments for a period not exceeding one year during which an approved unpaid leave of absence occurs other than a military leave of absence. The Loan Administrator shall provide the Participant a written explanation of the effect of the suspension of payments upon his loan.

If a Participant separates from service (or takes a leave of absence) from the Employer because of service in the military and does not receive a distribution of his Vested Account, the Plan shall suspend loan payments until the Participant’s completion of military service or until the Participant’s fifth anniversary of commencement of military service, if earlier, as permitted under Code Section 414(u). The Loan Administrator shall provide the Participant a written explanation of the effect of his military service upon his loan.

If any payment of principal and interest, or any portion thereof, remains unpaid for more than 90 days after due, the loan shall be in default. For purposes of Code Section 72(p), the Participant shall then be treated as having received a deemed distribution regardless of whether or not a distributable event has occurred.

Upon default, the Plan has the right to pursue any remedy available by law to satisfy the amount due, along with accrued interest, including the right to enforce its claim against the security pledged and execute upon the collateral as allowed by law. The entire principal balance whether or not otherwise then due, along with accrued interest, shall become immediately due and payable without demand or notice, and subject to collection or satisfaction by any lawful means, including specifically, but not limited to, the right to enforce the claim against the security pledged and to execute upon the collateral as allowed by law.

All reasonable costs and expenses, including but not limited to attorney's fees, incurred by the Plan in connection with any default or in any proceeding to enforce any provision of a promissory note or instrument by which a promissory note for a Participant loan is secured, shall be assessed and collected from the Account of the Participant as part of the loan balance.

If payroll deduction is being utilized, in the event that a Participant's available payroll deduction amounts in any given month are insufficient to satisfy the total amount due, there will be an increase in the amount taken subsequently, sufficient to make up the amount that is then due. If any amount remains past due more than 90 days, the entire principal amount, whether or not otherwise then due, along with interest then accrued, shall become due and payable, as above.

An outstanding loan will become due and payable in full when a Participant ceases to be a party-in-interest as defined in ERISA or after complete termination of the Plan.

SECTION 5.06--DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS.

The Plan specifically permits distributions to an Alternate Payee under a qualified domestic relations order as defined in Code Section 414(p), at any time, irrespective of whether the Participant has attained his earliest retirement age, as defined in Code Section 414(p), under the Plan. A distribution to an Alternate Payee before the Participant has attained his earliest retirement age is available only if the order specifies that distribution shall be made prior to the earliest retirement age or allows the Alternate Payee to elect a distribution prior to the earliest retirement age.

Nothing in this section shall permit a Participant to receive a distribution at a time otherwise not permitted under the Plan nor shall it permit the Alternate Payee to receive a form of payment not permitted under the Plan.

The benefit payable to an Alternate Payee shall be subject to the provisions of the SMALL AMOUNTS SECTION of Article X if the value of the benefit does not exceed $1,000.

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The Plan Administrator shall establish reasonable procedures to determine the qualified status of a domestic relations order. Upon receiving a domestic relations order, the Plan Administrator shall promptly notify the Participant and each Alternate Payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and each Alternate Payee, in writing, of its determination. The Plan Administrator shall provide notice under this paragraph by mailing to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations. The Plan Administrator may treat as qualified any domestic relations order entered before January 1, 1985, irrespective of whether it satisfies all the requirements described in Code Section 414(p).

If any portion of the Participant’s Vested Account is payable during the period the Plan Administrator is making its determination of the qualified status of the domestic relations order, a separate accounting shall be made of the amount payable. If the Plan Administrator determines the order is a qualified domestic relations order within 18 months of the date amounts are first payable following receipt of the order, the payable amounts shall be distributed in accordance with the order. If the Plan Administrator does not make its determination of the qualified status of the order within the 18-month determination period, the payable amounts shall be distributed in the manner the Plan would distribute if the order did not exist and the order shall apply prospectively if the Plan Administrator later determines the order is a qualified domestic relations order.

The Plan shall make payments or distributions required under this section by separate benefit checks or other separate distribution to the Alternate Payee(s).

No distributions to Alternate Payee(s) may be made until any outstanding Participant loans are repaid.

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ARTICLE VI

DISTRIBUTION OF BENEFITS

SECTION 6.01--FORM OF DISTRIBUTION.

(a) Retirement Benefits. The only form of retirement benefit is a single sum payment.

(b)Death Benefits. The only form of death benefit is a single sum payment.

SECTION 6.02--ELECTION PROCEDURES.

The Participant shall make any election under this section in writing or electronic signature as allowed by regulation and as available. The Plan Administrator may require such individual to complete and sign any necessary documents as to the provisions to be made. Any election permitted under (a) below shall be subject to the qualified election provisions of (b) below.

(a)Death Benefits. A Participant may elect his Beneficiary.

(b)Qualified Election. The Participant may make an election at any time during the election period. The Participant may revoke the election made (or make a new election) at any time and any number of times during the election period. An election is effective only if it meets the consent requirements below.

(1) Election Period for Death Benefits. A Participant may make an election as to death benefits at any time before he dies.

(2)Consent to Election. If the Participant’s Vested Account exceeds $1,000, any benefit that is immediately distributable requires the consent of the Participant.

The consent of the Participant to a benefit that is immediately distributable must not be made before the date the Participant is provided with the notice of the ability to defer the distribution. Such consent shall be in writing.

Except as provided in Section 6.03, the consent shall not be made more than 90 days before the Benefit Commencement Date. The consent of the Participant shall not be required to the extent that a distribution is required to satisfy Code Section 401(a)(9) or 415.

In addition, upon termination of this Plan, if the Plan does not offer an annuity option (purchased from a commercial provider), and if the Employer (or any entity within the same Controlled Group) does not maintain another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)), the Participant’s Account balance will, without the Participant’s consent, be distributed to the Participant. However, if any entity within the same Controlled Group maintains another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) then the Participant’s Account will be transferred, without the Participant’s consent, to the other plan if the Participant does not consent to an immediate distribution.

A benefit is immediately distributable if any part of the benefit could be distributed to the Participant before the Participant attains the older of Normal Retirement Age or age 62.

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SECTION 6.03--NOTICE REQUIREMENTS.

Forms of Distribution and Right to Defer. The Plan Administrator shall furnish to the Participant a written explanation of the right of the Participant to defer distribution until the benefit is no longer immediately distributable.

The Plan Administrator shall furnish the written explanation by a method reasonably calculated to reach the attention of the Participant no less than 30 days, and no more than 90 days, before the Benefit Commencement Date.

However, distribution may begin less than 30 days after the notice described in this subparagraph is given, provided the Plan Administrator clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and if applicable, a particular distribution option), and the Participant, after receiving the notice, affirmatively elects a distribution.

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ARTICLE VII

REQUIRED MINIMUM DISTRIBUTIONS

SECTION 7.01--APPLICATION.

The optional forms of distribution are only those provided in Article VI. An optional form of distribution shall not be permitted unless it meets the requirements of this article. The timing of any distribution must meet the requirements of this article. Unless otherwise specified, the provisions of this article apply to calendar years beginning after December 31, 2002.

SECTION 7.02--DEFINITIONS.

For purposes of this article, the following terms are defined:

Designated Beneficiary means the individual who is designated by the Participant (or the Participant’s surviving spouse) as the Beneficiary of the Participant’s interest under the Plan and who is the designated beneficiary under Code Section 401(a)(9) and section 1.401(a)(9)-4 of the regulations.

Distribution Calendar Year means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant's Required Beginning Date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under (b)(2) of the REQUIRED MINIMUM DISTRIBUTIONS SECTION of this article. The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

5-percent Owner means a Participant who is treated as a 5-percent Owner for purposes of this article. A Participant is treated as a 5-percent Owner for purposes of this article if such Participant is a 5-percent owner as defined in Code Section 416 at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 1/2.

Once distributions have begun to a 5-percent Owner under this article, they must continue to be distributed, even if the Participant ceases to be a 5-percent Owner in a subsequent year.

Life Expectancy means life expectancy as computed by use of the Single Life Table in Q&A-1 in section 1.401(a)(9)-9 of the regulations.

Participant's Account Balance means the Account balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

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Required Beginning Date means, for a Participant who is a 5-percent Owner, April 1 of the calendar year following the calendar year in which he attains age 70 1/2.

Required Beginning Date means, for any Participant who is not a 5-percent Owner, April 1 of the calendar year following the later of the calendar year in which he attains age 70 1/2 or the calendar year in which he retires.

The preretirement age 70 1/2 distribution option is only eliminated with respect to Participants who reach age 70 1/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated such option. The preretirement age 70 1/2 distribution option is an optional form of benefit under which benefits payable in a particular distribution form (including any modifications that may be elected after benefits begin) begin at a time during the period that begins on or after January 1 of the calendar year in which the Participant attains age 70 1/2 and ends April 1 of the immediately following calendar year.

The options available for Participants who are not 5-percent Owners and attained age 70 1/2 in calendar years before the calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated the preretirement age 70 1/2 distribution option shall be the following. Any such Participant attaining age 70 1/2 in years after 1995 may elect by April 1 of the calendar year following the calendar year in which he attained age 70 1/2 (or by December 31, 1997 in the case of a Participant attaining age 70 1/2 in 1996) to defer distributions until April 1 of the calendar year following the calendar year in which he retires. If no such election is made, the Participant shall begin receiving distributions by April 1 of the calendar year following the year in which the Participant attained age 70 1/2 (or by December 31, 1997 in the case of a Participant attaining age 70 1/2 in 1996). Any such Participant attaining age 70 1/2 in years prior to 1997 may elect to stop distributions that are not purchased annuities and recommence by April 1 of the calendar year following the calendar year in which he retires. There shall be a new Annuity Starting Date upon recommencement.

SECTION 7.03--REQUIRED MINIMUM DISTRIBUTIONS.

(a)General Rules.

(1)The requirements of this article shall apply to any distribution of a Participant’s interest and will take precedence over any inconsistent provisions of this Plan.

(2)All distributions required under this article shall be determined and made in accordance with the regulations under Code Section 401(a)(9) and the minimum distribution incidental benefit requirement of Code Section 401(a)(9)(G).

(b)Time and Manner of Distribution.

(1)Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

(2)Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(i) If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later, except to the extent that an election is made to receive distributions in

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accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(ii) If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(iii) If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(iv) If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse are required to begin, this (b)(2), other than (b)(2)(i), will apply as if the surviving spouse were the Participant.

For purposes of this (b)(2) and (d) below, unless (b)(2)(iv) above applies, distributions are considered to begin on the Participant’s Required Beginning Date. If (b)(2)(iv) above applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under (b)(2)(i) above. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under (b)(2)(i) above), the date distributions are considered to begin is the date distributions actually commence.

(3)Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with (c) and (d) below. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the regulations thereunder.

(c)Required Minimum Distributions During Participant’s Lifetime.

(1)Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:

(i) the quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Q&A-2 in section 1.401(a)(9)-9 of the regulations, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

(ii) if the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance

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by the number in the Joint and Last Survivor Table set forth in Q&A-3 in section 1.401(a)(9)-9 of the regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Distribution Calendar Year.

(2)Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this (c) beginning with the first Distribution Calendar Year and continuing up to, and including, the Distribution Calendar Year that includes the Participant’s date of death.

(d) Required Minimum Distributions After Participant’s Death.

(1) Death On or After Date Distributions Begin.

(i) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as follows:

A. The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

B. If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Distribution Calendar Years after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

C. If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(ii) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2)Death Before Date Distributions Begin.

(i) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the

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remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as provided in (d)(1) above, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(ii) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(iii) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under (b)(2)(i) above, this (d)(2) will apply as if the surviving spouse were the Participant.

(e)Election of 5-year Rule. Participants or Beneficiaries may elect on an individual basis whether the 5-year rule in (b)(2) and (d)(2) above applies to distributions after the death of a Participant who has a Designated Beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which the distribution would be required to begin under (b)(2) above if no such election is made, or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death.

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ARTICLE VIII

TERMINATION OF THE PLAN

The Employer expects to continue the Plan indefinitely but reserves the right to terminate the Plan in whole or in part at any time upon giving written notice to all parties concerned. Complete discontinuance of Contributions constitutes complete termination of the Plan.

The Account of each Participant shall be 100% vested and nonforfeitable as of the effective date of complete termination of the Plan. The Account of each Participant who is included in the group of Participants deemed to be affected by the partial termination of the Plan shall be 100% vested and nonforfeitable as of the effective date of the partial termination of the Plan. The Participant's Vested Account shall continue to participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund until his Vested Account is distributed.

The Participant’s entire Vested Account shall be paid in a single sum to the Participant as of the effective date of complete termination of the Plan if consent of the Participant is not required in the ELECTION PROCEDURES SECTION of Article VI to distribute a benefit that is immediately distributable. This is a small amounts payment. The small amounts payment is in full settlement of all benefits otherwise payable.

Upon complete termination of the Plan, no more Employees shall become Participants and no more Contributions shall be made, except as may relate to the operation of the Plan prior to the effective time of the termination.

The assets of this Plan shall not be paid to the Employer at any time, except that, after the satisfaction of all liabilities under the Plan, any assets remaining may be paid to the Employer. The payment may not be made if it would contravene any provision of law.

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ARTICLE IX

ADMINISTRATION OF THE PLAN

SECTION 9.01--ADMINISTRATION.

Subject to the provisions of this article, the Plan Administrator has complete control of the administration of the Plan. The Plan Administrator has all the powers necessary for it to properly carry out its administrative duties. Not in limitation, but in amplification of the foregoing, the Plan Administrator has complete discretion to construe or interpret the provisions of the Plan, including ambiguous provisions, if any, and to determine all questions that may arise under the Plan, including all questions relating to the eligibility of Employees to participate in the Plan and the amount of benefit to which any Participant or Beneficiary may become entitled. The Plan Administrator's decisions upon all matters within the scope of its authority shall be final.

Unless otherwise set out in the Plan or Annuity Contract, the Plan Administrator may delegate recordkeeping and other duties which are necessary to assist it with the administration of the Plan to any person or firm which agrees to accept such duties. The Plan Administrator shall be entitled to rely upon all tables, valuations, certificates and reports furnished by the consultant or actuary appointed by the Plan Administrator and upon all opinions given by any counsel selected or approved by the Plan Administrator.

The Plan Administrator shall receive all claims for benefits by Participants, former Participants and Beneficiaries. The Plan Administrator shall determine all facts necessary to establish the right of any Claimant to benefits and the amount of those benefits under the provisions of the Plan. The Plan Administrator may establish rules and procedures to be followed by Claimants in filing claims for benefits, in furnishing and verifying proofs necessary to determine age, and in any other matters required to administer the Plan.

SECTION 9.02--EXPENSES.

Expenses of the Plan, to the extent that the Employer does not pay such expenses, may be paid out of the assets of the Plan provided that such payment is consistent with ERISA. Such expenses include, but are not limited to, expenses for bonding required by ERISA; expenses for recordkeeping and other administrative services; fees and expenses of the Trustee or Annuity Contract; expenses for investment education service; and direct costs that the Employer incurs with respect to the Plan. Notwithstanding the foregoing, the Plan Administrator may allocate certain Plan expenses directly to the Account of the Participant on whose behalf the expense was incurred, provided that such allocation bear a reasonable relationship to the service furnished or made available to the Participant’s Account, and is consistent with the applicable fiduciary provisions of ERISA.

SECTION 9.03--RECORDS.

All acts and determinations of the Plan Administrator shall be duly recorded. All these records, together with other documents necessary for the administration of the Plan, shall be preserved in the Plan Administrator's custody.

Writing (handwriting, typing, printing), photostating, photographing, microfilming, magnetic impulse, mechanical or electrical recording, or other forms of data compilation shall be acceptable means of keeping records.

SECTION 9.04--INFORMATION AVAILABLE.

Any Participant in the Plan or any Beneficiary may examine copies of the Plan description, latest annual report, any bargaining agreement, this Plan, the Annuity Contract, or any other instrument under which the Plan was established or is operated. The Plan Administrator shall maintain all of the items listed in this section in its office, or in

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such other place or places as it may designate in order to comply with governmental regulations. These items may be examined during reasonable business hours. Upon the written request of a Participant or Beneficiary receiving benefits under the Plan, the Plan Administrator shall furnish him with a copy of any of these items. The Plan Administrator may make a reasonable charge to the requesting person for the copy.

SECTION 9.05--CLAIM PROCEDURES.

A Claimant must submit any necessary forms and needed information when making a claim for benefits under the Plan.

If a claim for benefits under the Plan is wholly or partially denied, the Plan Administrator shall provide adequate written notice to the Claimant whose claim for benefits under the Plan has been denied. The notice must be furnished within 90 days of the date that the claim is received by the Plan without regard to whether all of the information necessary to make a benefit determination is received. The Claimant shall be notified in writing within this initial 90-day period if special circumstances require an extension of the time needed to process the claim. The notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator's decision is expected to be rendered. In no event shall such extension exceed a period of 90 days from the end of the initial 90-day period.

The Plan Administrator's notice to the Claimant shall: (i) specify the reason or reasons for the denial; (ii) reference the specific Plan provisions on which the denial is based; (iii) describe any additional material and information needed for the Claimant to perfect his claim for benefits; (iv) explain why the material and information is needed; and (v) inform the Claimant of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on appeal.

Any appeal made by a Claimant must be made in writing to the Plan Administrator within 60 days after receipt of the Plan Administrator’s notice of denial of benefits. If the Claimant appeals to the Plan Administrator, the Claimant may submit written comments, documents, records, and other information relating to the claim for benefits. The Claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. The Plan Administrator shall review the claim taking into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

The Plan Administrator shall provide adequate written notice to the Claimant of the Plan’s benefit determination on review. The notice must be furnished within 60 days of the date that the request for review is received by the Plan without regard to whether all of the information necessary to make a benefit determination on review is received. The Claimant shall be notified in writing within this initial 60-day period if special circumstances require an extension of the time needed to process the claim. The notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render the determination on review. In no event shall such extension exceed a period of 60 days from the end of the initial 60-day period.

In the event the benefit determination is being made by a committee or board of trustees that hold regularly scheduled meetings at least quarterly, the above paragraph shall not apply. The benefit determination must be made by the date of the meeting of the committee or board that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, the benefit determination must be made by the date of the second meeting following the Plan’s receipt of the request for review. The date of the receipt of the request for review shall be determined without regard to whether all of the information necessary to make a benefit determination on review is received. The Claimant shall be notified in writing within this initial period if special circumstances require an extension of the time needed to process the claim. The

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notice shall indicate the special circumstances requiring an extension of time and the date by which the committee or board expects to render the determination on review. In no event shall such benefit determination be made later than the third meeting of the committee or board following the Plan’s receipt of the request for review. The Plan Administrator shall provide adequate written notice to the Claimant of the Plan’s benefit determination on review as soon as possible, but not later than five days after the benefit determination is made.

If the claim for benefits is wholly or partially denied on review, the Plan Administrator’s notice to the Claimant shall: (i) specify the reason or reasons for the denial; (ii) reference the specific Plan provisions on which the denial is based; (iii) include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits; and (iv) include a statement of the Claimant’s right to bring a civil action under ERISA section 502(a).

A Claimant may authorize a representative to act on the Claimant’s behalf with respect to a benefit claim or appeal of an adverse benefit determination. Such authorization shall be made by completion of a form furnished for that purpose. In the absence of any contrary direction from the Claimant, all information and notifications to which the Claimant is entitled shall be directed to the authorized representative.

The Plan Administrator shall perform periodic examinations, reviews, or audits of benefit claims to determine whether claims determinations are made in accordance with the governing Plan documents and, where appropriate, Plan provisions have been consistently applied with respect to similarly situated Claimants.

SECTION 9.06--DELEGATION OF AUTHORITY.

All or any part of the administrative duties and responsibilities under this article may be delegated by the Plan Administrator to a retirement committee. The duties and responsibilities of the retirement committee shall be set out in a separate written agreement.

SECTION 9.07--EXERCISE OF DISCRETIONARY AUTHORITY.

The Employer, Plan Administrator, and any other person or entity who has authority with respect to the management, administration, or investment of the Plan may exercise that authority in its/his full discretion, subject only to the duties imposed under ERISA. This discretionary authority includes, but is not limited to, the authority to make any and all factual determinations and interpret all terms and provisions of the Plan documents relevant to the issue under consideration. The exercise of authority will be binding upon all persons; will be given deference in all courts of law to the greatest extent allowed under law; and will not be overturned or set aside by any court of law unless found to be arbitrary and capricious or made in bad faith.

SECTION 9.08--TRANSACTION PROCESSING.

Transactions (including, but not limited to, investment directions, trades, loans, and distributions) shall be processed as soon as administratively practicable after proper directions are received from the Participant or other parties. No guarantee is made by the Plan, Plan Administrator, Trustee, Insurer, or Employer that such transactions will be processed on a daily or other basis, and no guarantee is made in any respect regarding the processing time of such transactions.

Notwithstanding any other provision of the Plan, the Employer, the Plan Administrator, or the Trustee reserve the right to not value an investment option on any given Valuation Date for any reason deemed appropriate by the Employer, the Plan Administrator, or the Trustee.

Administrative practicality will be determined by legitimate business factors (including, but not limited to, failure of systems or computer programs, failure of the means of the transmission of data, force majeure, the failure of a

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service provider to timely receive values or prices, and correction for errors or omissions or the errors or omissions of any service provider) and in no event will be deemed to be less than 14 days. The processing date of a transaction shall be binding for all purposes of the Plan and considered the applicable Valuation Date for any transaction.

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ARTICLE X

GENERAL PROVISIONS

SECTION 10.01--AMENDMENTS.

The Employer may amend this Plan at any time, including any remedial retroactive changes (within the time specified by Internal Revenue Service regulations), to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

An amendment may not diminish or adversely affect any accrued interest or benefit of Participants or their Beneficiaries nor allow reversion or diversion of Plan assets to the Employer at any time, except as may be required to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

An amendment may not eliminate or reduce a section 411(d)(6) protected benefit, as defined in Q&A-1 in section 1.411(d)-4 of the regulations, that has already accrued, except as provided in 1.411(d)-3 or 1.411(d)-4 of the regulations. This is generally the case even if such elimination or reduction is contingent upon the Employee’s consent. However, the Plan may be amended to eliminate or reduce section 411(d)(6) protected benefits with respect to benefits not yet accrued as of the later of the amendment’s adoption date or the effective date without violating Code Section 411(d)(6). Notwithstanding the preceding provisions, a Participant's Account may be reduced to the extent permitted under Code Section 412(c)(8).

An amendment shall not decrease a Participant's vested interest in the Plan. If an amendment to the Plan, or a deemed amendment in the case of a change in top-heavy status of the Plan as provided in the MODIFICATION OF VESTING REQUIREMENTS SECTION of Article XI, changes the computation of the percentage used to determine that portion of a Participant's Account attributable to Employer Contributions which is nonforfeitable (whether directly or indirectly), in the case of an Employee who is a Participant as of the later of the date such amendment or change is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee’s right to his Account attributable to Employer Contributions shall not be less than his percentage computed under the Plan without regard to such amendment or change. Furthermore, each Participant or former Participant

(a)who has completed at least three Years of Service on the date the election period described below ends (five Years of Service if the Participant does not have at least one Hour of Service in a Plan Year beginning after December 31, 1988) and

(b)whose nonforfeitable percentage will be determined on any date after the date of the change

may elect, during the election period, to have the nonforfeitable percentage of his Account that results from Employer Contributions determined without regard to the amendment. This election may not be revoked. If after the Plan is changed, the Participant’s nonforfeitable percentage will at all times be as great as it would have been if the change had not been made, no election needs to be provided. The election period shall begin no later than the date the Plan amendment is adopted, or deemed adopted in the case of a change in the top-heavy status of the Plan, and end no earlier than the 60th day after the latest of the date the amendment is adopted (deemed adopted) or becomes effective, or the date the Participant is issued written notice of the amendment (deemed amendment) by the Employer or the Plan Administrator.

For an amendment adopted after August 9, 2006, with respect to a Participant’s Account attributable to Employer Contributions accrued as of the later of the adoption or effective date of the amendment and earnings, the vested percentage of the Participant will be the greater of the vested percentage under the old vesting schedule or the vested percentage under the new vesting schedule.

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SECTION 10.02--DIRECT ROLLOVERS.

Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

In the event of a mandatory distribution of an Eligible Rollover Distribution greater than $1,000 in accordance with the small amounts payment provisions of Article VIII, if the Participant does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Participant in a Direct Rollover or to receive the distribution directly in accordance with this section, the Plan Administrator will pay the distribution in a Direct Rollover to an individual retirement plan designated by the Plan Administrator.

In the event of any other Eligible Rollover Distribution to a Distributee in accordance with the SMALL AMOUNTS SECTION of this article (or which is a small amounts payment under Article VIII at complete termination of the Plan), if the Distributee does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover or to receive the distribution directly, the Plan Administrator will pay the distribution to the Distributee.

A mandatory distribution is a distribution to a Participant that is made without the Participant’s consent and is made to the Participant before he attains the older of age 62 or his Normal Retirement Age.

SECTION 10.03--MERGERS AND DIRECT TRANSFERS.

The Plan may not be merged or consolidated with, nor have its assets or liabilities transferred to, any other retirement plan, unless each Participant in this Plan would (if that plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer (if this Plan had then terminated). The Employer may enter into merger agreements or direct transfer of assets agreements with the employers under other retirement plans which are qualifiable under Code Section 401(a), including an elective transfer, and may accept the direct transfer of plan assets, or may transfer plan assets, as a party to any such agreement. The Employer shall not consent to, or be a party to a merger, consolidation, or transfer of assets with a plan which is subject to the survivor annuity requirements of Code Section 401(a)(11) if such action would result in a survivor annuity feature being maintained under this Plan. The Employer will not transfer any amounts attributable to elective deferral contributions, qualified matching contributions, and qualified nonelective contributions unless the transferee plan provides that the limitations of section 1.401(k)-1(d) of the regulations shall apply to such amounts (including post-transfer earnings thereon), unless the amounts could have been distributed at the time of the transfer (other than for hardship), and the transfer is an elective transfer described in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations.

Notwithstanding any provision of the Plan to the contrary, to the extent any optional form of benefit under the Plan permits a distribution prior to the Employee’s retirement, death, disability, or Severance from Employment, and prior to plan termination, the optional form of benefit is not available with respect to benefits attributable to assets (including the post-transfer earnings thereon) and liabilities that are transferred, within the meaning of Code Section 414(l), to this Plan from a money purchase pension plan qualified under Code Section 401(a) (other than any portion of those assets and liabilities attributable to voluntary employee contributions). The limitations of section 1.401(k)-1(d) of the regulations applicable to elective deferral contributions, qualified matching contributions, and qualified nonelective contributions shall continue to apply to any amounts attributable to such contributions (including post-transfer earnings thereon) transferred to this Plan, unless the amounts could have been distributed at the time of the transfer (other than for hardship), and the transfer is an elective transfer described in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations.

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The Plan may accept a direct transfer of plan assets on behalf of an Eligible Employee. If the Eligible Employee is not an Active Participant when the transfer is made, the Eligible Employee shall be deemed to be an Active Participant only for the purpose of investment and distribution of the transferred assets. Employer Contributions shall not be made for or allocated to the Eligible Employee and he may not make Participant Contributions, until the time he meets all of the requirements to become an Active Participant.

The Plan shall hold, administer, and distribute the transferred assets as a part of the Plan. The Plan shall maintain a separate account for the benefit of the Employee on whose behalf the Plan accepted the transfer in order to reflect the value of the transferred assets.

A Participant’s section 411(d)(6) protected benefits, as defined in Q&A-1 in section 1.411(d)-4 of the regulations, may not be eliminated by reason of transfer or any transaction amending a plan or plans to transfer benefits except as provided below.

A Participant’s section 411(d)(6) protected benefits may be eliminated or reduced upon transfer between qualified defined contribution plans if the conditions in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations are met. The transfer must meet all of the other applicable qualification requirements.

A Participant’s section 411(d)(6) protected benefits may be eliminated or reduced if a transfer is an elective transfer of certain distributable benefits between qualified plans (both defined benefit and defined contribution) and the conditions in Q&A-3(c)(1) in section 1.411(d)-4 of the regulations are met. The rules applicable to distributions under the plan would apply to the transfer, but the transfer would not be treated as a distribution for purposes of the minimum distribution requirements of Code Section 401(a)(9). Beginning January 1, 2002, if the Participant is eligible to receive an immediate distribution of his entire nonforfeitable accrued benefit in a single sum distribution that would consist entirely of an eligible rollover distribution under Code Section 401(a)(31), such transfer will be accomplished as a direct rollover under Code Section 401(a)(31).

SECTION 10.04--PROVISIONS RELATING TO THE INSURER AND OTHER PARTIES.

The obligations of an Insurer shall be governed solely by the provisions of the Annuity Contract. The Insurer shall not be required to perform any act not provided in or contrary to the provisions of the Annuity Contract. Each Annuity Contract when purchased shall comply with the Plan. See the CONSTRUCTION SECTION of this article.

Any issuer or distributor of investment contracts or securities is governed solely by the terms of its policies, written investment contract, prospectuses, security instruments, and any other written agreements entered into with the Trustee with regard to such investment contracts or securities.

Such Insurer, issuer or distributor is not a party to the Plan, nor bound in any way by the Plan provisions. Such parties shall not be required to look to the terms of this Plan, nor to determine whether the Employer, the Plan Administrator, the Trustee, or the Named Fiduciary have the authority to act in any particular manner or to make any contract or agreement.

Until notice of any amendment or termination of this Plan or a change in Trustee has been received by the Insurer at its home office or an issuer or distributor at their principal address, they are and shall be fully protected in assuming that the Plan has not been amended or terminated and in dealing with any party acting as Trustee according to the latest information which they have received at their home office or principal address.

SECTION 10.05--EMPLOYMENT STATUS.

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Nothing contained in this Plan gives an Employee the right to be retained in the Employer's employ or to interfere with the Employer's right to discharge any Employee.

SECTION 10.06--RIGHTS TO PLAN ASSETS.

An Employee shall not have any right to or interest in any assets of the Plan upon termination of employment or otherwise except as specifically provided under this Plan, and then only to the extent of the benefits payable to such Employee according to the Plan provisions.

Any final payment or distribution to a Participant or his legal representative or to any Beneficiaries of such Participant under the Plan provisions shall be in full satisfaction of all claims against the Plan, the Named Fiduciary, the Plan Administrator, the Insurer, the Trustee, and the Employer arising under or by virtue of the Plan.

SECTION 10.07--BENEFICIARY.

Each Participant may name a Beneficiary to receive any death benefit that may arise out of his participation in the Plan. The Participant may change his Beneficiary from time to time. Unless a qualified election has been made, for purposes of distributing any death benefits before the Participant’s Retirement Date, the Beneficiary of a Participant who has a spouse shall be the Participant's spouse. The Participant's Beneficiary designation and any change of Beneficiary shall be subject to the provisions of the ELECTION PROCEDURES SECTION of Article VI.

It is the responsibility of the Participant to give written notice to the Plan Administrator of the name of the Beneficiary on a form furnished for that purpose.

With the Employer’s consent, the Plan Administrator or its delegate may maintain records of Beneficiary designations for Participants before their Retirement Dates. In that event, the written designations made by Participants shall be filed with the Plan Administrator. If a Participant dies before his Retirement Date, the Plan Administrator shall determine the Beneficiary designation on its records for the Participant.

If there is no Beneficiary named or surviving when a Participant dies, the Participant’s Beneficiary whall be in the following priority:

(a)   the Participant’s surviving spouse;

(b)   the Participant’s surviving children, including adopted children, in equal shares;

(c)   the Participant’s surviving parents, in equal shares; or

(d)   the legal representative of the estate of the last to die of the Participant and his Beneficiary.

SECTION 10.08--NONALIENATION OF BENEFITS.

Benefits payable under the Plan are not subject to the claims of any creditor of any Participant or Beneficiary. A Participant or Beneficiary does not have any rights to alienate, anticipate, commute, pledge, encumber, or assign such benefits, except in the case of a loan as provided in the LOANS TO PARTICIPANTS SECTION of Article V. The preceding sentences shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant according to a domestic relations order, unless such order is determined by the Plan Administrator to be a qualified domestic relations order, as defined in Code Section 414(p), or any domestic relations order entered before January 1, 1985. The preceding sentences shall not apply to any offset of a Participant’s benefits provided under the Plan against an amount the Participant is required to pay the Plan with respect to a

56

judgment, order, or decree issued, or a settlement entered into, on or after August 5, 1997, which meets the requirements of Code Sections 401(a)(13)(C) or (D).

SECTION 10.09--CONSTRUCTION.

The validity of the Plan or any of its provisions is determined under and construed according to Federal law and, to the extent permissible, according to the laws of the state in which the Employer has its principal office. In case any provision of this Plan is held illegal or invalid for any reason, such determination shall not affect the remaining provisions of this Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included.

In the event of any conflict between the provisions of the Plan and the terms of any Annuity Contract issued hereunder, the provisions of the Plan control.

SECTION 10.10--LEGAL ACTIONS.

No person employed by the Employer; no Participant, former Participant, or their Beneficiaries; nor any other person having or claiming to have an interest in the Plan is entitled to any notice of process. A final judgment entered in any such action or proceeding shall be binding and conclusive on all persons having or claiming to have an interest in the Plan.

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SECTION 10.11--SMALL AMOUNTS.

If consent of the Participant is not required for a benefit that is immediately distributable in the ELECTION PROCEDURES SECTION of Article VI, a Participant’s entire Vested Account shall be paid in a single sum as of the earliest of his Retirement Date, the date he dies, or the date he has a Severance from Employment for any other reason (the date the Employer provides notice to the record keeper of the Plan of such event, if later). If a Participant would have received a distribution under the first sentence of this paragraph but for the fact that the Participant’s consent was needed to distribute a benefit which is immediately distributable, and if at a later time consent would not be needed to distribute a benefit that is immediately distributable and such Participant has not again become an Employee, such Vested Account shall be paid in a single sum. This is a small amounts payment.

If a small amounts payment is made as of the date the Participant dies, the small amounts payment shall be made to the Participant’s Beneficiary. If a small amounts payment is made while the Participant is living, the small amounts payment shall be made to the Participant. The small amounts payment is in full settlement of all benefits otherwise payable.

No other small amounts payments shall be made.

SECTION 10.12--WORD USAGE.

The masculine gender, where used in this Plan, shall include the feminine gender and the singular words, where used in this Plan, shall include the plural, unless the context indicates otherwise.

The words “in writing” and “written,” where used in this Plan, shall include any other forms, such as voice response or other electronic system, as permitted by any governmental agency to which the Plan is subject.

SECTION 10.13--CHANGE IN SERVICE METHOD.

(a)Change of Service Method Under This Plan. If this Plan is amended to change the method of crediting service from the elapsed time method to the hours method for any purpose under this Plan, the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)The number of whole years of service credited to the Employee under the Plan as of the date the change is effective.

(2)One year of service for the computation period in which the change is effective if he is credited with the required number of Hours of Service. If an Employee was credited with a fractional part of a year of service as of the date of change using the elapsed time method, for the portion of such computation period ending on the date of change the Employee will be credited with the greater of his actual Hours-of-Service or an equivalent number of Hours-of-Service based on the fractional part of a year of service credited as of the date of change. The Employee shall be credited with 45 Hours-of-Service for each week of service in such fractional part of a year.

(3)The Employee’s service determined under this Plan using the hours method after the end of the computation period in which the change in service method was effective.

If this Plan is amended to change the method of crediting service from the hours method to the elapsed time method for any purpose under this Plan, the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

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(4)The number of whole years of service credited to the Employee under the Plan as of the beginning of the computation period in which the change in service method is effective.

(5)The greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the Plan as of the date the change is effective.

(6)The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period in which the change in service method was effective.

(b)Transfers Between Plans with Different Service Methods. If an Employee has been a participant in another plan of the Employer that credited service under the elapsed time method for any purpose that under this Plan is determined using the hours method, then the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)The number of whole years of service credited to the Employee under the other plan as of the date he became an Eligible Employee under this Plan.

(2)One year of service for the applicable computation period in which he became an Eligible Employee if he is credited with the required number of Hours of Service. If an Employee was credited with a fractional part of a year of service as of the date he became and Eligible Employee using the elapsed time method, for the portion of such computation period ending on the date he became an Eligible Employee the Employee will be credited with the greater of his actual Hours-of-Service or an equivalent number of Hours-of-Service based on the fractional part of a year of service credited as of the date he became an Eligible Employee. The Employee shall be credited with 45 Hours-of-Service for each week of service in such fractional part of a year.

(3)The Employee’s service determined under this Plan using the hours method after the end of the computation period in which he became an Eligible Employee.

If an Employee has been a participant in another plan of the Employer that credited service under the hours method for any purpose that under this Plan is determined using the elapsed time method, then the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

(4)The number of whole years of service credited to the Employee under the other plan as of the beginning of the computation period under that plan in which he became an Eligible Employee under this Plan.

(5)The greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the other plan as of the date he became an Eligible Employee under this Plan.

(6)The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period under the other plan in which he became an Eligible Employee.

If an Employee has been a participant in a Controlled Group member’s plan that credited service under a different method than is used in this Plan, in order to determine entry and vesting, the provisions in (b) above shall apply as though the Controlled Group member’s plan was a plan of the Employer.

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Any modification of service contained in this Plan shall be applicable to the service determined pursuant to this section.

SECTION 10.14--MILITARY SERVICE.

Notwithstanding any provision of this Plan to the contrary, the Plan shall provide contributions, benefits, and service credit with respect to qualified military service in accordance with Code Section 414(u). Loan repayments shall be suspended under this Plan as permitted under Code Section 414(u).

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ARTICLE XI

TOP-HEAVY PLAN REQUIREMENTS

SECTION 11.01--APPLICATION.

The provisions of this article shall supersede all other provisions in the Plan to the contrary. The provisions of this article shall apply for purposes of determining whether the Plan is a Top-heavy Plan for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefit requirements of Code Section 416(c) for such years.

For the purpose of applying the Top-heavy Plan requirements of this article, all members of the Controlled Group shall be treated as one Employer. The term Employer, as used in this article, shall be deemed to include all members of the Controlled Group, unless the term as used clearly indicates only the Employer is meant.

The accrued benefit or account of a participant that results from deductible employee contributions shall not be included for any purpose under this article.

The minimum vesting and contribution provisions of the MODIFICATION OF VESTING REQUIREMENTS and MODIFICATION OF CONTRIBUTIONS SECTIONS of this article shall not apply to any Employee who is included in a group of Employees covered by a collective bargaining agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, including the Employer, if there is evidence that retirement benefits were the subject of good faith bargaining between such representatives. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are employees who are owners, officers, or executives.

SECTION 11.02--DEFINITIONS.

For purposes of this article the following terms are defined:

Aggregation Group means:

(a)each of the Employer's qualified plans in which a Key Employee is a participant during the Plan Year containing the Determination Date (regardless of whether the plans have terminated) or one of the four preceding Plan Years,

(b)each of the Employer's other qualified plans which allows the plan(s) described in (a) above to meet the nondiscrimination requirement of Code Section 401(a)(4) or the minimum coverage requirement of Code Section 410, and

(c)any of the Employer's other qualified plans not included in (a) or (b) above which the Employer desires to include as part of the Aggregation Group. Such a qualified plan shall be included only if the Aggregation Group would continue to satisfy the requirements of Code Sections 401(a)(4) and 410.

The plans in (a) and (b) above constitute the "required" Aggregation Group. The plans in (a), (b), and (c) above constitute the "permissive" Aggregation Group.

Compensation means compensation as defined in the CONTRIBUTION LIMITATION SECTION of Article III.

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Determination Date means as to any plan, for any plan year subsequent to the first plan year, the last day of the preceding plan year. For the first plan year of the plan, the Determination Date is the last day of that year.

Key Employee means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date is:

(a)an officer of the Employer having Compensation for the Plan Year greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002),

(b)a 5-percent owner of the Employer, or

(c)a 1-percent owner of the Employer having Compensation for the Plan Year of more than $150,000.

The determination of who is a Key Employee shall be made according to Code Section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

Nonkey Employee means any Employee who is not a Key Employee.

Top-heavy Plan means a plan that is top-heavy for any plan year. This Plan shall be top-heavy if any of the following conditions exist:

(a)The Top-heavy Ratio for this Plan exceeds 60 percent and this Plan is not part of any required Aggregation Group or permissive Aggregation Group.

(b)This Plan is a part of a required Aggregation Group, but not part of a permissive Aggregation Group, and the Top-heavy Ratio for the required Aggregation Group exceeds 60 percent.

(c)This Plan is a part of a required Aggregation Group and part of a permissive Aggregation Group and the Top-heavy Ratio for the permissive Aggregation Group exceeds 60 percent.

Top-heavy Ratio means:

(a)If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for this Plan alone or for the required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the one-year period ending on the Determination Date(s) and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the one-year period ending on the Determination Date(s) and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group), both computed in accordance with Code Section 416 and the regulations thereunder. In the case of a distribution made for a reason other than Severance from Employment, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period.” Both the numerator and denominator of the Top-heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Code Section 416 and the regulations thereunder.

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(b)If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for any required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances under the aggregated defined contribution plan or plans of all Key Employees determined in accordance with (a) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with (a) above, and the present value of accrued benefits under the defined benefit plan or plans for all participants as of the Determination Date(s), all determined in accordance with Code Section 416 and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-heavy Ratio are increased for any distribution of an accrued benefit made in the one-year period ending on the Determination Date (and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group). In the case of a distribution made for a reason other than Severance from Employment, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period.”

(c)For purposes of (a) and (b) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (i) who is not a Key Employee but who was a Key Employee in a prior year or (ii) who has not been credited with at least one hour of service with any employer maintaining the plan at any time during the one-year period ending on the Determination Date will be disregarded. The calculation of the Top-heavy Ratio and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.

The accrued benefit of a participant other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code Section 411(b)(1)(C).

SECTION 11.03--MODIFICATION OF VESTING REQUIREMENTS.

A Participant's nonforfeitable percentage is 100%. Such percentage is at all times at least as great as the nonforfeitable percentage required to satisfy the requirements of Code Section 416.

The part of the Participant's Vested Account resulting from the minimum contributions required pursuant to the MODIFICATION OF CONTRIBUTIONS SECTION of this article (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or (D).

SECTION 11.04--MODIFICATION OF CONTRIBUTIONS.

During any Plan Year in which this Plan is a Top-heavy Plan, the Employer shall make a minimum contribution as of the last day of the Plan Year for each Nonkey Employee who is an Employee on the last day of the Plan Year and who was an Active Participant at any time during the Plan Year. A Nonkey Employee is not required to have a

63

minimum number of Hours of Service or minimum amount of Compensation in order to be entitled to this minimum. A Nonkey Employee who fails to be an Active Participant merely because his Compensation is less than a stated amount or merely because of a failure to make mandatory participant contributions or, in the case of a cash or deferred arrangement, elective contributions shall be treated as if he were an Active Participant. The minimum is the lesser of (a) or (b) below:

(a)3 percent of such person's Compensation for such Plan Year.

(b)The "highest percentage" of Compensation for such Plan Year at which the Employer's Contributions are made for or allocated to any Key Employee. The highest percentage shall be determined by dividing the Employer Contributions made for or allocated to each Key Employee during the Plan Year by the amount of his Compensation for such Plan Year, and selecting the greatest quotient (expressed as a percentage). To determine the highest percentage, all of the Employer's defined contribution plans within the Aggregation Group shall be treated as one plan. The minimum shall be the amount in (a) above if this Plan and a defined benefit plan of the Employer are required to be included in the Aggregation Group and this Plan enables the defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410.

For purposes of (a) and (b) above, Compensation shall be limited by Code Section 401(a)(17).

If the Employer's contributions and allocations otherwise required under the defined contribution plan(s) are at least equal to the minimum above, no additional contribution shall be required. If the Employer's total contributions and allocations are less than the minimum above, the Employer shall contribute the difference for the Plan Year.

The minimum contribution applies to all of the Employer's defined contribution plans in the aggregate which are Top-heavy Plans. A minimum contribution under a profit sharing plan shall be made without regard to whether or not the Employer has profits.

If a person who is otherwise entitled to a minimum contribution above is also covered under another defined contribution plan of the Employer’s which is a Top-heavy Plan during that same Plan Year, any additional contribution required to meet the minimum above shall be provided in this Plan.

If a person who is otherwise entitled to a minimum contribution above is also covered under a defined benefit plan of the Employer's that is a Top-heavy Plan during that same Plan Year, the minimum benefits for him shall not be duplicated. The defined benefit plan shall provide an annual benefit for him on, or adjusted to, a straight life basis equal to the lesser of:

(c)2 percent of his average compensation multiplied by his years of service, or

(d)20 percent of his average compensation.

Average compensation and years of service shall have the meaning set forth in such defined benefit plan for this purpose.

For purposes of this section, any employer contribution made according to a salary reduction or similar arrangement shall not apply in determining if the minimum contribution requirement has been met, but shall apply in determining the minimum contribution required. Matching contributions, as defined in Code Section 401(m), shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. Matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Code Section 401(m).

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The requirements of this section shall be met without regard to any Social Security contribution.

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By executing this Plan, the Primary Employer acknowledges having counseled to the extent necessary with selected legal and tax advisors regarding the Plan's legal and tax implications.

Executed this __________ day of _______________________________________, _________.

CAPITOL FEDERAL FINANCIAL

By:_________________________________________

_________________________________________

Title

Defined Contribution Plan CL2006

66

EX-10.1(II)

CAPITOL FEDERAL FINANCIAL

EMPLOYEE STOCK OWNERSHIP PLAN

Originally Effective October 1, 1998

Amended and Restated Effective October 1, 2007

i

CAPITOL FEDERAL FINANCIAL

EMPLOYEE STOCK OWNERSHIP PLAN

TABLE OF CONTENTS

PREAMBLE		5
ARTICLE I	DEFINITION OF TERMS AND CONSTRUCTION	2
1.1	Definitions	2
(a)	Account	2
(b)	Act	2
(c)	Administrator	2
(d)	Annual Additions	2
(e)	Authorized Leave of Absence	2
(f)	Beneficiary	2
(g)	Board of Directors	2
(h)	Break	2
(i)	Code	3
(j)	Compensation	3
(k)	Date of Hire	4
(l)	Disability	4
(m)	Disability Retirement Date	4
(n)	Early Retirement Date	4
(o)	Effective Date	4
(p)	Eligibility Period	4
(q)	Employee	4
(r)	Employee Stock Ownership Account	4
(s)	Employee Stock Ownership Contribution	4
(t)	Employee Stock Ownership Suspense Account	4
(u)	Employer	4
(v)	Employer Securities	4
(w)	Entry Date	5
(x)	Exempt Loan	5
(y)	Exempt Loan Suspense Account	5
(z)	Financed Shares	5
(aa)	Former Participant	5
(bb)	Fund	5
(cc)	Hour of Service	5
(dd)	Investment Adjustments	6
(ee)	Limitation Year	6
(ff)	Normal Retirement Date	6
(gg)	Participant	6
(hh)	Plan	6
(ii)	Plan Year	6
(jj)	Qualified Domestic Relations Order	6
(kk)	Related Employer	6
(ll)	Retirement	6
(mm)	Service	7
(nn)	Sponsor	7
(oo)	Trust Agreement	7
(pp)	Trustee	7
(qq)	Valuation Date	7
(rr)	Year of Eligibility Service	7
(ss)	Year of Vesting Service	7

ii

1.2	Plurals and Gender	7
1.3	Incorporation of Trust Agreement	7
1.4	Headings	7
1.5	Severability	7
1.6	References to Governmental Regulations	7
1.7	Notices	7
1.8	Evidence	8
1.9	Action by Employer	8
ARTICLE II	PARTICIPATION	9
2.1	Commencement of Participation	9
2.2	Termination of Participation	9
2.3	Resumption of Participation	9
2.4	Determination of Eligibility	9
2.5	Restricted Participation	9
ARTICLE III	CREDITED SERVICE	10
3.1	Service Counted for Eligibility Purposes	10
3.2	Service Counted for Vesting Purposes	10
3.3	Credit for Pre-Break Service	10
3.4	Service Credit During Authorized Leaves	10
3.5	Service Credit During Maternity or Paternity Leave	10
3.6	Ineligible Employees	11
ARTICLE IV	CONTRIBUTIONS	12
4.1	Employee Stock Ownership Contribution	12
4.2	Time and Manner of Employee Stock Ownership Contribution	12
4.3	Records of Contributions	13
4.4	Erroneous Contributions	13
ARTICLE V	ACCOUNTS, ALLOCATIONS AND INVESTMENTS	14
5.1	Establishment of Separate Participant Accounts	14
5.2	Establishment of Suspense Accounts	14
5.3	Allocation of Earnings, Losses and Expenses	15
5.4	Application of Forfeitures	15
5.5	Allocation of Employee Stock Ownership Contribution	15
5.6	Limitation on Annual Additions	15
5.7	Erroneous Allocations	16
5.8	Value of Participant's Account	16
5.9	Investment of Account Balances	16
ARTICLE VI	RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY	17
6.1	Normal Retirement	17
6.2	Early Retirement	17
6.3	Disability Retirement	17
6.4	Death Benefits	17
6.5	Designation of Beneficiary and Manner of Payment	17
ARTICLE VII	VESTING AND FORFEITURES	19
7.1	Vesting on Death, Disability and Normal Retirement	19
7.2	Vesting on Termination of Participation	19
7.3	Disposition of Forfeitures	19
ARTICLE VIII	EMPLOYEE STOCK OWNERSHIP PROVISIONS	20
8.1	Right to Demand Employer Securities	20
8.2	Voting Rights; Tendering Shares	20
8.3	Nondiscrimination in Employee Stock Ownership Contribution	21
8.4	Dividends	21

8.5	Exempt Loans	23
8.6	Exempt Loan Payments	23
8.7	Put Option	24
8.8	Diversification Requirements	25
8.9	Independent Appraiser	25
ARTICLE IX	PAYMENTS AND DISTRIBUTIONS	26
9.1	Payments on Termination of Service - In General	26
9.2	Commencement of Payments	26
9.3	Mandatory Commencement of Benefits	26
9.4	Required Beginning Dates	29
9.5	Form of Payment	29
9.6	Payments Upon Termination of Plan	29
9.7	Distributions Pursuant to Qualified Domestic Relations Orders	30
9.8	Cash-Out Distributions	30
9.9	ESOP Distribution Rules	31
9.1	Direct Rollover	31
9.11	Waiver of 30-day Notice	32
9.12	Re-employed Veterans	32
9.13	Share Legend	32
9.14.	Power to Reduce Benefit	32
ARTICLE X	PROVISIONS RELATING TO TOP-HEAVY PLANS	33
10.1	Top-Heavy Rules to Control	33
10.2	Top-Heavy Plan Definitions	33
10.3	Calculation of Accrued Benefits	33
10.4	Determination of Top-Heavy Status	35
10.5	Minimum Contribution	35
10.6	Vesting	36
ARTICLE XI	ADMINISTRATION	37
11.1	Appointment of Administrator	37
11.2	Resignation or Removal of Administrator	37
11.3	Appointment of Successors:  Terms of Office, Etc.	37
11.4	Powers and Duties of Administrator	37
11.5	Action by Administrator	38
11.6	Participation by Administrator	38
11.7	Agents	38
11.8	Allocation of Duties	39
11.9	Delegation of Duties	39
11.1	Administrator's Action Conclusive	39
11.11	Compensation and Expenses of Administrator	39
11.12	Records and Reports	39
11.13	Reports of Fund Open to Participants	39
11.14	Named Fiduciary	39
11.15	Information from Employer	40
11.16	Responsibilities of Directors	40
11.17	Liability and Indemnification	40
ARTICLE XII	CLAIMS PROCEDURE	41
12.1	Notice of Denial	41
12.2	Right to Reconsideration	41
12.3	Review of Documents	41
12.4	Decision by Administrator	41
12.5	Notice by Administrator	41
12.6	Special Claims Procedures	41

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ARTICLE XIII	AMENDMENTS, TERMINATION AND MERGER	43
13.1	Amendments	43
13.2	Effect of Change In Control	43
13.3	Consolidation or Merger of Trust	44
13.4	Bankruptcy or Insolvency of Employer	44
13.5	Voluntary Termination	45
13.6	Partial Termination of Plan or Permanent Discontinuance of Contributions	45
ARTICLE XIV	MISCELLANEOUS	46
14.1	No Diversion of Funds	46
14.2	Liability Limited	46
14.3	Facility of Payment	46
14.4	Spendthrift Clause	46
14.5	Benefits Limited to Fund	46
14.6	Cooperation of Parties	46
14.7	Payments Due Missing Persons	47
14.8	Governing Law	47
14.9	Nonguarantee of Employment	47
14.1	Counsel	47
14.11	Purposes	47
14.12	Invalidity	47
ARTICLE XVI	TRUST PROVISIONS	48
15.1	Contributions	48
15.2	Information and Data to be Furnished the Trustee	48
15.3	Trust Fund and Accounts	48
15.4	Duties and Powers of the Trustee	49
15.5	Resignation or Removal of the Trustee	53
15.6	Continuance and Termination of this Agreement	54
15.7	Miscellaneous	54

iv

CAPITOL FEDERAL FINANCIAL

EMPLOYEE STOCK OWNERSHIP PLAN

PREAMBLE

THIS PLAN AND TRUST AGREEMENT, made and entered into this 4th day of September, 2007, by and between Capitol Federal Financial, a federally-chartered corporation (hereinafter referred to as “Sponsor” or “Employer”) and Principal Financial Group (hereinafter referred to as “Trustee”), is to witnesseth that:

WHEREAS, effective as of October 1, 1998, Capitol Federal Financial, adopted the Capitol Federal Financial Employee Stock Ownership Plan (“Plan”) in order to enable Participants to share in the growth and prosperity of the Sponsor and its wholly owned subsidiary, Capitol Federal Savings Bank, and to provide Participants with an opportunity to accumulate capital for their future economic security by accumulating funds to provide retirement, death and disability benefits; and

WHEREAS,  the Plan is a stock bonus plan, designed to meet the applicable requirements of Code Section 409, and an employee stock ownership plan, designed to meet the applicable requirements of Code Section 4975(e)(7) and Act Section 407(d)(6); and

WHEREAS, the Plan is intended to invest primarily in “qualifying employer securities” as defined in Code Section 4975(e)(8); and

WHEREAS, The Sponsor intends that the Plan will qualify under Code Sections 401(a) and 501(a) and will comply with such provisions; and

WHEREAS, the Plan has been amended and restated from time to time to comply with various legislation affecting tax-qualified plans; and

WHEREAS, the Plan is hereby being amended to comply with the applicable provisions of the Pension Protection Act of 2006; and

WHEREAS, the Sponsor's Board of Directors has resolved to adopt, continue, sponsor, and maintain the Plan for the benefit of eligible employees; and

WHEREAS, the Sponsor wishes to include the Plan terms within the provisions of a trust document consistent with the Sponsor's practice with its other pension benefit plan; and

NOW, THEREFORE, in consideration of the foregoing premises, effective October 1, 2007, except to the extent a different effective date is prescribed by applicable pension legislation, or except to the extent a particular Plan section specifies a different effective date, the parties agree through this instrument to continue an existing plan and  trust relationship and, through this instrument, the sponsor amends, restates, continues, adopts and agrees to maintain that certain stock bonus plan and employee stock ownership plan qualified under Code Section 401(a) and 4975(e)(7) and Treas. Reg. §1.401-1(b)(1)(iii) known as the “Capitol Federal Financial Employee Stock Ownership Plan” in accordance with the provisions set forth herein.  Notwithstanding the foregoing, the rights of any person (including such person's beneficiaries) who terminated employment or who retired on or before any effective date, or the effective date of a particular amendment, shall be determined solely under the terms of this Plan as in effect on the date of his termination of employment or retirement, unless such person is thereafter reemployed and again becomes a participant.

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ARTICLE I

DEFINITION OF TERMS AND CONSTRUCTION

1.1           Definitions.

Unless a different meaning is plainly implied by the context, the following terms as used in this Plan shall have the following meanings:

(a)           "Account" shall mean a Participant's or Former Participant's entire accrued benefit under the Plan, including the balance credited to his Employee Stock Ownership Account and any other account described in Section 5.1.

(b)           "Act" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute, together with the applicable regulations promulgated thereunder.

(c)           "Administrator" shall mean the fiduciary provided for in Article XI.

(d)           "Annual Additions" shall mean, with respect to each Participant, the sum of those amounts allocated to the Participant's Account under this Plan and accounts under any other qualified defined contribution plan to which the Employer or a Related Employer contributes for any Limitation Year, consisting of the following:

(1)  Employer contributions;

(2)  Forfeitures; and

(3)  Employee contributions (if any).

Annual Additions shall not include any Investment Adjustment.  Annual Additions also shall not include employer contributions which are used by the Trust to pay interest on an Exempt Loan nor any forfeitures of Employer Securities purchased with the proceeds of an Exempt Loan, provided that not more than one-third of the employer contributions are allocated to Participants who are among the group of employees deemed "highly compensated employees" within the meaning of Code Section 414(q), as further described in Section 8.3.  Annual Additions also shall not include any other amounts not considered annual additions pursuant Treasury Regulations issued under Code Section 415.

(e)           "Authorized Leave of Absence" shall mean an absence from Service with respect to which the Employee may or may not be entitled to Compensation and which meets any one of the following requirements:

(1)            Service in any of the armed forces of the United States for up to 36 months, provided that the Employee resumes Service within 90 days after discharge, or such longer period of time during which such Employee's employment rights are protected by law; or

(2)           Any other absence or leave expressly approved and granted by the Employer.  In approving such leaves of absence, the Employer shall treat all Employees on a uniform and nondiscriminatory basis.

(f)           "Beneficiary" shall mean such legal or natural persons, who may be designated contingently or successively, as may be designated by the Participant pursuant to Section 6.5 to receive benefits after the death of the Participant, or in the absence of a valid designation, such persons specified in Section 6.5(b) to receive benefits after the death of the Participant.

(g)           "Board of Directors" shall mean the Board of Directors of the Sponsor.

(h)           "Break" shall mean a Plan Year during which an Employee fails to complete more than 500 Hours of Service.

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(i)           "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute, together with the applicable regulations promulgated thereunder.

(j)           "Compensation" shall be defined as follows:

(1)           Generally.  Compensation shall mean the “compensation” paid to an Employee by the Employer for services rendered to the Employer during a Plan Year, after the date on which the Employee becomes a Participant,  as defined in Code Section 3401(a) (for purposes of income tax withholding at the source) plus amounts that would be required to be included as wages but for an election under Code Sections 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Code, plus all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052.  Notwithstanding the following, for purposes of this Section 1.1(j)(1), the following items shall not constitute Compensation: reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation welfare benefits, amounts paid by the Employer or accrued with respect to this Plan or any other qualified or non-qualified unfunded plan of deferred compensation or other employee welfare plan to which the Employer contributes, payments for group insurance, medical benefits, expense reimbursements, including moving expenses, bonuses, excess commissions as described in certain employment contracts, overtime pay, incentive pay, employee referral payments and income reportable on Form W-2 in connection with the Employer's recognition and retention plan and stock option plans.  Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration 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)).

(2)           Compensation for purposes of applying the limitations of Code Section 415.  For purposes of applying the limitations of Code Section 415, the term “Compensation” shall mean wages within the meaning of Code Section 3401(a) (for purposes of income tax withholding at the source), plus amounts that would be included in wages but for an election under Code Sections 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b), plus all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. See §§1.6041-1(a), but excluding amounts paid or reimbursed by the Employer for moving expenses incurred by the Participant, but only to the extent that, at the time of the payment, it is reasonable to believe that these amounts are deductible by the Participant under Code Section 217.  Any rules that limit the remuneration 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)) are disregarded for this purpose.

(3)           General timing rule.  In order to be taken into account for a Plan Year with respect to (1) above, or a Limitation Year with respect to (2) above, Compensation must be actually paid or made available to a Participant (or, if earlier, includible in the gross income of the Participant) within the Plan Year or Limitation Year, as the case may be. For this purpose, compensation is treated as paid on a date if it is actually paid on that date or it would have been paid on that date but for an election under Code section 125, 132(f)(4), 401(k), 403(b), 408(k), 408(p)(2)(A)(i), or 457(b).

(4)           Special rules regarding severance compensation.  For purposes of applying the definitions in (1) and (2) above, in order to be taken into account for a Plan Year or Limitation Year, Compensation must be paid or treated as paid to the Participant prior to the Participant's severance from employment with the Employer maintaining the plan.  For this purpose, severance from employment is determined in the same manner as under Treasury Regulation Section 1.401(k)-1(d)(2) except that, for purposes of determining the employer of an employee, the modifications provided under Code Section 415(h) to the employer aggregation rules apply.

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This paragraph shall be interpreted in a manner consistent with the Regulations under Code Section 415.

(5)           Dollar Limitation.   Notwithstanding anything herein to the contrary, the annual Compensation of each Participant taken into account under the Plan for any purpose during any Plan Year shall not exceed $200,000.  The $200,000 dollar amount shall be adjusted from time to time in accordance with Section 415(d) of the Code.

(k)           "Date of Hire" shall mean the date on which an Employee shall perform his first Hour of Service.  Notwithstanding the foregoing, in the event that an Employee incurs one or more consecutive Breaks after his initial Date of Hire which results in the forfeiture of his pre-Break Service pursuant to Section 3.3, his "Date of Hire" shall thereafter be the date on which he completes his first Hour of Service after such Break or Breaks.

(l)           "Disability" shall mean a physical or mental impairment which prevents a Participant from performing the duties assigned to him by the Employer and which either has caused the Social Security Administration to classify the individual as "disabled" for purposes of Social Security or has been determined by a qualified physician selected by the Administrator.

(m)           "Disability Retirement Date" shall mean the first day of the month after which a Participant incurs a Disability.

(n)           "Early Retirement Date".   There is no early retirement under this Plan.

(o)           "Effective Date" shall mean October 1, 1998. The effective date of the amended and restated Plan shall mean October 1, 2007.

(p)           "Eligibility Period" shall mean the period of 12 consecutive months commencing on an Employee's Date of Hire.  Succeeding Eligibility Periods after the initial Eligibility Period shall be based on the Plan Year beginning with the Plan Year which includes the first anniversary date of an Employee's Date of Hire, and subsequent Plan Years.

(q)           "Employee" shall mean any person who is classified as an employee by the Employer or a Related Employer, including officers, but excluding directors in their capacity as such.  Individuals not originally classified as Employees who are later classified as such for any reason shall not be treated as Employees under the Plan.

(r)           "Employee Stock Ownership Account" shall mean the separate bookkeeping account established for each Participant pursuant to Section 5.1(a).

(s)           "Employee Stock Ownership Contribution" shall mean the cash, Employer Securities, or both that are contributed to the Plan by the Employer pursuant to Article IV.

(t)           "Employee Stock Ownership Suspense Account" shall mean the temporary account in which the Trustee may maintain any Employee Stock Ownership Contribution that is made prior to the last day of the Plan Year for which it is made, as described in Section 5.2.

(u)           "Employer" shall mean Capitol Federal Financial, a federally-chartered corporation, and its wholly owned subsidiary, Capitol Federal Savings Bank, or any successors to the aforesaid corporations by merger, consolidation or otherwise, which may agree to continue this Plan, or any Related Employer or any other business organization which, with the consent of the Sponsor, shall agree to become a party to this Plan.  To the extent required by the Code or the Act, references herein to the Employer shall also include all Related Employers, whether or not they are participating in this Plan.

(v)           "Employer Securities" shall mean the common stock issued by Capitol Federal Financial, a federally-chartered corporation.  Such term shall also mean, in the discretion of the Board of Directors, any other common stock issued by the Employer or any Related Employer having voting power and dividend rights equal to or in excess of:

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(1)           that class of common stock of the Employer or a Related Employer having the greatest voting power, and

(2)           that class of common stock of the Employer or a Related Employer having the greatest dividend rights.

Non-callable preferred stock shall be treated as Employer Securities if such stock is convertible at any time into stock which meets the requirements of (1) and (2) next above and if such conversion is at a conversion price which (as of the date of the acquisition by the Plan) is reasonable.  For purposes of the last preceding sentence, preferred stock shall be treated as non-callable if, after the call, there will be a reasonable opportunity for a conversion which meets the requirements of the last preceding sentence.

(w)           "Entry Date" shall mean each October 1 and April 1.

(x)           "Exempt Loan" shall mean a loan described at Section 4975(d)(3) of the Code to the Trustee to purchase Employer Securities for the Plan, made or guaranteed by a disqualified person, as defined at Section 4975(e)(2) of the Code, including, but not limited to, a direct loan of cash, a purchase money transaction, an assumption of an obligation of the Trustee, an unsecured guarantee or the use of assets of such disqualified person as collateral for such a loan.

(y)           "Exempt Loan Suspense Account" shall mean the account to which Financed Shares are initially credited until they are released in accordance with Section 8.5.

(z)           "Financed Shares" shall mean the Employer Securities acquired by the Trustee with the proceeds of an Exempt Loan and which are credited to the Exempt Loan Suspense Account until they are released in accordance with Section 8.5.

(aa)           "Former Participant" shall mean any previous Participant whose participation has terminated but who has a vested Account in the Plan which has not been distributed in full.

(bb)           "Fund" shall mean the trust fund maintained by the Trustee pursuant to the Trust Agreement in order to provide for the payment of the benefits specified in the Plan.

(cc)           "Hour of Service" shall mean each hour for which an Employee is directly or indirectly paid or entitled to payment by the Employer or a Related Employer for the performance of duties or for reasons other than the performance of duties (such as vacation time, holidays, sickness, disability, paid lay-offs, jury duty and similar periods of paid nonworking time).  To the extent not otherwise included, Hours of Service shall also include each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or a Related Employer.  Hours of working time shall be credited on the basis of actual hours worked, even though compensated at a premium rate for overtime or other reasons.  In computing and crediting Hours of Service for an Employee under this Plan, the rules set forth in Sections 2530.200b-2(b) and (c) of the Department of Labor Regulations shall apply, said sections being herein incorporated by reference.  Hours of Service shall be credited to the Plan Year or other relevant period during which the services were performed or the nonworking time occurred, regardless of the time when compensation therefor may be paid.  Any Employee for whom no hourly employment records are kept by the Employer or a Related Employer shall be credited with 45 Hours of Service for each calendar week in which he would have been credited with a least one Hour or Service under the foregoing provisions, if hourly records were available.  Solely for purposes of determining whether a Break for participation and vesting purposes has occurred in an Eligibility Period or a 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, 8 Hours of Service per day of such absence.  For purposes of Section 1.1(cc), an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of the birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement.  The Hours of Service credited under this provision shall be credited (1) in the

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computation period in which the absence begins if the crediting is necessary to prevent a Break in that period, or (2) in all other cases, in the following computation period.

(dd)           "Investment Adjustments" shall mean the increases and/or decreases in the value of a Participant's Account attributable to earnings, gains, losses and expenses of the Fund, as set forth in Section 5.3.

(ee)           "Limitation Year" shall mean the Plan Year.

(ff)           "Normal Retirement Date" shall mean the date on which a Participant attains age 65.

(gg)           "Participant" shall mean an Employee who has met all of the eligibility requirements of the Plan and who is currently included in the Plan as provided in Article II hereof; provided, however, that the term "Participant" shall not include (1) leased employees (as defined herein), (2) any individual who is employed by a Related Employer that has not adopted the Plan in accordance with Section 1.1(u) hereof, (3) any Employee who is regularly employed outside the Employer's own offices in connection with the operation and maintenance of buildings or other properties acquired through foreclosure or deed, (4) any Employee who is a non-resident alien individual and who has no earned income from sources within the United States, or (5) any Employee who is included in a unit of Employees covered by a collective-bargaining agreement with the Employer or a Related Employer that does not expressly provide for participation of such Employees in the Plan, where there has been good-faith bargaining between the Employer or a Related Employer and Employees' representatives on the subject of retirement benefits.  To the extent required by the Code or the Act, or appropriate based on the context, references herein to Participant shall include Former Participant.  The term "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 Code Section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient.

(hh)           "Plan" shall mean the Capitol Federal Financial Employee Stock Ownership Plan, as described herein or as hereafter amended from time to time.

(ii)           "Plan Year" shall mean the twelve month period commencing October 1 and ending September 30.

(jj)           "Qualified Domestic Relations Order" shall mean any judgment, decree or order that satisfies the requirements to be a "qualified domestic relations order," as defined in Section 414(p) of the Code.

(kk)           "Related Employer" shall mean any entity that is:

(1)            a member of a controlled group of corporations that includes the Employer, while it is a member of such controlled group (within the meaning of Section 414(b) of the Code);

(2)           a member of a group of trades or businesses under common control with the Employer, while it is under common control (within the meaning of Section 414(c) of the Code);

(3)           a member of an affiliated service group that includes the Employer, while it is a member of such affiliated service group (within the meaning of Section 414(m) of the Code); or

(4)           a leasing or other organization that is required to be aggregated with the Employer pursuant to the provisions of Section 414(n) or 414(o) of the Code.

(ll)           "Retirement" shall mean termination of employment which qualifies as early, normal or Disability retirement as described in Article VI.

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(mm)                      "Service" shall mean, for purposes of eligibility to participate and vesting,  employment with the Employer or any Related Employer, and for purposes of allocation of the Employee Stock Ownership Contribution and forfeitures, employment with the Employer.

(nn)           "Sponsor" shall mean Capitol Federal Financial.

(oo)           "Trust Agreement" shall mean the agreement by and between the Sponsor and the Trustee, as in effect from time to time, whether set forth herein or otherwise.

(pp)           "Trustee" shall mean the trustee or trustees by whom the assets of the Plan are held, as provided in the Trust Agreement, or his or their successors.

(qq)           "Valuation Date" shall mean the last day of each Plan Year.  Notwithstanding the foregoing, the Trustee may value the Trust as frequently as each business day of the Plan Year to determine the fair market value of each Participant's Account under the Plan.

(rr)           "Year of Eligibility Service" shall mean an Eligibility Period during which an Employee is credited with at least 1,000 Hours of Service, except as otherwise specified in Article III.

(ss)           "Year of Vesting Service" shall mean a Plan Year during which an Employee is credited with at least 1,000 Hours of Service, except as otherwise specified in Article III.

1.2           Plurals and Gender.

Where appearing in the Plan and the Trust Agreement, the masculine gender shall include the feminine and neuter genders, and the singular shall include the plural, and vice versa, unless the context clearly indicates otherwise.

1.3           Incorporation of Trust Agreement.

If there is a separate Trust Agreement, then that Trust Agreement, as the same may be amended from time to time, is intended to be and hereby is incorporated by reference into this Plan.  All contributions made under the Plan will be held, managed and controlled by the Trustee pursuant to the terms and conditions of the Trust Agreement.

1.4           Headings.

The headings and sub-headings in this Plan are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof.

1.5           Severability.

In case any provision of this Plan shall be held illegal or void, such illegality or invalidity shall not affect the remaining provisions of this Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein.

1.6           References to Governmental Regulations.

References in this Plan to regulations issued by the Internal Revenue Service, the Department of Labor, or other governmental agencies shall include all regulations, rulings, procedures, releases and other position statements issued by any such agency.

1.7           Notices.

Any notice or document required to be filed with the Administrator or Trustee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Administrator in care of the Sponsor or to the Trustee, each at its principal business offices.  Any notice required under the Plan may be waived in writing by the person entitled to notice.

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1.8           Evidence.

Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

1.9           Action by Employer.

Any action required or permitted to be taken by any entity constituting the Employer under the Plan shall be by resolution of its Board of Directors or by a person or persons authorized by its Board of Directors.

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ARTICLE II

PARTICIPATION

2.1           Commencement of Participation.

(a)           Any Employee who is otherwise eligible to become a Participant in accordance with Section 1.1(gg) hereof shall initially become a Participant on the Entry Date coincident with or next following the date on which he has attained age twenty-one (21) and completes one Year of Eligibility Service.

(b)           Any Employee who had satisfied the requirements set forth in Section 2.1(a) during the 12 consecutive month period prior to the Effective Date shall become a Participant on the Effective Date, provided he is still employed by the Employer on the Effective Date.

2.2           Termination of Participation.

After commencement or resumption of his participation, an Employee shall remain a Participant during each consecutive Plan Year thereafter until the earliest of the following dates:

(a)           His actual Retirement date;

(b)           His date of death; or

(c)           The last day of a Plan Year during which he incurs a Break.

2.3           Resumption of Participation.

(a)           Any Participant whose employment terminates and who resumes Service before he incurs a Break shall resume participation immediately on the date he is reemployed.

(b)           Except as otherwise provided in Section 2.3(c), any Participant who incurs one or more Breaks and resumes Service shall resume participation retroactively as of the first day of the first Plan Year in which he completes a Year of Eligibility Service after such Break(s).

(c)           Any Participant who incurs one or more Breaks and resumes Service, but whose pre-Break Service is not reinstated to his credit pursuant to Section 3.3, shall be treated as a new Employee and shall again be required to satisfy the eligibility requirements contained in Section 2.1(a) before resuming participation on the appropriate Entry Date, as specified in Section 2.1(a).

2.4           Determination of Eligibility.

The Administrator shall determine the eligibility of Employees in accordance with the provisions of this Article.  For each Plan Year, the Employer shall furnish the Administrator a list of all Employees, indicating their Date of Hire, their Hours of Service during their Eligibility Period, their date of birth, the original date of their reemployment with the Employer, if any, and any Breaks they may have incurred.

2.5           Restricted Participation.

Subject to the terms and conditions of the Plan, during the period between the Participant's date of termination of participation in the Plan (as described in Section 2.2) and the distribution of his entire Account (as described in Article IX), and during any period that a Participant does not meet the requirements of Section 2.1(a) or is employed by a Related Employer that is not participating in the Plan, the Participant or, in the event of the Participant's death, the Beneficiary of the Participant, will be considered and treated as a Participant for all purposes of the Plan, except as follows:

(a)           the Participant will not share in the Employee Stock Ownership Contribution and forfeitures (as described in Sections 7.2 and 7.3), except as provided in Sections 5.4 and 5.5; and

(b)           the Beneficiary of a deceased Participant cannot designate a Beneficiary under Section 6.5.

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ARTICLE III

CREDITED SERVICE

3.1           Service Counted for Eligibility Purposes.

Except as provided in Section 3.3, all Years of Eligibility Service completed by an Employee shall be counted in determining his eligibility to become a Participant on and after the Effective Date, whether such Service was completed before or after the Effective Date.

3.2           Service Counted for Vesting Purposes.

All Years of Vesting Service completed by an Employee (including Years of Vesting Service completed prior to the Effective Date) shall be counted in determining his vested interest in this Plan, except the following:

(a)           Service which is disregarded under the provisions of Section 3.3;

(b)           Service prior to the Effective Date of this Plan if such Service would have been disregarded under the "break in service" rules (within the meaning of Section 1.411(a)-5(b) of the Treasury Regulations).

3.3           Credit for Pre-Break Service.

Upon his resumption of participation following one or a series of consecutive Breaks, an Employee's pre-Break Service shall be reinstated to his credit for eligibility and vesting purposes only if either:

(a)           He was vested in any portion of his accrued benefit at the time the Break(s) began; or

(b)           The number of his consecutive Breaks does not equal or exceed the greater of 5 or the number of his Years of Eligibility Service or Years of Vesting Service, as the case may be, credited to him before the Breaks began.

Except as provided in the foregoing, none of an Employee's Service prior to one or a series of consecutive Breaks shall be counted for any purpose in connection with his participation in this Plan thereafter.

3.4           Service Credit During Authorized Leaves.

An Employee shall receive no Service credit under Section 3.1 or 3.2 during any Authorized Leave of Absence.  However, solely for the purpose of determining whether he has incurred a Break during any Plan Year in which he is absent from Service for one or more Authorized Leaves of Absence, he shall be credited with 45 Hours of Service for each week during any such leave period.  Notwithstanding the foregoing, if an Employee fails to return to Service on or before the end of a leave period, he shall be deemed to have terminated Service as of the first day of such leave period and his credit for Hours of Service, determined under this Section 3.4, shall be revoked.  Notwithstanding anything contained herein to the contrary, an Employee who is absent by reason of military service as set forth in Section 1.1(e)(1) shall be given Service credit under this Plan for such military leave period to the extent, and for all purposes, required by law.

3.5           Service Credit During Maternity or Paternity Leave.

For purposes of determining whether a Break has occurred for participation and vesting purposes, an individual who is on maternity or paternity leave as described in Section 1.1(cc), shall be deemed to have completed Hours of Service during such period of absence, all in accordance with Section 1.1(cc).  Notwithstanding the foregoing, no credit shall be given for such Hours of Service unless the individual furnishes to the Administrator such timely information as the Administrator may reasonably require to determine:

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(a)           that the absence from Service was attributable to one of the maternity or paternity reasons enumerated in Section 1.1(cc); and

(b) the number of days of such absence.

In no event, however, shall any credit be given for such leave other than for determining whether a Break has occurred.

3.6           Ineligible Employees.

Notwithstanding any provisions of this Plan to the contrary, any Employee who is ineligible to participate in this Plan either because of his failure

(a)           To meet the eligibility requirements contained in Article II; or

(b)           To be a Participant, as defined in Section 1.1(gg),

shall, nevertheless, earn Years of Eligibility Service and Years of Vesting Service pursuant to the rules contained in this Article III.  However, such Employee shall not be entitled to an allocation of any contributions or forfeitures hereunder unless and until he becomes a Participant in this Plan, and then, only during his period of participation.

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ARTICLE IV

CONTRIBUTIONS

4.1           Employee Stock Ownership Contribution.

(a)           Subject to all of the provisions of this Article IV, for each Plan Year commencing on or after the Effective Date, the Employer shall make an Employee Stock Ownership Contribution to the Fund in such amount as may be determined by resolution of the Board of Directors in its discretion; provided, however, that the Employer shall contribute an amount in cash not less than the amount required to enable the Trustee to discharge any indebtedness incurred with respect to an Exempt Loan in accordance with Section 8.6(c).  If any part of the Employee Stock Ownership Contribution under this Section 4.1 for any Plan Year is in cash in an amount exceeding the amount needed to pay the amount due during or prior to such Plan Year with respect to an Exempt Loan, such cash shall be applied by the Trustee, as directed by the Administrator in its sole discretion, either to the purchase of Employer Securities or to repay an Exempt Loan.  Contributions hereunder shall be in the form of cash, Employer Securities or any combination thereof.  In determining the value of Employer Securities transferred to the Fund as an Employee Stock Ownership Contribution, the Administrator may determine the average of closing prices of such securities for a period of up to 90 consecutive days immediately preceding the date on which the securities are contributed to the Fund.  In the event that the Employer Securities are not readily tradable on an established securities market, the value of the Employer Securities transferred to the Fund shall be determined by an independent appraiser in accordance with Section 8.9.

(b)           Subject to Section 4.1(a), in no event shall the Employee Stock Ownership Contribution exceed for any Plan Year the maximum amount that may be deducted by the Employer under Section 404 of the Code, nor shall such contribution cause the Employer to violate its regulatory capital requirements.  Each Employee Stock Ownership Contribution by the Employer shall be deemed to be made on the express condition that the Plan, as then in effect, shall be qualified under Sections 401(a) and 501(a) of the Code and that the amount of such contribution shall be deductible from the Employer's income under Section 404 of the Code.

4.2           Time and Manner of Employee Stock Ownership Contribution.

(a)           The Employee Stock Ownership Contribution (if any) for each Plan Year shall be paid to the Trustee in one lump sum or installments at any time on or before the expiration of the time prescribed by law (including any extensions) for filing of the Employer's federal income tax return for its fiscal year ending concurrent with or during such Plan Year; provided, however, that the Employee Stock Ownership Contribution (if any) for a Plan Year shall be made in a timely manner to make any required payment of principal and/or interest on an Exempt Loan for such Plan Year.  Any portion of the Employee Stock Ownership Contribution for each Plan Year that may be made prior to the last day of the Plan Year shall, if there is an Exempt Loan outstanding at such time, at the election of the Administrator, either (i) be applied immediately to make payments on such Exempt Loan or (ii) be maintained in the Employee Stock Ownership Suspense Account described in Section 5.2 until the last day of such Plan Year.

(b)           If an Employee Stock Ownership Contribution for a Plan Year is paid after the close of the Employer's fiscal year which ends concurrent with or during such Plan Year but on or prior to the due date (including any extensions) for filing of the Employer's federal income tax return for such fiscal year, it shall be considered, for allocation purposes, as an Employee Stock Ownership Contribution to the Fund for the Plan Year for which it was computed and accrued, unless such contribution is accompanied by a statement to the Trustee, signed by the Employer, which specifies that the Employee Stock Ownership Contribution is made with respect to the Plan Year in which it is received by the Trustee.  Any Employee Stock Ownership Contribution paid by the Employer during any Plan Year but after the due date (including any extensions) for filing of its federal income tax return for the fiscal year of the Employer ending on or before the last day of the preceding Plan Year shall be treated, for allocation purposes, as an Employee Stock Ownership Contribution to the Fund for the Plan Year in which the contribution is paid to the Trustee.

(c)           Notwithstanding anything contained herein to the contrary, no Employee Stock Ownership Contribution shall be made for any Plan Year during which a limitations account created pursuant to Section 5.6(c)(3) is in existence until the balance of such limitations account has been reallocated in accordance with Section 5.6(c)(3).

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4.3           Records of Contributions.

The Employer shall deliver at least annually to the Trustee, with respect to the Employee Stock Ownership Contribution contemplated in Section 4.1, a certificate of the Administrator, in such form as the Trustee shall approve, setting forth:

(a)           The aggregate amount of such contribution, if any, to the Fund for such Plan Year;

(b)           The names, Internal Revenue Service identifying numbers and current residential addresses of all Participants in the Plan;

(c)           The amount and category of contributions to be allocated to each such Participant; and

(d)           Any other information reasonably required for the proper operation of the Plan.

4.4           Erroneous Contributions.

(a)           Notwithstanding anything herein to the contrary, upon the Employer's written request, a contribution which was made by a mistake of fact, or conditioned upon the initial qualification of the Plan, under Code Section 401(a), or upon the deductibility of the contribution under Section 404 of the Code, shall be returned to the Employer by the Trustee within one year after the payment of the contribution, the denial of the qualification or the disallowance of the deduction (to the extent disallowed), whichever is applicable; provided, however, that in the case of denial of the initial qualification of the Plan, a contribution shall not be returned unless an Application for Determination has been timely filed with the Internal Revenue Service.  Any portion of a contribution returned pursuant to this Section 4.4 shall be adjusted to reflect its proportionate share of the losses of the Fund, but shall not be adjusted to reflect any earnings or gains.  Notwithstanding any provisions of this Plan to the contrary, the right or claim of any Participant or Beneficiary to any asset of the Fund or any benefit under this Plan shall be subject to and limited by this Section 4.4.

(b)           In no event shall Employee contributions be accepted.  Any such Employee contributions (and any earnings attributable thereto) mistakenly received by the Trustee shall promptly be returned to the Participant.

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ARTICLE V

ACCOUNTS, ALLOCATIONS AND INVESTMENTS

5.1           Establishment of Separate Participant Accounts.

The Administrator shall establish and maintain a separate Account for each Participant in the Plan and for each Former Participant in accordance with the provisions of this Article V.  Such separate Account shall be for bookkeeping purposes only and shall not require a segregation of the Fund, and no Participant, Former Participant or Beneficiary shall acquire any right to or interest in any specific assets of the Fund as a result of the allocations provided for under this Plan.

(a)           Employee Stock Ownership Accounts.

The Administrator shall establish a separate Employee Stock Ownership Account in the Fund for each Participant.  The Administrator may establish subaccounts hereunder, an Employer Stock Account reflecting a Participant's interest in Employer Securities held by the Fund, and an Other Investments Account reflecting the Participant's interest in his Employee Stock Ownership Account other than Employer Securities.  Each Participant's Employer Stock Account shall reflect his share of any Employee Stock Ownership Contribution made in Employer Securities, his allocable share of forfeitures (as described in Section 5.4), and any Employer Securities attributable to earnings on such stock.  Each Participant's Other Investments Account shall reflect any Employee Stock Ownership Contribution made in cash, any cash dividends on Employer Securities allocated and credited to his Employee Stock Ownership Account (other than currently distributable dividends) and his share of corresponding cash forfeitures, and any income, gains, losses, appreciation, or depreciation attributable thereto.   Dividends attributable to Employer Securities that are allocated to a Participant pursuant to Section 8.4 (and not distributable thereunder) shall be treated as part of the Participant's Employee Stock Ownership Account.

(b)           Distribution Accounts.

In any case where distribution of a terminated Participant's vested Account is to be deferred, the Administrator may establish a separate, nonforfeitable account in the Fund to which the balance in his Employee Stock Ownership Account in the Plan shall be transferred after such Participant incurs a Break.  Unless the Former Participant's distribution accounts are segregated for investment purposes pursuant to Article IX, they shall share in Investment Adjustments.

(c)           Other Accounts.

The Administrator shall establish such other separate accounts for each Participant as may be necessary or desirable for the convenient administration of the Fund.

5.2           Establishment of Suspense Accounts.

The Administrator shall establish a separate Employee Stock Ownership Suspense Account.  There shall be credited to such account any Employee Stock Ownership Contribution that may be made prior to the last day of the Plan Year and that are allocable to the Employee Stock Ownership Suspense Account pursuant to Section 4.2(a).  The Employee Stock Ownership Suspense Account shall share proportionately as to time and amount in any Investment Adjustments.  As of the last day of each Plan Year, the balance of the Employee Stock Ownership Suspense Account shall be added to the Employee Stock Ownership Contribution and allocated to the Employee Stock Ownership Accounts of Participants as provided in Section 5.5, except as provided herein.  In the event that the Plan takes an Exempt Loan, the Employer Securities purchased thereby shall be allocated as Financed Shares to a separate Exempt Loan Suspense Account, from which Employer Securities shall be released in accordance with Section 8.5 and shall be allocated in accordance with Section 8.6(b).

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5.3           Allocation of Earnings, Losses and Expenses.

Except as otherwise provided in this instrument, as of each Valuation Date, any increase or decrease in the net worth of the aggregate Employee Stock Ownership Accounts held in the Fund attributable to earnings, losses, expenses and unrealized appreciation or depreciation in each such account, as determined by the Trustee, shall be credited to or deducted from the appropriate suspense accounts and all Participants̓ Employee Stock Ownership Accounts (except segregated distribution accounts described in Section 5.1(b) and the “limitations account” described in Section 5.6(c)(3)), in accordance with this Section.  Earnings, losses, and unrealized appreciation or depreciation in Employer Securities in a Participant's Employee Stock Ownership Account shall be determined and allocated only to such account, but such determination shall be made immediately prior to crediting any Contributions and forfeitures for the current Plan Year, but after adjustment for any transfer to or from such accounts.  Earnings, losses, and unrealized appreciation or depreciation in investments other than Employer Securities in the Participant's Other Investment Accounts shall be allocated in the proportion that the value of each such account (determined immediately prior to such allocation and before crediting any Contributions and forfeitures for the current Plan Year but after adjustment for any transfer to or from such accounts and for the time such funds were in such accounts) bears to the value of all Other Investment Accounts.  Provided, however, cash dividends paid to the Plan shall be allocated or otherwise disposed of in accordance with Plan Section 8.4. Plan expenses paid from the assets of this employee pension benefit plan shall be allocated across all Accounts in the proportion that the value of each Participant's Account bears to the value of all Participant Accounts.

5.4           Application of Forfeitures.

Forfeitures occurring during the Plan Year may, at the discretion of the Administrator, be used to pay or reimburse expenses of the Plan, to the extent such payment or reimbursement is consistent with the applicable fiduciary requirements of the Act.  As of the last day of each Plan Year, all forfeitures which have not been applied in accordance with the preceding sentence shall be added to the Employee Stock Ownership Contribution (if any) for such year and allocated among the Participants' Employee Stock Ownership Accounts, as appropriate, in the manner provided in Section 5.5.

5.5           Allocation of Employee Stock Ownership Contribution.

As of the last day of each Plan Year for which the Employer shall make an Employee Stock Ownership Contribution, the Administrator shall allocate the Employee Stock Ownership Contribution (including reallocable forfeitures) for such Plan Year to the Employee Stock Ownership Account of each Participant who completed a Year of Vesting Service during that Plan Year, provided that he is still employed by the Employer on the last day of the Plan Year.  Such allocation shall be made in the same proportion that each such Participant's Compensation for such Plan Year bears to the total Compensation of all such Participants for such Plan Year, subject to Section 5.6.  Furthermore, if a Participant completes a Year of Vesting Service and is on an authorized Leave of Absence on the last day of the Plan Year, such a Participant shall be entitled to an allocation based on his Compensation earned during such Plan Year.

5.6           Limitation on Annual Additions.

(a)           Notwithstanding any provisions of this Plan to the contrary, the total Annual Additions credited to a Participant's Account under this Plan (and accounts under any other defined contribution plan maintained by the Employer or a Related Employer) for any Limitation Year shall not exceed the lesser of:

(1)           $40,000, as adjusted for increases in the cost-of-living under section 415(d) of the Code, or

(2) 100 percent of the Participant's Compensation for the Limitation Year.

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(b)           This Section 5.6 shall be applied in a manner consistent with the Treasury Regulations under Code Section 415, which shall be incorporated herein by this reference, except as provided herein or in the definition of Compensation.

(c)           In the event that the limitations on Annual Additions described in Section 5.6(a) above are exceeded with respect to any Participant in any Limitation Year, then:

(1)           The Administrator shall determine to what extent the Annual Additions to any Participant's Employee Stock Ownership Account must be reduced in each Limitation Year.  The Administrator shall reduce the Annual Additions to all other qualified, tax-exempt retirement plans maintained by the Employer or a Related Employer in accordance with the terms contained therein for required reductions or reallocations mandated by Section 415 of the Code before reducing any Annual Additions in this Plan.

(2)           If any excess Annual Additions remain, then the excess shall be corrected pursuant to a correction method provided for in the Internal Revenue Service employee plans compliance resolution system procedure then in effect.

5.7           Erroneous Allocations.

No Participant shall be entitled to any Annual Additions or other allocations to his Account in excess of those permitted under Sections 5.3, 5.4, 5.5, and 5.6.  If it is determined at any time that the Administrator has erred in accepting and allocating any contributions or forfeitures under this Plan, or in allocating Investment Adjustments, or in excluding or including any person as a Participant, then the Administrator, in a uniform and nondiscriminatory manner, shall determine the manner in which such error shall be corrected and shall promptly advise the Trustee in writing of such error and of the method for correcting such error.  The accounts of any or all Participants may be revised, if necessary, in order to correct such error.  To the extent applicable, such correction shall be made in accordance with the provisions of the most recent Internal Revenue Service Revenue Procedure regarding self-correction of tax-qualification defects.

5.8           Value of Participant's Account.

At any time, the value of a Participant's Account shall consist of the aggregate value of his Employee Stock Ownership Account and his distribution account, if any, determined as of the next-preceding Valuation Date.  The Administrator shall maintain adequate records of the cost basis of Employer Securities allocated to each Participant's Employee Stock Ownership Account.

5.9           Investment of Account Balances.

The Employee Stock Ownership Accounts shall be invested primarily in Employer Securities.  All sales of Employer Securities by the Trustee attributable to the Employee Stock Ownership Accounts of all Participants shall be charged prorata to the Employee Stock Ownership Accounts of all Participants.

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ARTICLE VI

RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY

6.1           Normal Retirement.

A Participant who reaches his Normal Retirement Date and who shall retire at that time shall thereupon be entitled to retirement benefits based on the value of his Account, payable pursuant to the provisions of Section 9.1.  A Participant who remains in Service after his Normal Retirement Date shall not be entitled to any retirement benefits until his actual termination of Service thereafter (except as provided in Section 9.4), and he shall meanwhile continue to participate in this Plan.

6.2           Early Retirement.

There is no early retirement under this Plan.

6.3           Disability Retirement.

In the event a Participant incurs a Disability, he may retire on his Disability Retirement Date and shall thereupon be entitled to retirement benefits based on the value of his Account, payable pursuant to the provisions of Section 9.1.

6.4           Death Benefits.

(a)           Upon the death of a Participant before his Retirement or other termination of Service, the value of his Account shall be payable pursuant to the provisions of Section 9.1.  The Administrator shall direct the Trustee to distribute his Account to any surviving Beneficiary designated by the Participant or, if none, to such persons specified in Section 6.5(b).

(b)           Upon the death of a Former Participant, the Administrator shall direct the Trustee to distribute any undistributed balance of his Account to any surviving Beneficiary designated by him or, if none, to such persons specified in Section 6.5(b).

(c)           The Administrator may require such proper proof of death and such evidence of the right of any person to receive the balance credited to the Account of a deceased Participant or Former Participant as the Administrator may deem desirable.  The Administrator's determination of death and of the right of any person to receive payment shall be conclusive.

6.5           Designation of Beneficiary and Manner of Payment.

(a)           Each Participant shall have the right to designate a Beneficiary to receive the sum or sums to which he may be entitled upon his death.  The Participant may also designate the manner in which any death benefits under this Plan shall be payable to his Beneficiary, provided that such designation is in accordance with Section 9.5.  Such designation of Beneficiary and manner of payment shall be in writing and delivered to the Administrator, and shall be effective when received by the Administrator while the Participant is alive.  The Participant shall have the right to change such designation by notice in writing to the Administrator while the Participant is alive.  Such change of Beneficiary or the manner of payment shall become effective upon its receipt by the Administrator while the Participant is alive.  Any such change shall be deemed to revoke all prior designations.

(b)           If a Participant shall fail to designate validly a Beneficiary, or if no designated Beneficiary survives the Participant, the balance credited to his Account shall be paid to the person or persons in the first of the following classes of successive preference Beneficiaries surviving at the death of the Participant:  the Participant's (1) widow or widower, (2) natural-born or adopted children, (3) natural-born or adoptive parents, and (4) estate.  The Administrator shall determine which Beneficiary, if any, shall have been validly designated or entitled to receive the balance credited to the Participant's Account in accordance with the foregoing order of preference, and its decision shall be binding and conclusive on all persons.

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(c)           Notwithstanding the foregoing, if a Participant is married on the date of his death, the sum or sums to which he may be entitled under this Plan upon his death shall be paid to his spouse, unless the Participant's spouse shall have consented to the election of another Beneficiary.  Such a spousal consent shall be in writing and shall be witnessed either by a representative of the Administrator or by a notary public.  Any designation by an unmarried Participant shall be rendered ineffective by any subsequent marriage, and any consent of a spouse shall be effective only as to that spouse.  If it is established to the satisfaction of the Administrator that spousal consent cannot be obtained because there is no spouse, because the spouse cannot be located, or other reasons prescribed by governmental regulations, the consent of the spouse may be waived, and the Participant may designate a Beneficiary or Beneficiaries other than his spouse.

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ARTICLE VII

VESTING AND FORFEITURES

7.1           Vesting on Death, Disability and Normal Retirement.

Unless his participation in this Plan shall have terminated prior thereto, upon a Participant's death, Disability or Normal Retirement Date (whether or not he actually retires at that time) while he is still employed by the Employer, the Participant's entire Account shall be fully vested and nonforfeitable.

7.2           Vesting on Termination of Participation.

(a)           Upon termination of his participation in this Plan for any reason other than death, Disability, or Normal Retirement, a Participant shall be vested in a percentage of his Employee Stock Ownership Account, such vested percentage to be determined under the following table (“Vesting Schedule”), based on the Years of Vesting Service (including Years of Vesting Service prior to the Effective Date) credited to him at the time of his termination of participation:

Years of Vesting Service                                                                Percentage Vested

Less than 5                                                         0%

           5 or more                                                     100%

(b)           The foregoing Vesting Schedule shall remain in effect for Plan Years beginning before the earlier of (a) the date on which an Exempt Loan that was in existence on September 26, 2005 (a “Pre-PPA Exempt Loan”) is repaid in full, or (b) the date on which such Pre-PPA Exempt Loan is scheduled to be repaid in full.  For subsequent Plan Years, the Vesting Schedule shall be as follows:

Years of Vesting Service                                                                Percentage Vested

                             Less than 3                                                           0%

                                            3 or more                                                       100%

Notwithstanding the foregoing, a Participant shall at all times have a nonforfeitable interest in Employer Securities acquired with dividends received pursuant to Section 8.4(c).

(c)           Any portion of the Participant's Employee Stock Ownership Account which is not vested at the time he incurs a Break shall thereupon be forfeited and disposed of pursuant to Section 7.3.  In such event, Employer Securities shall be forfeited only after other assets. Distribution of the vested portion of a terminated Participant's interest in the Plan shall be payable in any manner permitted under Section 9.1.

7.3           Disposition of Forfeitures.

(a)           Subject to the limited possible application of Section 9.8, in the event a Participant incurs 5 consecutive Breaks in Service, forfeiture shall occur.

(b)           In the event a Participant terminates Service and receives (or is deemed to receive) a distribution, then the forfeitable portion of his Employee Stock Ownership Account, including Investment Adjustments, shall be forfeited as of the date the Participant terminates Service, and such forfeiture shall be reallocated to other Participants pursuant to Section 5.4.

(c)           In the event a former Participant is rehired, any amounts previously forfeited from his Accounts in connection with his previous termination of Service shall be restored.

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ARTICLE VIII

EMPLOYEE STOCK OWNERSHIP PROVISIONS

8.1           Right to Demand Employer Securities.

A Participant entitled to a distribution from his Account shall be entitled to demand that his interest in the Account be distributed to him in the form of Employer Securities, all subject to Section 9.9.  The Administrator shall notify the Participant of his right to demand distribution of his vested Account balance entirely in whole shares of Employer Securities (with the value of any fractional share paid in cash).  However, if the charter or by-laws of the Employer restrict ownership of substantially all of the outstanding Employer Securities to Employees and the Trust, then the distribution of a Participant's vested Account shall be made entirely in the form of cash or other property, and the Participant is not entitled to a distribution in the form of Employer Securities.

8.2           Voting Rights; Tendering Shares.

(a)           Each Participant with an Employee Stock Ownership Account shall be entitled to direct the Trustee as to the manner in which the Employer Securities in such account are to be voted.  Employer Securities held in the Employee Stock Ownership Suspense Account or the Exempt Loan Suspense Account shall be voted by the Trustee on each issue with respect to which shareholders are entitled to vote in the same proportion as the Participants who timely directed the Trustee as to the manner of voting their shares in the Employee Stock Ownership Accounts with respect to such issue (that is, affirmatively, negatively or with an abstention).  In the event that a Participant fails to give timely voting instructions to the Trustee with respect to the voting of Employer Securities that are allocated to his Employee Stock Ownership Account, the Trustee shall vote such shares in the same proportion as those shares on which the Trustee has received timely direction from the Participants with respect to such issue (that is, affirmatively, negatively or with an abstention).

(b)           Tender rights or exchange offers for Employer Securities will be passed through to Participants.  As soon as practicable after the commencement of a tender or exchange offer for Employer Securities, the Employer shall cause each person with power to control the response to such tender or exchange offer to be advised in writing the terms of the offer and, if applicable, to be provided with a form for instructing the Trustee, or for revoking such instruction, to tender or exchange shares of Employer Securities, to the extent permitted under the terms of such offer.  In advising such persons of the terms of the offer, the Employer may include statements from the board of directors setting forth its position with respect to the offer.  To the extent some or all of the Participants have not directed or have not timely directed the Trustee on how to respond to such tender or exchange, then the Trustee shall tender or exchange such Employer Securities on which no direction was received as directed by the Plan Administrator.  In addition, shares attributable to Employer Securities held unallocated in the Exempt Loan Suspense Account as a result of and Exempt Loan shall be tendered or exchanged (or not tendered or exchanged) in the same proportion as those tendered by Participants.  If the tender or exchange offer is limited so that all of the shares that the Trustee has been directed to tender or exchange cannot be sold or exchanged, the shares that each Participant directed to be tendered or exchanged shall be deemed to have been sold or exchanged in the same ratio that the number of shares actually sold or exchanged bears to the total number of shares that the Trustee was directed to tender or exchange. The Trustee shall hold the Participant's individual directions with respect to voting rights or tender decisions in confidence and, except as required by law, shall not divulge or release such individual directions to anyone associated with the Employer. The Employer may require verification of the Trustee's compliance with the directions received from Participants by any independent auditor selected by the Employer, provided that such auditor agrees to maintain the confidentiality of such individual directions. The Employer may develop procedures to facilitate the exercise of votes or tender rights, such as the use of facsimile transmissions for the Participants located in physically remote areas.

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8.3           Nondiscrimination in Employee Stock Ownership Contribution.

In the event that the amount of the Employee Stock Ownership Contribution that would be required in any Plan Year to make the scheduled payments on an Exempt Loan would exceed the amount that would otherwise be deductible by the Employer for such Plan Year under Code Section 404, then no more than one-third of the Employee Stock Ownership Contribution for the Plan Year, which is also the Employer's taxable year, shall be allocated to the group of Employees who:

(a)           Was at any time during the Plan Year or the preceding Plan Year a 5 percent owner of the Employer; or

(b)           Received Compensation (within the meaning of Section 1.1(j)(2)) from the Employer for the preceding Plan Year in excess of $80,000, as adjusted under Code Section 414(q), and was in the “top-paid group” of Employees (as defined below) for such year.  An Employee shall be deemed a member of the “top-paid group” of Employees for a given Plan Year if such Employee is in the group of the top 20% of the Employees of the Employer when ranked on the basis of compensation (as defined above).

A former Employee shall be included in the group of Employees described above if either such former Employee was included in such group when such Employee separated from Service, or such former Employee was included in such group at any time after attaining age 55.

The determination of who is included in the group of Employees described above, including the determination of the number and identity of Employees in the “top-paid group,” will be made in accordance with Section 414(q) of the Code and the regulations thereunder. Amounts not allocable on account of this Section 8.3 shall be allocated among the Accounts of Participants who are not highly compensated employees, as defined herein, in accordance with Sections 5.5 and 5.6.

8.4           Dividends.

(a)           Dividends paid with respect to Employer Securities credited to a Participant's Employee Stock Ownership Account as of the record date for the dividend payment may be allocated to the Participant's Employee Stock Ownership Account, paid in cash to the Participant, or used by the Trustee to make payments on an Exempt Loan, pursuant to the direction of the Administrator.

(b)           If the Administrator shall direct that the aforesaid dividends shall be paid directly to Participants, the dividends paid with respect to such Employer Securities shall be paid to the Plan, from which dividend distributions in cash shall be made to the Participants with respect to the Employer Securities in their Employee Stock Ownership Accounts within 90 days of the close of the Plan Year in which the dividends were paid.

(c)           If the Administrator permits, then Participants shall be able to elect, in accordance with regulations or other guidance, to have the dividends paid and allocable to the Participant's Account either (i) distributed to the Participant (or his Beneficiary) no later than 90 days after close of the Plan Year in which the dividend is paid (reduced by any investment losses occurring from when the dividend is paid to the Plan to when it is distributed to the Participant), or (ii) retained in the Participant's Account under the Plan to be invested in Employer Securities.  Such election procedure shall be consistent with the requirements of Section 404(k) of the Code. If the Participant fails to make the election, he shall be deemed to have elected payment to the Plan and reinvestment in Employer Securities.  All elections shall be irrevocable upon the later of (i) the date of the Participant's election, or (ii) the end of the applicable election period.

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(d)           If dividends on Employer Securities already allocated to Participants' Employee Stock Ownership Accounts are used to make payments on an Exempt Loan, the Employer Securities which are released from the Exempt Loan Suspense Account shall first be allocated to each Employee Stock Ownership Account in an amount equal to the amount of dividends that would have been allocated to such Account if the dividends had not been used to make payments on an Exempt Loan, and the remaining Employer Securities (if any) which are released shall be allocated on a pro-rata basis based on the shares of Employer Securities held by all Participants in their Employee Stock Ownership Accounts, all in accordance with Section 404(k) of the Code.

(e)           Dividends on Employer Securities obtained pursuant to an Exempt Loan and still held in the Exempt Loan Suspense Account may be used to make payments on an Exempt Loan, as described in Section 8.6.

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8.5           Exempt Loans.

(a)           The Sponsor may direct the Trustee to obtain Exempt Loans.  The Exempt Loan may take the form of (i) a loan from a bank or other commercial lender to purchase Employer Securities (ii) a loan from the Employer to the Plan; or (iii) an installment sale of Employer Securities to the Plan.  The proceeds of any such Exempt Loan shall be used, within a reasonable time after the Exempt Loan is obtained, only to purchase Employer Securities, repay the Exempt Loan, or repay any prior Exempt Loan.  Any such Exempt Loan shall provide for no more than a reasonable rate of interest and shall be without recourse against the Plan.  The number of years to maturity under the Exempt Loan must be definitely ascertainable at all times.  The only assets of the Plan that may be given as collateral for an Exempt Loan are Financed Shares acquired with the proceeds of the Exempt Loan and Financed Shares that were used as collateral for a prior Exempt Loan repaid with the proceeds of the current Exempt Loan.  Such Financed Shares so pledged shall be placed in an Exempt Loan Suspense Account.  No person or institution entitled to payment under an Exempt Loan shall have recourse against Trust assets other than the Financed Shares, the Employer Stock Ownership Contribution (other than contributions of Employer Securities) that is available under the Plan to meet obligations under the Exempt Loan, and earnings attributable to such Financed Shares and the investment of such contribution.  Any Employee Stock Ownership Contribution paid during the Plan Year in which an Exempt Loan is made (whether before or after the date the proceeds of the Exempt Loan are received), any Employee Stock Ownership Contribution paid thereafter until the Exempt Loan has been repaid in full, and all earnings from investment of such Employee Stock Ownership Contribution, without regard to whether any such Employee Stock Ownership Contribution and earnings have been allocated to Participants' Employee Stock Ownership Accounts, shall be available to meet obligations under the Exempt Loan as such obligations accrue, or prior to the time such obligations accrue, unless otherwise provided by the Employer at the time any such contribution is made.  Any pledge of Employer Securities shall provide for the release of Financed Shares upon the payment of any portion of the Exempt Loan.

(b)           For each Plan Year during the duration of the Exempt Loan, the number of Financed Shares released from such pledge shall equal the number of Financed Shares held immediately before release for the current Plan Year multiplied by a fraction.  The numerator of the fraction is the sum of principal and interest paid in such Plan Year.  The denominator of the fraction is the sum of the numerator plus the principal and interest to be paid for all future years.  Such years will be determined without taking into account any possible extension or renewal periods.  If interest on any Exempt Loan is variable, the interest to be paid in future years under the Exempt Loan shall be computed by using the interest rate applicable as of the end of the Plan Year.

(c)           Notwithstanding the foregoing, the Trustee may, in accordance with the direction of the Administrator, obtain an Exempt Loan pursuant to the terms of which the number of Financed Shares to be released from encumbrance shall be determined with reference to principal payments only.  In the event that such an Exempt Loan is obtained, annual payments of principal and interest shall be at a cumulative rate that is not less rapid at any time than level payments of such amounts for not more than 10 years.  The amount of interest in any such annual loan repayment shall be disregarded only to the extent that it would be determined to be interest under standard loan amortization tables.  The requirement set forth in the preceding sentence shall not be applicable from the time that, by reason of a renewal, extension, or refinancing, the sum of the expired duration of the Exempt Loan, the renewal period, the extension period, and the duration of a new Exempt Loan exceeds 10 years.

8.6           Exempt Loan Payments.

(a)           Payments of principal and interest on any Exempt Loan during a Plan Year shall be made by the Trustee (as directed by the Administrator) only from (1) the Employee Stock Ownership Contribution to the Trust made to meet the Plan's obligation under an Exempt Loan (other than contributions of Employer Securities) and from any earnings attributable to Financed Shares and investments of such contributions (both received during or prior to the Plan Year); (2) the proceeds of a subsequent Exempt Loan made to repay a prior Exempt Loan; and (3) the proceeds of the sale of any Financed Shares.  Such contribution and earnings shall be accounted for separately by the Plan until the Exempt Loan is repaid.

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(b)           Employer Securities released from the Exempt Loan Suspense Account by reason of the payment of principal or interest on an Exempt Loan from amounts allocated to Participants' Employee Stock Ownership Accounts shall immediately upon release be allocated as set forth in Section 5.5.

(c)           The Employer shall contribute to the Trust sufficient amounts to enable the Trust to pay principal and interest on any such Exempt Loans as they are due, provided, however, that no such contribution shall exceed the limitations in Section 5.6.  In the event that such contributions by reason of the limitations in Section 5.6 are insufficient to enable the Trust to pay principal and interest on such Exempt Loan as it is due, then upon the Administrator's direction the Employer shall:

(1)           Make an Exempt Loan to the Trust in sufficient amounts to meet such principal and interest payments.  Such new Exempt Loan shall be subordinated to the prior Exempt Loan.  Employer Securities released from the pledge of the prior Exempt Loan shall be pledged as collateral to secure the new Exempt Loan.  Such Employer Securities will be released from this new pledge and allocated to the Employee Stock Ownership Accounts of the Participants in accordance with the applicable provisions of the Plan;

(2)           Purchase any Financed Shares in an amount necessary to provide the Trustee with sufficient funds to meet the principal and interest repayments.  Any such sale by the Plan shall meet the requirements of Section 408(e) of the Act; or

(3)           Any combination of the foregoing.

However, the Employer shall not, pursuant to the provisions of this subsection, do, fail to do or cause to be done any act or thing which would result in a disqualification of the Plan as an employee stock ownership plan under Section 4975(e)(7) of the Code.

(d)           Except as provided in Section 8.1 above and notwithstanding any amendment to or termination of the Plan which causes it to cease to qualify as an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Code, or any repayment of an Exempt Loan, no shares of Employer Securities acquired with the proceeds of an Exempt Loan obtained by the Trust to purchase Employer Securities may be subject to a put, call or other option, or buy-sell or similar arrangement, while such shares are held by the Plan or when such shares are distributed from the Plan.  The provisions of this Section 8.6(d) shall continue to be applicable to Employer Securities held by the Trustee, whether or not allocated to Participants' and Former Participants' Accounts, even if the Plan ceases to be an employee stock ownership plan, as defined in Section 4975(e)(7) of the Code.

8.7           Put Option.

In the event that the Employer Securities distributed to a Participant are not readily tradable on an established market, the Participant shall be entitled to require that the Employer repurchase the Employer Securities under a fair valuation formula, as provided by governmental regulations.  The Participant or Beneficiary shall be entitled to exercise the put option described in the preceding sentence for a period of not more than 60 days following the date of distribution of Employer Securities to him.  If the put option is not exercised within such 60-day period, the Participant or Beneficiary may exercise the put option during an additional period of not more than 60 days after the beginning of the first day of the first Plan Year following the Plan Year in which the first put option period occurred, all as provided in regulations promulgated by the Secretary of the Treasury.

If a Participant exercises the foregoing put option with respect to Employer Securities that were distributed as part of a total distribution pursuant to which a Participant's Employee Stock Ownership Account is distributed to him in a single taxable year, the Employer or the Plan may elect to pay the purchase price of the Employer Securities over a period not to exceed 5 years.  Such payments shall be made in substantially equal installments not less frequently than annually over a period beginning not later than 30 days after the exercise of the put option.  Reasonable interest shall be paid to the Participant with respect to the unpaid balance of the purchase price, and adequate security shall be provided with respect thereto.  In the event that a Participant exercises a put option with respect to Employer Securities

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that are distributed as part of an installment distribution, if permissible under Section 9.5, the amount to be paid for such securities shall be paid not later than 30 days after the exercise of the put option.

8.8           Diversification Requirements.

(a)           Each Participant who is fully vested in his Account and has attained age 50 may elect, beginning after the close of the Plan Year in which such requirements are satisfied (the “Diversification Year”), to have at least 25 percent of his Employee Stock Ownership Account diversified from investment in Employer Securities.  This is a one-time election. After the fifth anniversary of the last day of the Participant's Diversification Year, an eligible Participant may elect (on a one-time basis) to have at least 50 percent of his Employee Stock Ownership Account diversified from investment in Employer Securities.  The diversification process shall be carried out in accordance with procedures promulgated by the Administrator, and coordinated with the diversification requirements of Section 8.8(b).

(b)           Each Participant who has completed at least 10 years of participation in the Plan and has attained age 55 may elect within 90 days after the close of each Plan Year during his “qualified election period” to direct the Plan as to the investment of at least (that is, up to) 25 percent of his Employee Stock Ownership Account (to the extent such percentage exceeds the amount to which a prior election under this Section 8.8(b) had been made). For purposes of this Section 8.8(b), the term “qualified election period” shall mean the 5-Plan-Year period beginning with the Plan Year after the Plan Year in which the Participant attains age 55 (or, if later, beginning with the Plan Year after the first Plan Year in which the Employee first completes at least 10 years of participation in the Plan). In the case of an Employee who has attained age 60 and completed 10 years of participation in the prior Plan Year and in the case of the election year in which any other Participant who has met the minimum age and service requirements for diversification can make his last election hereunder, he shall be entitled to direct the Plan as to the investment of (that is, up to) at least 50 percent of his Employee Stock Ownership Account (to the extent such percentage exceeds the amount to which a prior election under this Section 8.8(b) had been made). Notwithstanding the foregoing, if the fair market value of the Employer Securities allocated to the Employee Stock Ownership Account of a Participant otherwise entitled to diversify hereunder is $500 or less as of the Valuation Date immediately preceding the first day of any election period, then such Participant shall not be entitled to an election under this Section 8.8(b) for that qualified election period.

(c)           The Plan shall diversify a Participant's Employee Stock Ownership Account pursuant to an election made under Section 8.8(a) or Section 8.8(b) by making a distribution of the elected amount to the Participant or his designated Beneficiary within 90 days after the election.  Such distribution may either be in cash or in the form of Employer Securities and, if an eligible rollover distribution within the meaning of Code Section 402(c)(4), may be directly transferred to an eligible retirement plan in a direct transfer pursuant to Section 9.10.

(d)           Diversification elections under this Section 8.8 shall be restricted, delayed or eliminated if and to the extent that the Administrator determines that such elections would cause the Plan not to be invested primarily in Employer Securities.  Notwithstanding the preceding sentence, diversification elections shall be permitted and implemented to the extent necessary to comply with Code Section 401(a)(28)(B), and such diversification elections shall be given priority over other diversification elections.

8.9           Independent Appraiser.

An independent appraiser meeting the requirements of the regulations promulgated under Code Section 170(a)(1) shall value the Employer Securities in those Plan Years when such securities are not readily tradable on an established securities market.

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ARTICLE IX

PAYMENTS AND DISTRIBUTIONS

9.1           Payments on Termination of Service - In General.

All benefits provided under this Plan shall be funded by the value of a Participant's vested Account in the Plan.  As soon as practicable after a Participant's Retirement, Disability, death or other termination of Service, the Administrator shall ascertain the value of his vested Account, as provided in Article V, and the Administrator shall hold or dispose of the same in accordance with the following provisions of this Article IX.

9.2           Commencement of Payments.

(a)           Distributions upon Retirement, Disability or Death.  Upon a Participant's Retirement, Disability or death, payment of benefits under this Plan shall, unless the Participant otherwise elects (in accordance with Section 9.3), commence as soon as practicable after the Valuation Date next following the date of the Participant's Retirement, Disability or death.

(b)           Distribution following Termination of Service.  Unless a Participant elects otherwise, if a Participant terminates Service prior to Retirement, Disability or death, he shall be accorded an opportunity to commence receipt of benefits as soon as administratively practicable after his termination of Service.  A Participant who terminates Service with a vested Account balance shall be entitled to receive from the Administrator a statement of his benefits.  If a Participant's vested Account balance does not exceed $1,000, the Plan Administrator shall distribute the vested portion of his Account balance as soon as administratively feasible after the date the Participant terminates Service without the consent of the Participant or his spouse.

(c)           Distribution of Larger Accounts.  If the value of a Participant's vested Account balance exceeds $1,000, and the Account balance is immediately distributable, the Participant must consent to any distribution of such Account balance.  The Administrator shall notify the Participant of the right to defer any distribution until the Participant's Account balance is no longer immediately distributable.  The consent of the Participant shall not be required to the extent that a distribution is required to satisfy Code Section 401(a)(9) or Code Section 415.

9.3           Mandatory Commencement of Benefits.

(a)           Unless a Participant elects otherwise, in writing, distribution of benefits will begin no later than the 60th day after the latest to occur of the close of the Plan Year in which (i) the Participant attains age 65, (ii) the tenth anniversary of the Plan Year in which the Participant commenced participation, or (iii) the Participant terminates Service with the Employer and all Related Employers.

(b)           In the event that the Plan shall be subsequently amended to provide for a form of distribution other than a lump sum, if the Participant's interest is to be distributed in other than a lump sum, the following minimum distribution rules shall apply on or after the required beginning date:

(1)           All distributions required under this Section 9.3(b) shall be determined and made in accordance with the Treasury Regulation under Code Section 401(a)(9).

(2)           Time and Manner of Distribution.

(A)           The Participant's entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant 's Required Beginning Date.

(B)           If the Participant dies before distributions begin, the Participant 's entire interest will be distributed, or begin to be distributed, no later than as follows:

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(i)           If the Participant 's surviving spouse is the Participant's sole designated beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70½, if later.

(ii)           If the Participant's surviving spouse is not the Participant's sole designated beneficiary, then distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(iii)            If there is no designated beneficiary as of September 30 of the year following the year of the Participant's death, the Participant's entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

(iv)           If the participant's surviving spouse is the participant's sole designated beneficiary and the surviving spouse dies after the participant but before distributions to the surviving spouse begin, this Section 9.3(b)(2)(B), other than Section 9.3(b)(2)(B)(i), will apply as if the surviving spouse were the participant.

For purposes of this Section 9.3(b)(2)(B) and Section 9.3(b)(4) ,unless Section 9.3(b)(2)(B)(iv) applies, distributions are considered to begin on the Participant's required beginning date. If Section 9.3(b)(2)(B)(iv) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 9.3(b)(2)(B)(i).

(3)           Required Minimum Distributions During Participant's Lifetime.  During the Participant's lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A)           the quotient obtained by dividing the Participant's account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant's age as of the Participant's birthday in the distribution calendar year; or

(B)           if the Participant's sole designated beneficiary for the distribution calendar year is the Participant's spouse, the quotient obtained by dividing the Participant's account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant's and spouse's attained ages as of the Participant's and spouse's birthdays in the distribution calendar year.

Required minimum distributions will be determined under this Section 9.3(b)(2) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the participant's date of death.

(4) Required Minimum Distributions After Participant's Death.

(A)           Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated beneficiary, determined as follows:

(i)           The Participant's remaining life expectancy is calculated using the age of the participant in the year of death, reduced by one for each subsequent year.

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(ii)           If the Participant's surviving spouse is the Participant's sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant's death using the surviving spouse's age as of the spouse's birthday in that year. For distribution calendar years after the year of the surviving spouse's death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse's birthday in the calendar year of the spouse's death, reduced by one for each subsequent calendar year.

(iii)           If the Participant's surviving spouse is not the Participant's sole designated beneficiary, the designated beneficiary's remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the participant's death, reduced by one for each subsequent year.

(B)           If the Participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the Participant's death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's  account balance by the Participant's remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(5) Death Before Date Distributions Begin.

(A)           Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the remaining life expectancy of the Participant's designated beneficiary, determined as provided in (4) above.

(B)           No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the Participant's death, distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's  death.

(C)           Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant's surviving spouse is the Participant's sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse, this paragraph (5) will apply as if the surviving spouse were the Participant.

(6) Definitions.

(A)           Designated beneficiary. The individual who is designated as the beneficiary under the Plan and is the designated beneficiary under Code Section 401(a)(9) of and section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.

(B)           Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 9.3(b)(2).  The required minimum distribution for the Participant's first distribution calendar year will be made on or before the Participant's required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant's  required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

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(C)           Life expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.

(D)           Participant's account balance. The account balance as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(E) Required beginning date. The date specified in Section 9.4.

9.4           Required Beginning Dates.

(a)           General Rule. The required beginning date of a Participant who is a 5-percent owner of the Employer is the first day of April of the calendar year following the calendar year in which the Participant attains age 70-1/2.  The required beginning date of a Participant who is not a 5-percent owner shall be April 1 of the calendar year following the later of either:  (i) the calendar year in which the Participant attains age 70-1/2, or (ii) the calendar year in which the Participant retires.

(b)           5-percent owner.  A Participant is treated as a 5-percent owner for purposes of this section if such Participant is a 5-percent owner as defined in section 416(i) of the Code (determined in accordance with section 416 but without regard to whether the plan is top-heavy) at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 or any subsequent Plan Year.  Once distributions have begun to a 5-percent owner under this section, they must continue to be distributed, even if the Participant ceases to be a 5-percent owner in a subsequent year.

9.5           Form of Payment.

Each Participant's vested Account balance shall be distributed in a lump sum payment.  Notwithstanding the preceding sentence, but subject to Section 9.3, the Administrator may not distribute a lump sum without the Participant's consent when the present value of a Participant's total Account balance is in excess of $1,000.  This form of payment shall be the normal form of distribution.  However, in the event that the Administrator must commence distributions, as required by Section 9.4 herein, with respect to an Employee who has attained age 70 ½ and is still employed by the Employer, if the Employee does not elect a lump sum distribution, payments shall be made in installments in such amounts as shall satisfy the minimum distribution rules of Section 9.3.

9.6           Payments Upon Termination of Plan.

Upon termination of this Plan pursuant to Sections 13.2, 13.4, 13.5 or 13.6, the Administrator shall continue to perform its duties and the Trustee as directed by the Administrator, and shall make all payments upon the following terms, conditions and provisions:  The Account balance of each affected Participant and Former Participant shall immediately become fully vested and nonforfeitable; the Account balance of all Participants and Former Participants shall be determined within 60 days after such termination, and the Administrator shall have the same powers to direct the Trustee in making payments as contained in Sections 9.1 and 13.5.

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9.7           Distributions Pursuant to Qualified Domestic Relations Orders.

Nothing contained in this Plan prevents the Trustee, in accordance with the direction of the Retirement and Benefits Committee, from complying with the provisions of a Qualified Domestic Relations Order. This Plan specifically permits distribution to an alternate payee under a Qualified Domestic Relations Order at any time, irrespective of whether the Participant has attained his earliest retirement age (as defined under Code §414(p)) under the Plan. A distribution to an alternate payee prior to the Participant's attainment of earliest retirement age is available only if: (1) the order specifies distribution at that time or permits an agreement between the Plan and the alternate payee to authorize an earlier distribution; and (2) if the present value of the alternate payee's benefits under the Plan exceeds $5,000, and the order requires, the alternate payee consents to any distribution occurring prior to the Participant's attainment of earliest retirement age. Nothing in this Section 9.7 gives a Participant a right to receive distribution at a time otherwise not permitted under the Plan nor does it permit the alternate payee to receive a form of payment not otherwise permitted under the Plan.

The Committee must establish reasonable procedures to determine the qualified status of a domestic relations order. Upon receiving a domestic relations order, the Committee promptly will notify the Participant and any alternate payee named in the order, in writing, of the receipt of the order and the Plan's procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Committee must determine the qualified status of the order and must notify the Participant and each alternate payee, in writing, of its determination. The Committee must provide notice under this paragraph by mailing to the individual's address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations.

If any portion of the Participant's Account is payable during the period the Committee is making its determination of the qualified status of the domestic relations order, the Committee must make a separate accounting of the amounts payable. If the Committee determines the order is a Qualified Domestic Relations Order within 18 months of the date amounts first are payable following receipt of the order, the Committee will direct the Trustee to distribute the payable amounts in accordance with the order. If the Committee does not make its determination of the qualified status of the order within the 18 month determination period, the Committee will direct the Trustee to distribute the payable amounts in the manner the Plan would distribute if the order did not exist and will apply the order prospectively if the Committee later determines the order is a Qualified Domestic Relations Order. To the extent it is not inconsistent with the provisions of the Qualified Domestic Relations Order, the Committee may direct the Trustee to invest any partitioned amount in a segregated sub-account or separate account and to invest the account in Federally insured, interest-bearing savings account(s) or time deposit(s) (or a combination of both), or in other fixed income investments. A segregated sub-account remains a part of the Trust, but it alone shares in any income it earns, and it alone bears any expense or loss it incurs. The Trustee will make any payments or distributions required under this Section 9.7 by separate benefit checks or other separate distribution to the alternate payee(s).

9.8           Cash-Out Distributions.

If the Plan becomes subject to its top heavy vesting schedule, or the Plan is amended  to implement a graded vesting schedule, a Participant who receives a distribution of his entire vested Account balance because of the termination of his participation in the Plan, the Plan shall disregard a Participant's Service with respect to which such cash-out distribution shall have been made, in computing his Account balance in the event that a Former Participant shall again become an Employee and become eligible to participate in the Plan.  Such a distribution shall be deemed to be made on termination of participation in the Plan if it is made not later than the close of the second Plan Year following the Plan Year in which such termination occurs.  The forfeitable portion of a Participant's Account balance shall be restored upon repayment to the Plan by such Former Participant of the full amount of the cash-out distribution, provided that the Former Participant again becomes an Employee.  Such repayment must be made by the Employee not later than the end of the 5-year period beginning with the date the Participant is reemployed by the Company or a Related Employer, or the close of the first period of 5 consecutive Breaks commencing after the distribution to the Participant.  Forfeitures required to be restored by virtue of such repayment shall be restored from the following sources in the following order of preference: (i)

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current forfeitures; (ii) an additional Employee Stock Ownership Contribution, as appropriate, and as subject to Section 5.6; and (iii) investment earnings of the Fund.  In the event that a Participant's Account balance is totally forfeitable, a Participant shall be deemed to have received a distribution of zero upon his termination of Service.  In the event of a return to Service within 5 years of the date of his deemed distribution, the Participant shall be deemed to have repaid his distribution in accordance with the rules of this Section 9.8.

9.9           ESOP Distribution Rules.

Notwithstanding any provision of this Article IX to the contrary, the distribution of a Participant's Employee Stock Ownership Account (unless the Participant elects otherwise in writing) shall commence as soon as administratively feasible as of the first Valuation Date coincident with or next following his death, Disability or termination of Service, but not later than 1 year after the close of the Plan Year in which the Participant separates from Service by reason of the attainment of his Normal Retirement Date, Disability, death or separation from Service.  In addition, all distributions hereunder shall, to the extent that the Participant's Account is invested in Employer Securities, be made in the form of Employer Securities or cash, or a combination of Employer Securities and cash, in the discretion of the Administrator, subject to the Participant's right to demand Employer Securities in accordance with Section 8.1.  Fractional shares, however, may be distributed in the form of cash.

9.10           Direct Rollover.

(a)           Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an "eligible rollover distribution" paid directly to an "eligible retirement plan" specified by the distributee in a "direct rollover."

(b)           For purposes of this Section 9.10, an "eligible rollover distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an "eligible rollover distribution" does not include:  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 distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer Securities); and any hardship distribution made on behalf of the Participant.

(c)           For purposes of this Section 9.10, an "eligible retirement plan" is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution.  However, in the case of an "eligible rollover distribution" to the surviving spouse or a non-spouse designated beneficiary, an "eligible retirement plan" is an individual retirement account or individual retirement annuity (and in the case of a non-spouse designated beneficiary an inherited individual retirement account or individual retirement annuity).  An eligible retirement plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan.  The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse or a non-spouse designated beneficiary, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code.

(d)           For purposes of this Section 9.10, a distributee includes a Participant or Former Participant.  In addition, the Participant's or Former Participant's surviving spouse and the Participant's or Former Participant's spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order are "distributees" with regard to the interest of the spouse or former spouse.

(e)           For purposes of this Section 9.10, a "direct rollover" is a payment by the Plan to the "eligible retirement plan" specified by the distributee.

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9.11           Waiver of 30-day Notice.

If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (1) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution.

9.12           Re-employed Veterans.

Notwithstanding any provision of the Plan to the contrary, contributions, benefits, Plan loan repayment suspensions and Service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).

9.13           Share Legend.

Employer Securities held or distributed by the Trustee may include such legend restrictions on transferability as the Employer may reasonably require in order to assure compliance with applicable Federal and State securities and other laws.

9.14. Power to Reduce Benefit.

Notwithstanding Section 14.4, effective for judgments, orders, and decrees issued, and settlement agreements entered into, on or after August 5, 1997, a Participant's Plan benefit may be reduced to satisfy liabilities of the Participant to the Plan due to:

(a)           The Participant's being convicted of committing a crime involving the Plan;

(b)           A civil judgment (or consent order or decree) entered by a court in an action brought in connection with a violation of the fiduciary provisions of the Act; or

(c)           A settlement agreement between the Department of Labor and the Participant in connection with a violation of the fiduciary provisions of the Act.

The court order establishing such liability must require that the Participant's benefit in the Plan be applied to satisfy the liability.

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ARTICLE X

PROVISIONS RELATING TO TOP-HEAVY PLANS

10.1           Top-Heavy Rules to Control.

Anything contained in this Plan to the contrary notwithstanding, if for any Plan Year the Plan is a top-heavy plan, as determined pursuant to Section 416 of the Code, then the Plan must meet the requirements of this Article X for such Plan Year.

10.2           Top-Heavy Plan Definitions.

Unless a different meaning is plainly implied by the context, the following terms as used in this Article X shall have the following meanings:

(a)           "Accrued Benefit" shall mean the account balances or accrued benefits of an Employee, calculated pursuant to Section 10.3.

(b)           "Determination Date" shall mean, with respect to any particular Plan Year of this Plan, the last day of the preceding Plan Year (or, in the case of the first Plan Year of the Plan, the last day of the first Plan Year).  In addition, the term "Determination Date" shall mean, with respect to any particular plan year of any plan (other than this Plan) in a Required Aggregation Group or a Permissive Aggregation Group, the last day of the plan year of such plan which falls within the same calendar year as the Determination Date for this Plan.

(c)           "Employer" shall mean the Employer (as defined in Section 1.1(q)) and any entity which is (1) a member of a controlled group including such Employer, while it is a member of such controlled group (within the meaning of Section 414(b) of the Code), (2) in a group of trades or businesses under common control with such Employer, while it is under common control (within the meaning of Section 414(c) of the Code), and (3) a member of an affiliated service group including such Employer, while it is a member of such affiliated service group (within the meaning of Section 414(m) of the Code).

(d)           "Key Employee" shall mean any Employee or former Employee (including any deceased  Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code), a 5-percent owner of the Employer, or a 1-percent owner of the Employer having annual compensation of more than $150,000.  For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code.  The determination of who is a key employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(e)           "Non-Key Employee" shall mean any Employee or former Employee (or any Beneficiary of such Employee or former Employee, as the case may be) who is not considered to be a Key Employee with respect to this Plan.

(f)           "Permissive Aggregation Group" shall mean all plans in the Required Aggregation Group and any other plans maintained by the Employer which satisfies Sections 401(a)(4) and 410 of the Code when considered together with the Required Aggregation Group.

(g)           "Required Aggregation Group" shall mean each plan (including any terminated plan) of the Employer in which a Key Employee is (or in the case of a terminated plan, had been) a Participant in the Plan Year containing the Determination Date or any of the 4 preceding Plan Years, and each other plan of the Employer which enables any plan of the Employer in which a Key Employee is a Participant to meet the requirements of Sections 401(a)(4) or 410 of the Code.

10.3           Calculation of Accrued Benefits.

(a)           An Employee's Accrued Benefit shall be equal to:

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(1)           With respect to this Plan or any other defined contribution plan (other than a defined contribution pension plan) in a Required Aggregation Group or a Permissive Aggregation Group, the Employee's account balances under the respective plan, determined as of the most recent plan valuation date within a 12-month period ending on the Determination Date, including contributions actually made after the valuation date but before the Determination Date (and, in the first plan year of a plan, also including any contributions made after the Determination Date which are allocated as of a date in the first plan year).

(2)           With respect to any defined contribution pension plan in a Required Aggregation Group or a Permissive Aggregation Group, the Employee's account balances under the plan, determined as of the most recent plan valuation date within a 12-month period ending on the Determination Date, including contributions which have not actually been made, but which are due to be made as of the Determination Date.

(3)           With respect to any defined benefit plan in a Required Aggregation Group or a Permissive Aggregation Group, the present value of the Employee's accrued benefits under the plan, determined as of the most recent plan valuation date within a 12-month period ending on the Determination Date, pursuant to the actuarial assumptions used by such plan, and calculated as if the Employee terminated Service under such plan as of the valuation date (except that, in the first plan year of a plan, a current Participant's estimated Accrued Benefit as of the Determination Date shall be taken into account).

(4)           The present values of accrued benefits and the amounts of account balances of an employee as of the Determination Date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the Determination Date.  The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code.  In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period."

(5)           The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

(6)           The Accrued Benefit shall be calculated to include all amounts attributable to both Employer and Employee contributions, but shall exclude amounts attributable to voluntary deductible Employee contributions, if any.

(7)           Rollover and direct plan-to-plan transfers shall be taken into account as follows:

(A)           If the transfer is initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another unrelated employer, the transferring plan shall continue to count the amount transferred; the receiving plan shall not count the amount transferred.

(B)           If the transfer is not initiated by the Employee or is made between plans maintained by related employers, the transferring plan shall no longer count the amount transferred; the receiving plan shall count the amount transferred.

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10.4           Determination of Top-Heavy Status.

This Plan shall be considered to be a top-heavy plan for any Plan Year if, as of the Determination Date, the value of the Accrued Benefits of Key Employees exceeds 60% of the value of the Accrued Benefits of all eligible Employees under the Plan.  Notwithstanding the foregoing, if the Employer maintains any other qualified plan, the determination of whether this Plan is top-heavy shall be made after aggregating all other plans of the Employer in the Required Aggregation Group and, if desired by the Employer as a means of avoiding top-heavy status, after aggregating any other plan of the Employer in the Permissive Aggregation Group.  If the required Aggregation Group is top-heavy, then each plan contained in such group shall be deemed to be top-heavy, notwithstanding that any particular plan in such group would not otherwise be deemed to be top-heavy.  Conversely, if the Permissive Aggregation Group is not top-heavy, then no plan contained in such group shall be deemed to be top-heavy, notwithstanding that any particular plan in such group would otherwise be deemed to be top-heavy.  In no event shall a plan included in a top-heavy Permissive Aggregation Group be deemed a top-heavy plan unless such plan is also included in a top-heavy Required Aggregation Group.

10.5           Minimum Contribution.

(a)           For any Plan Year in which the Plan is top-heavy, each Non-Key Employee who has met the age and service requirements, if any, contained in the Plan, shall be entitled to a minimum contribution (which may include forfeitures otherwise allocable) equal to a percentage of such Non-Key Employee's compensation (as defined in Section 415 of the Code) as follows:

(1)           If the Non-Key Employee is not covered by a defined benefit plan maintained by the Employer, then the minimum contribution under this Plan shall be 3% of such Non-Key Employee's compensation.

(2)           If the Non-Key Employee is covered by a defined benefit plan maintained by the Employer, then the minimum contribution under this Plan shall be 5% of such Non-Key Employee's compensation.

(b)           Notwithstanding the foregoing, the minimum contribution otherwise allocable to a Non-Key Employee under this Plan shall be reduced in the following circumstances:

(1)           The percentage minimum contribution required under this Plan shall in no event exceed the percentage contribution made for the Key Employee for whom such percentage is the highest for the Plan Year after taking into account contributions under other defined contribution plans in this Plan's Required Aggregation Group; provided, however, that this Section 10.5(b)(1) shall not apply if this Plan is included in a Required Aggregation Group and this Plan enables a defined benefit plan in such Required Aggregation Group to meet the requirements of Section 401(a)(4) or 410 of the Code.

(2)           No minimum contribution shall be required (or the minimum contribution shall be reduced, as the case may be) for a Non-Key Employee under this Plan for any Plan Year if the Employer maintains another qualified plan under which a minimum benefit or contribution is being accrued or made on account of such Plan Year, in whole or in part, on behalf of the Non-Key Employee, in accordance with Section 416(c) of the Code.

(c)           For purposes of this Section 10.5, there shall be disregarded (1) any Employer contributions attributable to a salary reduction or similar arrangement, or (2) any Employer contributions to or any benefits under Chapter 21 of the Code (relating to the Federal Insurance Contributions Act), Title II of the Social Security Act, or any other federal or state law.

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(d)           For purposes of this Section 10.5, minimum contributions shall be required to be made on behalf of only those Non-Key Employees, as described in Section 10.6(a), who have not terminated Service as of the last day of the Plan Year.  If a Non-Key Employee is otherwise entitled to receive a minimum contribution pursuant to this Section 10.5(d), the fact that such Non-Key Employee failed to complete 1,000 Hours of Service or failed to make any mandatory or elective contributions under this Plan, if any are so required, shall not preclude him from receiving such minimum contribution.

(e)           Matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan.  The preceding sentence shall apply with respect to matching contributions under the Plan or, if the plan provides that the minimum contribution requirement shall be met in another plan, such other plan.  Matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code.

10.6 Vesting.

(a)           For any Plan Year in which the Plan is a top-heavy plan, a Participant’s Account shall continue to vest according to the following schedule:

Years of Vesting Service Completed Percentage Vested

Less than 2                    0%

2 but less than 3           20%

3 but less than 4           40%

4 but less than 5           60%

 5 or more            100%

After all Pre-PPA Exempt Loans (as defined in Section 7.2(b)) are repaid in full, the top-heavy vesting schedule shall be the same as in Section 7.2.

(b)           If for any Plan Year the Plan becomes top-heavy and the vesting schedule set forth in Section 10.6(a) becomes effective, then, even if the Plan ceases to be top-heavy in any subsequent Plan Year, the vesting schedule set forth in Section 10.7(a) shall remain applicable with respect to any Participant who has completed 3 or more Years of Service.

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ARTICLE XI

ADMINISTRATION

11.1           Appointment of Administrator.

This Plan shall be administered by a committee consisting of up to 7 persons, whether or not Employees or Participants, who shall be appointed from time to time by the Board of Directors to serve at its pleasure.  Such Committee may, at the Board's discretion, be one and the same as the Committee or Retirement and Benefits Committee which administers the Sponsor's other employee benefit plans.  The Sponsor may require that each person appointed as an Administrator shall signify his acceptance by filing an acceptance with the Sponsor.  The term "Administrator" as used in this Plan shall refer to the members of the committee, either individually or collectively, as appropriate.  The authority to control and manage the operation and administration of the Plan is vested in the Administrator appointed by the Board of Directors. The Administrator shall have the rights, duties and obligations of an "administrator," as that term is defined in section 3(16)(A) of the Act, and of a "plan administrator," as that term is defined in Section 414(g) of the Code.  In the event that the Sponsor shall elect not to appoint any individuals to constitute a committee to administer the Plan, the Sponsor shall serve as the Administrator hereunder.

11.2           Resignation or Removal of Administrator.

An Administrator shall have the right to resign at any time by giving notice in writing, mailed or delivered to the Sponsor and to the Trustee.  Any Administrator who was an employee of the Employer at the time of his appointment shall be deemed to have resigned as an Administrator upon his termination of Service.  The Board of Directors may, in its discretion, remove any Administrator with or without cause, by giving notice in writing, mailed or delivered to the Administrator and to the Trustee.

11.3           Appointment of Successors:  Terms of Office, Etc.

Upon the death, resignation or removal of an Administrator, the Sponsor may appoint, by Board of Directors' resolution, a successor or successors.  Notice of termination of an Administrator and notice of appointment of a successor shall be made by the Sponsor in writing, with copies mailed or delivered to the Trustee, and the successor shall have all the rights and privileges and all of the duties and obligations of the predecessor.

11.4           Powers and Duties of Administrator.

The Administrator shall have the following duties and responsibilities in connection with the administration of this Plan:

(a)           To promulgate and enforce such rules, regulations and procedures as shall be proper for the efficient administration of the Plan, such rules, regulations and procedures to apply uniformly to all Employees, Participants and Beneficiaries;

(b)           To exercise discretion in determining all questions arising in the administration, interpretation and application of the Plan, including questions of eligibility and of the status and rights of Participants, Beneficiaries and any other persons hereunder;

(c)           To decide any dispute arising hereunder strictly in accordance with the terms of the Plan; provided, however, that no Administrator shall participate in any matter involving any questions relating solely to his own participation or benefits under this Plan;

(d)           To advise the Employer and direct the Trustee regarding the known future needs for funds to be available for distribution in order that the Trustee may establish investments accordingly;

(e)           To correct defects, supply omissions and reconcile inconsistencies to the extent necessary to effectuate the Plan;

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(f)           To advise the Employer of the maximum deductible contribution to the Plan for each fiscal year;

(g)           To direct the Trustee concerning all matters requiring the Administrator's direction pursuant to the provisions of this Plan and the Trust Agreement;

(h)           To advise the Trustee on all terminations of Service by Participants, unless the Employer has so notified the Trustee;

(i)           To confer with the Trustee on the settling of any claims against the Fund;

(j)           To make recommendations to the Board of Directors with respect to proposed amendments to the Plan and the Trust Agreement;

(k)           To file all reports with government agencies, Employees and other parties as may be required by law, whether such reports are initially the obligation of the Employer, the Plan or the Trustee;

(l)           To have all such other powers as may be necessary to discharge its duties hereunder; and

(m)           To direct the Trustee to pay all expenses of administering this Plan, except to the extent that the Employer pays such expenses.

Full discretion is granted to the Administrator to interpret the Plan and to determine the benefits, rights and privileges of Participants, Beneficiaries or other persons affected by this Plan.  The Administrator shall exercise its discretion under the terms of this Plan and shall administer the Plan in accordance with its terms, such administration to be exercised uniformly so that all persons similarly situated shall be similarly treated.

11.5           Action by Administrator.

The Administrator may elect a Chairman and Secretary from among its members and may adopt rules for the conduct of its business.  A majority of the members then serving shall constitute a quorum for the transaction of business.  All resolutions or other action taken by the Administrator shall be by vote of a majority of those present at such meeting and entitled to vote.  Resolutions may be adopted or other action taken without a meeting upon written consent signed by at least a majority of the members.  All documents, instruments, orders, requests, directions, instructions and other papers shall be executed on behalf of the Administrator by either the Chairman or the Secretary of the Administrator, if any, or by any member or agent of the Administrator duly authorized to act on the Administrator's behalf.

11.6           Participation by Administrator.

No member of the committee constituting the Administrator shall be precluded from becoming a Participant in the Plan if he would be otherwise eligible, but he shall not be entitled to vote or act upon matters or to sign any documents relating specifically to his own participation under the Plan, except when such matters or documents relate to benefits generally.  If this disqualification results in the lack of a quorum, then the Board of Directors shall appoint a sufficient number of temporary members of the committee constituting the Administrator who shall serve for the sole purpose of determining such a question.

11.7           Agents.

The Administrator may employ agents and provide for such clerical, legal, actuarial, accounting, medical, advisory or other services as it deems necessary to perform its duties under this Plan.  The cost of such services and all other expenses incurred by the Administrator in connection with the administration of the Plan shall be paid from the Fund, unless paid by the Employer.

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11.8           Allocation of Duties.

The duties, powers and responsibilities reserved to the Administrator may be allocated among its members so long as such allocation is pursuant to written procedures adopted by the Administrator, in which case, except as may be required by the Act, no Administrator shall have any liability, with respect to any duties, powers or responsibilities not allocated to him, for the acts of omissions of any other Administrator.

11.9           Delegation of Duties.

The Administrator may delegate any of its duties to any Employees of the Employer, or to any other person or firm, provided that the Administrator shall prudently choose such agents and rely in good faith on their actions.

11.10                      Administrator's Action Conclusive.

Any action on matters within the authority of the Administrator shall be final and conclusive except as provided in Article XII.

11.11                      Compensation and Expenses of Administrator.

No Administrator who is receiving compensation from the Employer as a full-time employee, as a director or agent, shall be entitled to receive any compensation or fee for his services hereunder.  Any other Administrator shall be entitled to receive such reasonable compensation for his services as an Administrator hereunder as may be mutually agreed upon between the Employer and such Administrator.  Any such compensation shall be paid from the Fund, unless paid by the Employer.  Each Administrator shall be entitled to reimbursement by the Employer for any reasonable and necessary expenditures incurred in the discharge of his duties.

11.12                      Records and Reports.

The Administrator shall maintain adequate records of its actions and proceedings in administering this Plan and shall file all reports and take all other actions as it deems appropriate in order to comply with the Act, the Code and governmental regulations issued thereunder.

11.13                      Reports of Fund Open to Participants.

The Administrator shall keep on file, in such form as it shall deem convenient and proper, all annual reports of the Fund received by the Administrator from the Trustee, and a statement of each Participant's interest in the Fund as from time to time determined.  The annual reports of the Fund and the statement of his Account balance, as well as a complete copy of the Plan and the Trust Agreement and copies of annual reports to the Internal Revenue Service, shall be made available by the Administrator to the Employer for examination by each Participant during reasonable hours at the office of the Employer, provided, however, that the statement of a Participant's Account balance shall not be made available for examination by any other Participant.

11.14                      Named Fiduciary.

The Administrator is the named fiduciary for purposes of Section 402 of the Act and shall be the designated agent for receipt of service of process on behalf of the Plan.  It shall use the care and diligence in the performance of its duties under this Plan that are required of fiduciaries under the Act.  Nothing in this Plan shall preclude the Employer from purchasing liability insurance to protect the Administrator with respect to its duties under this Plan.

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11.15                      Information from Employer.

The Employer shall promptly furnish all necessary information to the Administrator to permit it to perform its duties under this Plan.  The Administrator shall be entitled to rely upon the accuracy and completeness of all information furnished to it by the Employer, unless it knows or should have known that such information is erroneous.

11.16                      Responsibilities of Directors.

Subject to the rights reserved to the Board of Directors acting on behalf of the Employer as set forth in this Plan, no member of the Board of Directors shall have any duties or responsibilities under this Plan, except to the extent he shall be acting in the capacity of an Administrator or Trustee.

11.17                      Liability and Indemnification.

(a)           To the extent not prohibited by the Act, the Administrator shall not be responsible in any way for any action or omission of the Employer, the Trustee or any other person in the performance of their duties and obligations set forth in this Plan and in the Trust Agreement.  To the extent not prohibited by the Act, the Administrator shall also not be responsible for any act or omission of any of its agents, or with respect to reliance upon advice of its counsel (whether or not such counsel is also counsel to the Employer or the Trustee), provided that such agents or counsel were prudently chosen by the Administrator and that the Administrator relied in good faith upon the action of such agent or the advice of such counsel.

(b)           The Administrator shall not be relieved from responsibility or liability for any responsibility, obligation or duty imposed upon it under this Plan or under the Act.  Except for its own gross negligence, willful misconduct or willful breach of the terms of this Plan, the Administrator shall be indemnified and held harmless by the Employer against liability or losses occurring by reason of any act or omission of the Administrator to the extent that such indemnification does not violate the Act or any other federal or state laws.

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ARTICLE XII

CLAIMS PROCEDURE

12.1           Notice of Denial.

If a Participant or his Beneficiary is denied any benefits under this Plan, either in whole or in part, the Administrator shall advise the claimant in writing of the amount of his benefit, if any, and the specific reasons for the denial.  The Administrator shall also furnish the claimant at that time with a written notice containing:

(a)           A specific reference to pertinent Plan provisions;

(b)           A description of any additional material or information necessary for the claimant to perfect his claim, if possible, and an explanation of why such material or information is needed; and

(c)           An explanation of the Plan's claim review procedure.

12.2           Right to Reconsideration.

Within 60 days of receipt of the information described in 12.1 above, the claimant shall, if he desires further review, file a written request for reconsideration with the Administrator.

12.3           Review of Documents.

So long as the claimant's request for review is pending (including the 60-day period described in Section 12.2 above), the claimant or his duly authorized representative may review pertinent Plan documents and the Trust Agreement (and any pertinent related documents) and may submit issues and comments in writing to the Administrator.

12.4           Decision by Administrator.

A final and binding decision shall be made by the Administrator within 60 days of the filing by the claimant of his request for reconsideration; provided, however, that if the Administrator feels that a hearing with the claimant or his representative present is necessary or desirable, this period shall be extended an additional 60 days.

12.5           Notice by Administrator.

The Administrator's decision shall be conveyed to the claimant in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based.  The Administrator's decision shall be binding and conclusive with respect to all persons interested therein unless the Administrator has no reasonable basis for its decision.

12.6           Special Claims Procedures.

The following changes to the claims procedures set forth above shall apply to all claims for disability benefits under the Plan.  A disability benefit is any benefit, the availability of which is conditioned upon a showing of a disability.  Unless a change to the normal claims procedures set forth above is indicated, the normal procedures will also apply to claims for disability benefits.

(a)           In the case of a claim for disability benefits, the Administrator shall advise the claimant of any adverse determination not later than 45 days after receipt of the claim.  Should it be necessary, that period may be extended by 30 days provided the Plan notifies the claimant of the circumstances prior to the expiration of the initial 45 day period.  In addition to the disclosure requirements of Section 12.1, a notice of denial of disability benefits must include:  (a) any internal rule or guideline relied upon by the Plan in making its determination and; (b) if the adverse determination is based on a medical necessity or

41

experimental treatment, a statement explaining the specific clinical judgment for the determination, or a statement that such an explanation will be provided upon request.

(b)           Within 180 days of receipt of a notice of denial of a disability claim, the claimant may file a written claim for review with the Administrator.

(c)           Within 45 days, the Administrator must provide the claimant with a written notification of the benefit determination on review.  Should an extension of time be required, the initial period may be extended by up to 45 additional days.  The notice of the review determination shall include all of the disclosures required to be made by Section 12.1 and this Section 12.6.

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ARTICLE XIII

AMENDMENTS, TERMINATION AND MERGER

13.1           Amendments.

The Sponsor reserves the right at any time and from time to time, for any reason and retroactively if deemed necessary or appropriate by it, to the extent permissible under law, to conform with governmental regulations or other policies, to amend in whole or in part any or all of the provisions of this Plan, provided that:

(a)           No amendment shall make it possible for any part of the Fund to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries under the Trust Agreement, except to the extent provided in Section 4.4;

(b)           No amendment may, directly or indirectly, reduce the vested portion of any Participant's Account balance as of the effective date of the amendment or change the vesting schedule with respect to the future accrual of Employer contributions for any Participants unless each Participant with 3 or more Years of Vesting Service is permitted to elect to have the vesting schedule in effect before the amendment used to determine his vested benefit;

(c)           No amendment may eliminate an optional form of benefit; and.

(d)           No amendment may increase or change the duties or liabilities of the Trustee without its consent.

Amendments may be made in the form of Board of Directors' resolutions or separate written document.  Copies of all amendments shall be delivered to the Trustee.

13.2           Effect of Change In Control.

(a)           In the event of a “change in control” of the Sponsor, as defined in paragraph (d) below, this Plan shall terminate at the effective time of such change in control.  Nothing in this Plan shall prevent the Sponsor from becoming a party to such a change in control.

(b)           Upon the effective time of a change in control, the Account balances of all affected Participants and Former Participants shall become fully vested and nonforfeitable, and the Trustee shall make payments to each Participant and Beneficiary in accordance with Section 9.5.

(c)           Notwithstanding any provision of the Plan to the contrary, at and after the effective time of a change in control, each of the following provisions shall become applicable; provided, however, that any such provision shall not apply if the Board of Directors determines that such provision would adversely affect the tax-qualified status of the Plan pursuant to Code Section 401(a), or should not apply for any other reason:

(1)           The Plan shall be interpreted, maintained and operated exclusively for the benefit of those individuals who are participating in the Plan as of the effective time of the change in control and their Beneficiaries.  Notwithstanding the provisions of Section 2.1(a), no Employee shall become a Participant for the first time at or after the effective time of a change in control.

(2)           After a Participant's Retirement, Disability or other termination of Service, such Participant's Account, regardless of its value, shall not be distributed and shall share in the allocation of the Employee Stock Ownership Contribution and Investment Adjustments until such time as either (A) the Fund is liquidated in connection with the termination of the Plan, or (B) the Participant (or his Beneficiary) receives a full distribution of his Account either upon his election in accordance with Section 9.2(c) or as required in accordance with Section 8.8, 9.3 or 9.4.

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(3)           Upon the termination of the Plan, Employer Securities that are allocated to the Exempt Loan Suspense Account and that are not used to repay an Exempt Loan shall be allocated as Investment Adjustments in accordance with Section 5.3.

(4)           Employer Securities that are released from the Exempt Loan Suspense Account in accordance with Section 8.5 shall be allocated to the Employee Stock Ownership Account of each Participant regardless of whether he completed a Year of Vesting Service during the Plan Year or was an Employee on the last day of such Plan Year.

(5)           The Administrator shall consist of a committee selected by the Board of Directors, and such committee shall have the exclusive authority (i) to remove the Trustee and to appoint a successor trustee, (ii) to adopt amendments to the Plan or the Trust Agreement to effectuate the provisions and intent of this Section 13.2, and (iii) to perform any or all of the functions and to exercise all of the discretion that are delegated to the Administrator pursuant to Article XI.

(6)           Any application for a favorable determination letter with respect to the tax-qualified status of the Plan under Code Section 401(a) with respect to its termination shall be subject to the prior review, comment and approval (which approval shall not be unreasonably withheld) of the Administrator, as defined in paragraph (5) above.

(d)           For purposes of this Section 13.2, the term "change in control" means the occurrence of any one or more of the events specified in the following clauses (i) through (iii): (i)any third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial owner of shares of the Sponsor with respect to which 25% or more of the total number of votes for the election of the Board of Directors may be cast, (ii) as a result of, or in connection with, any cash tender offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Sponsor shall cease to constitute a majority of the Board of Directors, or (iii) the effective time of a transaction that is approved by the stockholders of the Sponsor and that provides either for the Sponsor to cease to be an independent publicly-owned corporation or for a sale or other disposition of all or substantially all of the assets of the Sponsor.

13.3           Consolidation or Merger of Trust.

In the event of any merger or consolidation of the Fund with, or transfer in whole or in part of the assets and liabilities of the Fund to, another trust fund held under any other plan of deferred compensation maintained or to be established for the benefit of all or some of the Participants of this Plan, the assets of the Fund applicable to such Participants shall be transferred to the other trust fund only if:

(a)           Each Participant would receive a benefit under such successor trust fund immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (determined as if this Plan and such transferee trust fund had then terminated);

(b)           Resolutions of the Board of Directors, or of any new or successor employer of the affected Participants, shall authorize such transfer of assets, and, in the case of the new or successor employer of the affected Participants, its resolutions shall include an assumption of liabilities imposed under this Plan with respect to such Participants' inclusion in the new employer's plan; and

(c)           Such other plan and trust are qualified under Sections 401(a) and 501(a) of the Code.

13.4           Bankruptcy or Insolvency of Employer.

In the event of (a) the Employer's legal dissolution or liquidation by any procedure other than a consolidation or merger, (b) the Employer's receivership, insolvency, or cessation of its business as a going concern, or (c) the commencement of any proceeding by or against the Employer under the federal bankruptcy laws, or similar federal or state statute, or any federal or state statute or rule providing for the

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relief of debtors, compensation of creditors, arrangement, receivership, liquidation or any similar event which is not dismissed within 30 days, this Plan shall terminate automatically with respect to such entity on such date (provided, however, that if a proceeding is brought against the Employer for reorganization under Chapter 11 of the United States Bankruptcy Code or any similar federal or state statute, then this Plan shall terminate automatically if and when said proceeding results in a liquidation of the Employer, or the approval of any Plan providing therefor, or the proceeding is converted to a case under Chapter 7 of the Bankruptcy Code or any similar conversion to a liquidation proceeding under federal or state law including, but not limited to, a receivership proceeding).  In the event of any such termination as provided in the foregoing sentence, the Trustee shall make payments to the persons entitled thereto in accordance with Section 9.6 hereof.

13.5           Voluntary Termination.

The Board of Directors reserves the right to terminate this Plan at any time by giving to the Trustee and the Administrator notice in writing of such desire to terminate.  The Plan shall terminate upon the date of receipt of such notice, the Account balances of all affected Participants and Former Participants shall become fully vested and nonforfeitable, and the Trustee shall make payments to each Participant or Beneficiary in accordance with Section 9.6.  Alternatively, the Sponsor, in its discretion, may determine to continue the Trust Agreement and to continue the maintenance of the Fund, in which event distributions shall be made upon the contingencies and in all the circumstances under which such distributions would have been made, on a fully vested basis, had there been no termination of the Plan.  In addition, an entity other than the Sponsor that is participating in this Plan may terminate its participation in the Plan on a prospective basis by action of its board of directors.  Upon such termination of participation, Participants who are employees of such entity shall be entitled to distributions from this Plan in accordance with Article IX and this Article XIII.

13.6           Partial Termination of Plan or Permanent Discontinuance of Contributions.

In the event that a partial termination of the Plan shall be deemed to have occurred, or if the Employer shall discontinue permanently its contributions hereunder, the right of each affected Participant and Former Participant in his Account balance shall be fully vested and nonforfeitable.  The Sponsor, in its discretion, shall decide whether to direct the Trustee to make immediate distribution of such portion of the Fund assets to the persons entitled thereto or to make distribution in the circumstances and contingencies which would have controlled such distributions if there had been no partial termination or permanent discontinuance of contributions.

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ARTICLE XIV

MISCELLANEOUS

14.1           No Diversion of Funds.

It is the intention of the Employer that it shall be impossible for any part of the corpus or income of the Fund to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except to the extent that a return of the Employer's contribution is permitted under Section 4.4.

14.2           Liability Limited.

Neither the Employer nor the Administrator, nor any agents, employees, officers, directors or shareholders of any of them, nor the Trustee, nor any other person, shall have any liability or responsibility with respect to this Plan, except as expressly provided herein.

14.3           Facility of Payment.

If the Administrator shall receive evidence satisfactory to it that a Participant or Beneficiary entitled to receive any benefit under the Plan is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of such Participant or Beneficiary and that no guardian, committee or other representative of the estate of such Participant or Beneficiary shall have been duly appointed, the Administrator may direct the Trustee to make payment of such benefit otherwise payable to such Participant or Beneficiary, to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.

14.4           Spendthrift Clause.

Except as permitted by the Act or the Code, including in the case of certain judgments and settlements described in subparagraph (C) of Section 401(a)(13) of the Code, no benefits or other amounts payable under the Plan shall be subject in any manner to anticipation, sale, transfer, assignment, pledge, encumbrance, charge or alienation.  If the Administrator determines that any person entitled to any payments under the Plan has become insolvent or bankrupt or has attempted to anticipate, sell, transfer, assign, pledge, encumber, charge or otherwise in any manner alienate any benefit or other amount payable to him under the Plan or that there is any danger of any levy or attachment or other court process or encumbrance on the part of any creditor of such person entitled to payments under the Plan against any benefit or other accounts payable to such person, the Administrator may, at any time, in its discretion, and in accordance with applicable law, direct the Trustee to withhold any or all payments to such person under the Plan and apply the same for the benefit of such person, in such manner and in such proportion as the Administrator may deem proper.

14.5           Benefits Limited to Fund.

All contributions by the Employer to the Fund shall be voluntary, and the Employer shall be under no legal liability to make any such contributions, except as otherwise provided herein.  The benefits of this Plan shall be provided solely by the assets of the Fund, and no liability for the payment of benefits under the Plan or for any loss of assets due to any action or inaction of the Trustee shall be imposed upon the Employer.

14.6           Cooperation of Parties.

All parties to this Plan and any party claiming interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary and desirable for carrying out this Plan or any of its provisions.

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14.7           Payments Due Missing Persons.

The Administrator shall direct the Trustee to make a reasonable effort to locate all persons entitled to benefits under the Plan; however, notwithstanding any provision in the Plan to the contrary, if, after a period of 5 years from the date such benefit shall be due, any such persons entitled to benefits have not been located, their rights under the Plan shall stand suspended.  Before this provision becomes operative, the Trustee shall send a certified letter to all such persons at their last known address advising them that their interest in benefits under the Plan shall be suspended.  Any such suspended amounts shall be held by the Trustee for a period of 3 additional years (or a total of 8 years from the time the benefits first became payable), and thereafter such amounts shall be reallocated among current Participants in the same manner that a current contribution would be allocated.  However, if a person subsequently makes a valid claim with respect to such reallocated amounts and any earnings thereon, the Plan earnings or the Employer's contribution to be allocated for the year in which the claim shall be paid shall be reduced by the amount of such payment.  Any such suspended amounts shall be handled in a manner not inconsistent with regulations issued by the Internal Revenue Service and Department of Labor.

14.8           Governing Law.

This Plan has been executed in the State of Kansas, and all questions pertaining to its validity, construction and administration shall be determined in accordance with the laws of that State, except to the extent superseded by the Act.

14.9           Nonguarantee of Employment.

Nothing contained in this Plan shall be construed as a contract of employment between the Employer and any Employee, or as a right of any Employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its Employees, with or without cause.

14.10                      Counsel.

The Trustee and the Administrator may consult with legal counsel, who may be counsel for the Employer and for the Administrator or the Trustee (as the case may be), with respect to the meaning or construction of this Plan and the Trust Agreement, their respective obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and they shall be fully protected to the extent allowable by law with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel.

14.11                      Purposes.

This Plan is intended to satisfy the Federal Tax Qualification Requirements for stock bonus plans which are intended to operate and serve as employee stock ownership plans as described in Code Section 4975(e)(7).  This Plan has been implemented so that Participants may be provided with an opportunity to accumulate capital for their future economic security by being provided an equity interest in their employer.  This Plan, as an employee stock ownership plan, is intended to invest primarily in “qualifying employer securities” as defined in Code Section 4975(e)(8) of the Code.

14.12                      Invalidity.

Subject to the requirements of the Code and the Act, in the event any provision of the Agreement, as between the Sponsor and the Trustee, shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof, and this Agreement shall thereafter be construed and enforced as if said illegal or invalid provisions had never been included herein.

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ARTICLE XVI

TRUST PROVISIONS

15.1           Contributions.

The Employer shall contribute and pay over to the Trustee, annually or more often, as the Employer shall decide, such amounts as shall be determined under the Plan. Notwithstanding the foregoing, however, the Employer shall contribute sufficient amounts to make the principal and interest payments on any Exempt Loan as they become due; provided, however, that no such contribution shall exceed the limitations under Sections 404 and 415 of the Code. Contributions may be made by the Employer to the Trustee in the form of cash, Employer Securities or any other property permissible under the Code and acceptable to the Trustee.

As set forth in the Plan, and except as provided in this Section, the Employer assumes no contractual obligation to continue contributions to the Plan but has specifically reserved therein the right at any time and for any reason to discontinue the Plan and the contributions provided to be made thereunder. Failure by the Employer to continue the Plan or make contributions provided to be made thereunder shall not give rise to any liability on its part whatsoever other than for contributions provided to be made prior to the effective date of the termination.

15.2           Information and Data to be Furnished the Trustee.

(a)           The Employer agrees to furnish the Trustee, through the Administrator, with such information and data relative to the Plan as is necessary for the proper administration of the Fund established hereunder. The Employer also agrees that the Administrator or an investment manager appointed pursuant to this Article (“Investment Manager”) shall direct the Trustee with respect to all matters contemplated by the Plan and this Agreement. The Employer shall promptly notify the Trustee in writing in the event that the Internal Revenue Service proposes to disallow the qualified status of the Plan or Trust.

(b)           Except as otherwise provided by law or as otherwise provided in the Plan or in this Agreement, neither the Employer nor any of its shareholders or directors, nor the Administrator, shall have any duties or obligations with respect to this Agreement.

(c)           Except as otherwise provided by law, neither the Employer, nor any of its officers, directors, employees, or partners (as the case may be), nor the Administrator, shall in any way be liable or responsible to any Participant, Beneficiary, Trustee or any other person, firm or corporation whatsoever for any acts of omission or commission in connection with his or its duties, as specified in this Article, unless such act of omission or commission is due to his or its own individual, willful and intentional nonfeasance, malfeasance or misfeasance.

15.3           Trust Fund and Accounts.

(a)           The Trustee shall establish and maintain a trust fund into which shall be paid the contributions made by the Employer under the terms of the Plan, which contributions, together with any income, gains or profits, less distributions, expenses and losses, shall comprise the Fund held by the Trustee. The Trustee shall hold, invest, reinvest, manage, administer and distribute the assets of the Fund, as hereinafter set forth, in accordance with the directions of the Administrator or an Investment Manager and for the exclusive benefit of the Employees participating in the Plan or their  Beneficiaries.

(b)           As a part of the Fund, the Administrator shall establish and maintain any individual Participants' Accounts required under the provisions of the Plan for such individuals who become Participants from time to time, including any separate accounts as may be provided for in the Plan from time to time to aid in the administration of the Plan. In addition, the Trustee shall establish and maintain suspense accounts as a part of the Fund for the purposes specified in the Plan. The establishment of separate accounts hereunder shall not require a segregation of any part of the assets of the Fund, and no Participant shall acquire any right to or interest in any specific asset of the Fund as a result of the allocations to such accounts provided for under the Plan.

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(c)           The Trustee shall accept and hold in the Fund contributions made by the Employer under the Plan. If the amount of the contribution is less than any minimum established for any investment medium, then the contribution may be held by the Trustee in cash, without interest, until such time as the required amount has been contributed so that an investment may be properly made. The Trustee shall not be responsible in any way for the administration of the Plan and shall be under no duty to determine whether the amount of any contribution is in accordance with the Plan or to collect or enforcement of any contribution.

(d)           The Trustee shall make payment from the Fund to such persons (who may include the Administrator) in such manner, at such times, and in such amounts as the Administrator may from time to time direct in writing. Each such direction shall be in the form of a certificate setting forth the names and addresses of, and the amount payable to, the persons named therein and verifying that such persons are entitled to receive benefits under the Plan in the amounts and at the times stated in such certificate. All such payments shall be made by the Trustee in kind or, if in cash, by checks mailed postage prepaid to the persons or companies named in such certificate at their addresses therein set forth.

(e)           Upon receipt of written instructions from the Administrator, the Trustee shall charge the appropriate account of the Participant for any withdrawals or distributions made under the Plan.

(f)           In the event that any dispute shall arise as to the persons to whom payments and the delivery of any fund or property shall be made by the Trustee, or the amounts thereof, the Trustee may retain such payments and/or postpone such delivery until actual adjudication of such dispute shall have been made in a court of competent jurisdiction as provided herein, or it shall be indemnified against loss to its satisfaction.

(g) The Trust Fund  shall be valued as follows:

(i)           As of each Valuation Date, the Trustee shall determine the net worth of the assets of the Fund and report such value to the Administrator in writing. In determining such net worth, the Trustee shall evaluate the assets of the Fund at their fair market value as of such Valuation Date and shall deduct all expenses chargeable to the Fund. Any increase or decrease in the net worth of the assets of the Fund shall be allocated as of each Valuation Date among the Accounts established as a part of the Fund in the manner specified in the Plan.

(ii)           In determining and valuing the assets and liabilities of the Fund for any purpose, securities held in the Fund shall be valued at their last published sale price on the Valuation Date, or if the Valuation Date is not a business day, then on the business day immediately prior thereto upon the New York Stock Exchange or upon any other recognized exchange or exchanges, or if no sale shall have been reported, and in the case of over-the-counter quotations, the last bid price at the close of business on said business day, all as reported by any report in common use or authorized as official by the New York Stock Exchange or any such other exchange, as the case may be. Where any security is listed on two or more exchanges, the Administrator or an Investment Manager shall direct the Trustee from time to time with respect to the particular exchange which shall be used for the purpose of this Section.

(iii)           However, with respect to securities, in the event the Administrator or an Investment Manager considers the method described in Section 15.3(g)(ii) above to be impracticable because of the fact that any of the securities included in the Fund are not quoted or listed, or for any other reason, then the Trustee shall employ, at the expense of the Fund, an independent appraiser to appraise such securities for the purpose of obtaining the value of the Fund and for any other purpose in the administration of the Trust.

15.4           Duties and Powers of the Trustee.

(a)           The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, which shall show the complete record of the operation of the Fund, and all such accounts and the books and records relating thereto shall be open to inspection at all reasonable times by any person designated in writing by the Administrator.

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(b)           The Trustee shall also furnish to the Employer and the Administrator, upon request, balance sheets and statements of receipts and disbursements during the continuance of this Agreement as of any date requested, but the Trustee shall not be required to furnish such statements more than once in any three-month period.

(c)           Within one hundred twenty (120) days following the close of each Plan Year, and within one hundred twenty (120) days following the resignation or removal of the Trustee as provided for in Section 15.5 hereof, and within one hundred twenty (120) days following the completion of the application or distribution of the Fund upon termination of the Plan, the Trustee shall file with the Employer and with the Administrator a written account setting forth all investments, receipts, disbursements and other transactions effected by it during such year or during the period from the closing date of the last preceding written account to the date of such resignation or removal or to the date of such completion of application or distribution of funds. Each such account shall set forth in summary form the receipts and disbursements of the Trustee for the period accounted for and shall include a description of all securities and other assets purchased and sold during the period accounted for, and the cost or proceeds of sale thereof, and shall show all cash, securities and other property held at the end of such period, and the cost and the market value of each item thereof. Except as otherwise prescribed by the Act, the Trustee shall be forever released and discharged from any liability or accountability to anyone about the propriety of its acts or transactions shown in such account, except with respect to any such acts or transactions as to which the Employer or Administrator shall, within the one year period after such account shall have been filed with the Employer and with the Administrator, file with the Trustee a written statement setting forth its or their exceptions or objections. If such account is filed with the Trustee and the matters thereby brought into controversy cannot be adjusted by agreement between the Employer and/or Administrator and the Trustee, then the Trustee shall file such account in any court of competent jurisdiction for audit and adjudication, as provided in Section 15.8(g) hereof. The written approval by the Employer and by the Administrator of any account filed by the Trustee with the Employer and the Administrator shall forever release and discharge the Trustee from any liability or accountability to anyone about the propriety of its acts or transactions shown in such account.

(d)           The Trustee may employ such counsel, accountants, brokers, actuaries and other agents and provide for such clerical, accounting, actuarial and other services as the Trustee may deem advisable to perform its duties under this Agreement, or as may be directed by the Administrator. The Trustee may pay for such services in accordance with Section 15.4(y) hereof.

(e)           The Trustee may enter into contracts in such form as it shall determine with one or more persons, firms, corporations or associations to provide administrative services in handling investments, including custodial arrangements with qualified parties.

(f)           The Administrator may retain the services of one or more persons or firms for the management of (including the power to acquire and dispose of) all or any part of the Fund, or to direct the Trustee on investments for all or any part of the Fund, provided that each such person or firm is registered as an investment advisor under the Investment Advisers Act of 1940, is a bank (as defined in that Act), or is an insurance company qualified to manage, acquire or dispose of trust assets under the laws of more than one state, and provided that each of such persons or firms has acknowledged in writing that he or it is a fiduciary with respect to the Plan; in such event, the investment manager or managers shall have the same investment powers and duties as the Administrator to direct the Trustee with respect to any matters contemplated under the Plan or this Agreement, to the extent that such advisors are so retained, and the Trustee shall not be liable for the acts or omissions of such investment manager or managers, or for any transaction entered into upon the instructions of such investment manager or managers, nor shall it be under any obligation to invest or otherwise manage any Fund assets except as directed by the Administrator or such investment manager or managers.

(g)           The Trustee shall have all of the powers necessary or desirable to perform properly its duties as a directed trustee under the terms of this Agreement.

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(h)           The Trustee shall invest and reinvest the Fund assets primarily in Employer Securities in accordance with the directions of the Administrator or an Investment Manager. If any distribution of an investment may be paid at the election of the shareholder in additional shares or in cash, the Trustee may elect to receive it in additional shares. The Trustee is also directed to sell or redeem shares as required to implement the instructions of the Administrator or an Investment Manager or to pay the Trustee’s fees and expenses.

(i)           In extension and not in limitation of the powers given it by law or by other provisions of this Agreement, the Trustee, in complying with the directions of the Administrator or an Investment Manager, shall have the following powers with respect to the Fund, to be exercised at the direction of the Administrator or an Investment Manager, if applicable.

(j)           To invest and reinvest any monies at any time forming a part of the Fund in any capital or common stock (whether voting or non-voting and whether or not currently paying a dividend), preferred or preference stock (whether voting or non-voting and whether or not currently paying a dividend), convertible securities, corporate and governmental obligations, common or collective trust funds or pooled investment funds maintained by a bank or trust company or pooled investment funds of an insurance company qualified to do business in a state even though such bank, trust company or insurance company is a disqualified person within the meaning of Section 4975(e)(2) of the Code, notes and other evidences of indebtedness or ownership (secured or unsecured), contracts, partnership or joint venture interests, choses in action, and warrants and other instruments entitling the owner thereof to subscribe to or purchase any of the aforesaid. A substitute trustee need not request approval from any governmental agency as to the propriety of any investment in the Fund at the time it assumes its duties.

(k)           To borrow or raise money for the purposes of the Fund, including the borrowing of money for the purpose of acquiring Employer Securities to the extent permitted by the Act, the Code and the applicable regulations, upon such terms and conditions as are directed by the Administrator or an Investment Manager in its absolute discretion. For any sum so borrowed, the Trustee may, in accordance with the directions of the Administrator or an Investment Manager, issue a promissory note as Trustee and secure the repayment thereof by pledging, mortgaging or otherwise assigning all or any part of the Fund.

(l)           To vote in person or by proxy any stocks, bonds or other securities held by the Trustee; to exercise any options appurtenant to any stocks, bonds or other securities, or to exercise any right to subscribe for additional stocks, bonds, or other securities and to make any and all necessary payments therefor; to join in, or to dissent from and to oppose the reorganization, recapitalization, consolidation, liquidation, sale or merger of corporations or properties, upon such terms and conditions as may be specified in directions to the Trustee by the Administrator or an Investment Manager. Notwithstanding the foregoing, each Participant with an Employee Stock Ownership Account shall be entitled to direct the Trustee as to the manner in which the Employer Securities in such Account are to be voted in accordance with Section 8.2.

(m)           To cause any investments from time to time held by it to be registered in, or transferred into, its name as Trustee, or the name of a nominee, or to retain them unregistered or in form permitting transferability by delivery, but the books and records of the Trustee shall at all times show that all such investments are part of the Fund. The Administrator or an Investment Manager may direct the Trustee to utilize the services of a securities clearing corporation to the extent permitted by applicable law.

(n)           To employ and enter into agreements with such counsel, accountants, brokers, investment advisors, and other agents as the Trustee shall deem advisable, or as may be directed by the Administrator, and to pay their reasonable expenses and compensation.

(o)           To retain any cash and keep unproductive of income any portion of the Fund as the Administrator or an Investment Manager, in its absolute discretion, may direct, without liability to pay interest on such cash balance or on cash in its hands pending investment or distribution.

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(p)           To hold and administer the Fund without distinction between principal and income, and as a single trust fund without physical segregation of any separate funds or accounts provided for in the Plan, except where the Plan clearly requires the segregation of Fund assets.

(q)           The Trustee shall acquire or hold, in accordance with the directions of the Administrator or an Investment Manager, any security issued by the Employer or an affiliate of the Employer which is a “qualifying employer security” or any real property (and related personal property) which is leased to the Employer or an affiliate of the Employer which is a “qualifying employer real property,” as such terms are defined in the Act and the Code. The Trustee may invest up to one hundred percent (100%) of the Fund in qualifying employer securities in accordance with the direction of the Administrator or an Investment Manager.

(r)           In accordance with the direction of the Administrator or an Investment Manager, the Trustee shall purchase or sell qualifying employer securities from or to any party (subject to any restrictions applicable to such employer securities), including the Employer.

(s)           Any qualifying employer securities held in the Fund shall be valued at fair market value for all purposes of the Plan. The determination of fair market value shall be made in good faith by the Trustee in accordance with Section 15.3(g) hereof.

(t)           As this Trust is the trust for an employee stock ownership plan, the Trustee shall invest the assets of the Trust, in accordance with the directions of the Administrator or an Investment Manager, primarily in Employer Securities.

(u)           Any Employer Securities received by the Trustee as a stock split or dividend or as the result of a reorganization or recapitalization of the Sponsor shall be allocated as of each Valuation Date in proportion to the Employer Securities to which they are attributable.

(v)           The Trustee shall perform its duties in accordance with the Act, as well as in accordance with the Plan and this Agreement insofar as they are consistent with the provisions of the Act. The Trustee shall be under no duty to defend or engage in any suit with respect to the Fund unless the Trustee shall have been fully indemnified to its satisfaction. To the extent not prohibited by the Act, the Trustee shall not be responsible in any way for any action or omission of the Employer or the Administrator with respect to its duties and obligations as set forth in the Plan and this Agreement. To the extent not prohibited by the Act, the Trustee shall also not be responsible for any action or omission of any of its agents or with respect to reliance upon the advice of its counsel (whether or not such counsel is also counsel to the Employer or the Administrator), provided that such agents or counsel were prudently chosen by the Trustee and that the Trustee relied in good faith upon the action of such agent or the advice of such counsel. The Trustee shall not be relieved from responsibility or liability for any responsibility, obligation or duty imposed upon it under the Plan or under the Act.

(w)           The Trustee is a party to this document solely for the purposes set forth in this document and to perform the acts set forth herein, and no obligation or duty shall be expected or required of the Trustee except as expressly stated in the Plan or this Agreement.

(x)           The Trustee may receive such reasonable fee for its services as shall be mutually agreed upon, prior to the rendering of such services, between the Sponsor and the Trustee. Any expenses incurred by the Trustee in the administration of the Trust shall be paid from the Trust unless paid by the Employer directly. If paid by the Trust, such expenses (including the fees of a corporate trustee) shall be charged proportionately (or in such other reasonable manner as the Trustee shall determine) to the Accounts of all Participants, unless such expenses are allocable to the Account or Accounts of one or more specific Participants.

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(y)           The Employer shall indemnify and hold harmless the Trustee and its respective officers, directors, employees and agents from and against any and all damages (including without limitation amounts paid in settlement), fines, losses, costs, liabilities, interest and reasonable attorneys' fees that result from or relate to any Claims (as defined below) that relate to or arise out of Trustee's being or having been Trustee of the Plan (hereinafter collectively referred to as the “Trustee Liabilities”) (whether or not it is Trustee at the time any such Trustee Liabilities are asserted or incurred); provided, however, that the foregoing indemnification shall not apply to matters as to which Trustee breached its fiduciary duties under the Act, unless such breach either: (i) was performed (or not performed) in accordance with the specific direction of the Employer, the Administrator, or any person engaged by the Employer or Administrator for such purpose (including, but not limited to, directions from an Investment Manager); or (ii) was caused by the Employer's or the Administrator's knowing violation of applicable law or their respective duties undertaken with respect to the Plan and Trust (including, but not limited to, their fiduciary duties under the Act). For purposes of this Section, “Claims” shall mean any actions, causes of action, claims, demands, suits, proceedings, disputes, citations, summons, subpoenas, inquiries or investigations of any nature whatsoever, whether or not in law, in equity or in any civil, criminal or regulatory proceeding.

Each and all of the foregoing powers may be exercised without court order or other legal formality. No one dealing with the Trustee need inquire concerning the validity or propriety of anything that is done or need see to the application of any money paid or property transferred to or upon the order of the Trustee.

15.5           Resignation or Removal of the Trustee.

The Trustee may resign from being trustee under this Agreement at any time by giving the Sponsor and the Administrator written notice of resignation. The Trustee may be removed by the Sponsor by written notice of removal either mailed or delivered by hand to the Trustee. Such resignation or removal shall take effect on the date specified in the notice of resignation or removal, but the date thus specified shall not be less than thirty (30) days nor more than ninety (90) days following the date of mailing or delivery of such notice. In the event that the Trustee is unable or unwilling to comply with instructions from the Sponsor, the Investment Manager (if any), or the Administrator, or the voting determination made pursuant to Plan Section 8.2, the Trustee shall be entitled to resign immediately upon delivery of written notice to the Sponsor. Notwithstanding the preceding sentence, the Trustee shall not be entitled to resign immediately in the event of a dispute between the Trustee and the Sponsor or the Administrator about the prudence of continuing to make payments under a previously negotiated Exempt Loan to purchase Employer Securities. In the event of such a dispute, the Trustee may resign, but such resignation shall not take effect less than thirty (30) days from the date of the mailing of such written resignation. In no event shall the resignation or removal of the Trustee terminate this Agreement, but upon such resignation or removal of the Trustee, the Sponsor shall have the duty forthwith to appoint a successor trustee to carry out the terms of this Agreement. Notice in writing of such appointment of a successor trustee shall be given to the Trustee resigning or being removed by the Sponsor. In the event of such resignation or removal of the Trustee and upon the appointment of a successor trustee and acceptance by such trustee, the Trustee shall transfer to the successor trustee the assets of the Fund and all records or books of account pertaining to this Agreement in its possession, provided that the Trustee shall be given a reasonable time, not to exceed sixty (60) days, to complete its accounting before making such transfer. Upon such resignation or removal of a corporate Trustee, it shall be entitled to be paid its fee, if any, earned to the date of such resignation or removal. A successor trustee shall have the same powers and duties as those herein conferred upon the Trustee. A successor trustee may be removed or may resign in the same manner, and, in the event of such removal or resignation of a successor trustee, the same steps shall be allowed as on the removal or resignation of the Trustee. When the Fund assets shall have been transferred and delivered to the successor trustee and the accounts of the Trustee shall have been settled in accordance with Section 15.4(c), the Trustee shall be forever released and discharged from all further accountability, responsibility and liability to anyone for the Fund assets and shall not be responsible in any way for the further disposition of the Fund.

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15.6           Continuance and Termination of this Agreement.

(a)           The Trust shall continue as long as the Plan is in full force and effect. If the Plan ceases to be in full force and effect, the Trust shall thereupon terminate unless expressly extended by the Sponsor.

(b)           Upon the termination of the Plan, the Fund shall be allocated and distributed or held by the Trustee as provided in Article XII.

(c)           Except as otherwise expressly provided in this instrument, neither the termination of the Trust nor any other action or non-action shall cause the Employer to have any right whatsoever with respect to any contribution, any asset of the Fund, or any other matter or thing whatsoever in connection with the Fund, it being expressly agreed and understood that all contributions made are irrevocable and that none of said contributions may, under any circumstances whatsoever (except as specifically set forth in the Plan), be returned to or used for the benefit of the Employer.

15.7           Miscellaneous.

(a)           The parties hereto shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, statement or other document which they reasonably believe to be genuine and to have been signed by the proper party or parties or by a person or persons authorized to act on its behalf.

(b)           No person dealing with the Trustee shall be under any obligation to inquire into the validity, expediency or propriety of any action by the Trustee or of any exercise by it of any of the powers conferred upon it by this Agreement. The execution by the Trustee of any instrument, document or paper in connection with the exercise of any of the powers enumerated herein shall, of itself, be conclusive evidence to all persons of the authority of the Trustee to execute the same and to exercise the powers incident thereto.

(c)           If at any time or times the Trustee is in doubt as to the course which it should follow in any matter relating to the administration of this Agreement, it may request the Administrator to advise it with respect thereto, and it shall be protected in relying upon the advice or direction which may be given it by the Administrator, in writing, in response to such request.

(d)           The Trustee shall not be required to give any bond or other security for the faithful performance of its duties hereunder, unless otherwise required by law.

54

IN WITNESS WHEREOF, the Sponsor has caused these presents to be executed by its duly authorized officers and its corporate seal to be affixed on this _____ day of _______, 2007.

ATTEST: CAPITOL FEDERAL FINANCIAL

By           

Secretary President and Chief Executive Officer

[Corporate Seal]

ATTEST: CAPITOL FEDERAL SAVINGS BANK

By           

Secretary President and Chief Executive Officer

[Corporate Seal]

55

EX-10.8

Capitol Federal Financial

Exhibit 10.8

Named Executive Officer Salary and Bonus Arrangements

Base Salaries

The base salaries, effective July 7, 2007, for the executive officers (the "named executive officers") of Capitol Federal Financial who will be named in the compensation table that appears in the Company's annual meeting proxy statement for the fiscal year ended September 30, 2007 are as follows:

Name and Title	Base Salary
John B. Dicus President and Chief Executive Officer	$489,000
John C. Dicus Chairman of the Board	$412,000
R. Joe Aleshire Executive Vice President	$214,000
Larry K. Brubaker Executive Vice President	$214,000
Kent G. Townsend Chief Financial Officer	$210,000

Bonus Plans

On December 12, 2005, the Compensation Committee of the Company’s board of directors approved a short-term performance cash bonus plan.  The plan was filed on December 14, 2005 as Exhibit 10.10 to the Annual Report on Form 10-K for the fiscal year ended September 30, 2005.  The plan will expire following the payment of bonuses for fiscal 2011.  The short-term performance plan provides for annual bonus awards, as a percentage of base salary, to selected management personnel based on the achievement of pre-established corporate and individual performance criteria.  Awards, if any, are typically made in January for the fiscal year ended the preceding September 30th.

The corporate performance criteria under the short-term performance plan are comprised of targeted levels of the Company’s return on average equity, basic earnings per share and efficiency ratio.  For each executive officer named below, 90% of his award will continue to be based on the attainment of corporate performance goals, with the remainder based on his achievement of individual performance objectives.

Under the short-term performance plan, the maximum potential annual bonus awards for the executive officers whom the Company believes are likely to be named in the summary compensation table in the Company’s proxy statement for its annual meeting of stockholders following the end of fiscal year 2008 are as follows:  John C. Dicus, Chairman, 60% of base salary; John B. Dicus, President and Chief Executive Officer, 60% of base salary; Larry K. Brubaker, Executive Vice President for Corporate Services, 40% of base salary; Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer, 40% of base salary; and Richard J. Aleshire, Executive Vice President for Retail Operations, 40% of base salary.

On December 7, 2006, the Compensation Committee of the Company’s board of directors approved a deferred incentive bonus plan (the “DFIB”).  The DFIB was filed on December 14, 2006 as Exhibit 10.4 to the Annual Report on Form 10-K for the fiscal year ended September 30, 2006.  Under the DFIB, a portion of the bonus awarded under the short-term performance plan (from $2 thousand to as much as 50% of the award, up to a maximum of $100 thousand) to an officer eligible to participate in the DFIB may be deferred under the DFIB for a three year period.  The total amount of the deferred bonus, plus a 50% Company match, is deemed to be invested in the Company’s common stock at the closing price as of the December 31st immediately preceding the deferral date.  If the participant is still employed at the end of the deferral period, the participant will receive a cash payment equal to the sum of: (1) the deferred amount, (2) the Company match, (3) the value of all dividend equivalents paid during the deferral period on the Company common stock in which the participant is deemed to have invested and (4) the appreciation, if any, during the deferral period on the Company common stock in which the participant is deemed to

EX-13

SELECTED CONSOLIDATED FINANCIAL DATA

The summary information presented below under "Selected Balance Sheet Data" and "Selected Operations Data" for, and as of the end of, each of the years ended September 30 is derived from our audited consolidated financial statements.  The following information is only a summary and you should read it in conjunction with our consolidated financial statements and notes beginning on page 42.

	September 30,
	2007	2006	2005	2004(1)		2003
	(Dollars in thousands)
Selected Balance Sheet Data:
Total assets	$7,675,886	$8,199,073	$8,409,687	$8,541,124		$8,582,733
Loans receivable, net	5,290,071	5,221,117	5,464,130	4,747,530		4,307,696
Investment securities:
Available-for-sale (“AFS”), at market value	102,424	189,480	--	--		--
Held-to-maturity (“HTM”), at cost	421,744	240,000	430,499	638,079		1,022,412
Mortgage-related securities:
Trading, at market value	--	396,904	--	--		--
AFS, at market value	402,686	556,248	737,638	1,201,800		2,128,721
HTM, at cost	1,011,585	1,131,634	1,407,616	1,446,908		815,453
Capital stock of Federal Home Loan Bank (“FHLB”)	139,661	165,130	182,259	174,126		169,274
Deposits	3,922,782	3,900,431	3,960,297	4,127,774		4,238,145
Advances from FHLB	2,732,183	3,268,705	3,426,465	3,449,429		3,200,000
Other borrowings	53,524	53,467	53,410	53,348		81,146
Stockholders’ equity	867,631	863,219	865,063	832,414		976,445
	Year Ended September 30,
	2007	2006	2005	2004(1)		2003
	(Dollars and counts in thousands, except per share amounts)
Selected Operations Data:
Total interest and dividend income	$411,550	$410,928	$400,107		$384,833	$441,536
Total interest expense	305,110	283,905	244,201		268,642	326,848
Net interest and dividend income	106,440	127,023	155,906		116,191	114,688
(Recovery) provision for loan losses	(225)	247	215		64	--
Net interest and dividend income after (recovery)
provision for loan losses	106,665	126,776	155,691		116,127	114,688
Retail fees and charges	16,120	17,007	16,029		15,119	15,157
Gains on sales of loans receivable held for sale	88	49	84		107	18,949
Other income	7,758	7,739	7,202		8,321	9,006
Total other income	23,966	24,795	23,315		23,547	43,112
Prepayment penalty on FHLB advances	--	--	--		236,109	--
Total other expenses	77,725	72,868	73,631		309,000	72,510
Income (loss) before income tax expense (benefit)	52,906	78,703	105,375		(169,326)	85,290
Income tax expense (benefit)	20,610	30,586	40,316		(63,051)	33,259
Net income (loss)	32,296	48,117	65,059		(106,275)	52,031
Basic earnings (loss) per share	$     0.44	$     0.66	$     0.90		$  (1.48)	$    0.74
Average shares outstanding	72,849	72,595	72,506		71,599	70,699
Diluted earnings (loss) per share	$     0.44	$     0.66	$     0.89		$  (1.48)	$    0.72
Average diluted shares outstanding	72,970	72,854	73,082		71,599	72,392

6

	2007		2006		2005		2004(1)	2003
Selected Performance and Financial Ratios
and Other Data:
Performance Ratios:
Return on average assets	0.41	%	0.58	%	0.77	%	(1.25)%	0.60%
Return on average equity	3.72		5.58		7.62		(11.36)	5.28
Dividends paid per public share(2)	$    2.09		$     2.30		$  2.00		$   2.81	$   2.12
Dividend payout ratio	133.14	%	97.41	%	62.59	%	n/a	76.68%
Ratio of operating expense to
average total assets	0.98		0.88		0.87		3.64%	0.84
Efficiency ratio	59.60		48.03		41.19		221.83	46.05
Ratio of average interest-earning assets
to average interest-bearing liabilities	1.12		1.11		1.10		1.12	1.13
Interest rate spread information:
Average during period	0.93		1.19		1.59		1.05	0.90
End of period	0.89		1.07		1.46		1.77	0.42
Net interest margin	1.36		1.57		1.87		1.39	1.34
Asset Quality Ratios:
Non-performing assets to total assets	0.12		0.10		0.08		0.12	0.15
Non-performing loans to total loans	0.14		0.11		0.09		0.13	0.21
Allowance for loan losses to
non-accruing loans	56.87		79.03		89.14		74.04	50.87
Allowance for loan losses to
loans receivable, net	0.08		0.08		0.08		0.09	0.11
Capital Ratios:
Equity to total assets at end of period	11.30		10.53		10.29		9.75	11.38
Average equity to average assets	10.91		10.47		10.05		11.03	11.33
Regulatory Capital of Bank:
Core capital	10.3		9.5		9.1		8.8	11.0
Tier I risk-based capital	22.9		22.6		21.3		21.6	29.0
Total risk-based capital	22.8		22.5		21.3		21.6	29.1
Other Data:
Number of traditional offices	29		29		29		28	28
Number of in-store offices	9		9		8		8	7

(1)During 2004, Capitol Federal Savings Bank refinanced $2.40 billion of its FHLB advances that were not hedged by interest rate swaps.  In doing so, Capitol Federal Savings Bank incurred a $236.1 million prepayment penalty.

(2)For all years shown, Capitol Federal Savings Bank MHC, which owns a majority of the outstanding shares of Capitol Federal Financial common stock, waived its right to receive dividends paid on the common stock with the exception of the $0.50 per share dividend paid on 500,000 shares in February 2005.  Public shares exclude shares held by Capitol Federal Savings Bank MHC, as well as unallocated shares held in the Capitol Federal Financial Employee Stock Ownership Plan.  See page 27 for additional information.

7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Overview

Capitol Federal Financial (the “Company”) is the mid-tier holding company and the sole shareholder of Capitol Federal Savings Bank (the “Bank”).  Capitol Federal Savings Bank MHC (“MHC”), a federally chartered mutual holding company, is the majority owner of the Company.  MHC owns 52,192,817 shares of the 74,258,977 voting shares outstanding on September 30, 2007.  The Company’s common stock is traded on the NASDAQ Stock Market LLC under the symbol “CFFN.”  The Bank comprises almost all of the assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations.  Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company.

Forward-Looking Statements

We may from time to time make written or oral "forward-looking statements", including statements contained in our filings with the Securities and Exchange Commission (“SEC”).  These forward-looking statements may be included in this annual report to stockholders and in other communications by the Company, which are made in good faith by us pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control.  The words "may", "could", "should", "would", "believe", "anticipate", "estimate", "expect", "intend", "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

·   our ability to continue to maintain overhead costs at reasonable levels;

·   our ability to continue to originate a significant volume of one- to four-family mortgage loans in our market area;

·   our ability to acquire funds from or invest funds in wholesale or secondary markets;

·   the future earnings and capital levels of the Bank, which could affect the ability of the Company to pay dividends in accordance with its dividend policies;

·   the credit risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

·   the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

·   the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

·   the effects of, and changes in, foreign and military policies of the United States Government;

·   inflation, interest rates, market and monetary fluctuations;

·   our ability to access cost-effective funding;

·   the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services;

·   the willingness of users to substitute competitors' products and services for our products and services;

·   our success in gaining regulatory approval of our products, services and branching locations, when required;

·   the impact of changes in financial services laws and regulations, including laws concerning taxes, banking, securities and insurance;

·   technological changes;

·   acquisitions and dispositions;

·   changes in consumer spending and saving habits; and

·   our success at managing the risks involved in our business.

This list of important factors is not exclusive.  We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

8

The following discussion is intended to assist in understanding the financial condition and results of operations of the Company.  The discussion includes comments relating to the Bank, since the Bank is wholly owned by the Company and comprises the majority of assets and is the principal source of income for the Company.

Executive Summary

The following summary should be read in conjunction with our Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety.

Our principal business consists of attracting deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences.  We also originate consumer loans, loans secured by first mortgages on nonowner-occupied one- to four-family residences, permanent and construction loans secured by one- to four-family residences, commercial real estate loans and multi-family real estate loans.  While our primary business is the origination of one- to four-family mortgage loans funded through retail deposits, we also purchase whole loans and invest in certain investment and mortgage-related securities using FHLB advances as an additional funding source.

The Company is significantly affected by prevailing economic conditions including federal monetary and fiscal policies and federal regulation of financial institutions.  Deposit balances are influenced by a number of factors including interest rates paid on competing personal investments, the level of personal income, and the personal rate of savings within our market areas.  Lending activities are influenced by the demand for housing and other loans, as well as interest rate pricing competition from other lending institutions.  The primary sources of funds for lending activities include deposits, loan repayments, investment income, borrowings, and funds provided from operations.

The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, mortgage-related securities, and investments, and the interest paid on deposits and borrowings.  We generally price our loan and deposit products based upon an analysis of our competition and changes in market rates.  On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market rates to assess all pricing strategies.  While we do not explicitly price our products at a margin to a specific market rate or index, our products tend to be priced at a margin to general market rates or indices.  While national market rates change constantly, and rates offered by competitors with nationwide delivery channels may change during a business day, our offered rates generally remain available to customers for up to a week on deposit products and several days to a week on loan products.  Our one- to four-family mortgage loans are generally priced based upon the 10-year Treasury rate while the rates on our deposits are generally priced based upon short-term Treasury rates.  The majority of our loans are fixed-rate products with maturities up to 30 years, while the majority of our deposits have maturity or reprice dates of less than 2 years.

During the majority of fiscal year 2007, the yield curve was generally flat or slightly inverted.  Net interest income is affected by the yield curve environment to a large extent, as our interest-earning assets and interest-bearing liabilities are generally priced relative to the rates reflected in the yield curve.  Our interest-bearing liabilities reprice more rapidly than our interest-earning assets.  As a result of the generally flat or slighted inverted yield curve, the Company experienced continued net interest margin compression in fiscal year 2007.  During the last quarter of fiscal year 2007, the yield curve began to assume a positive shape.

The Federal Open Market Committee (“FOMC”) of the Federal Reserve Board decreased the Federal Funds rate by 50 basis points from 5.25% to 4.75% in the last quarter of fiscal year 2007.  The rate had remained unchanged at 5.25% since mid-2006, with the FOMC citing inflationary risk as the primary variable in maintaining the Federal Funds rate at that level.  Data as of September 30, 2007 suggests that inflationary risks are no longer the FOMC’s primary economic concern, but rather the marked decline in credit quality experienced nationwide due to the ongoing adjustment in the housing sector, the resulting lack of liquidity in national markets, and recent increases in delinquencies on subprime loans.  Delinquency rates market-wide have prompted a tightening of credit standards, which has restricted additional economic recovery.  The FOMC expects the recent 50 basis point reduction to promote modest economic recovery, and is cautious about further policy easing since inflationary concerns have not completely subsided.  The Federal Funds rate is the rate at which depository institutions lend reserve requirement surplus balances at the Federal Reserve to other depository institutions in deficit of their reserve requirement.  A change in this rate does not directly impact the rates offered to loan consumers, but the trickle-down effect caused by the change in borrowing costs for banks may be eventually realized in mortgage, consumer, and corporate loan rates.   The forward yield curve generally indicates that the market expects the yield curve to continue to assume a positive shape, with additional rate cuts by the FOMC expected during fiscal year 2008.  See additional discussion of interest rate risk in "Quantitative and Qualitative Disclosure About Market Risk."

9

Management actively monitors the Company’s interest rate sensitivity, and has implemented strategies to address that sensitivity.  The strategies have resulted in a year-over-year reduction in total assets, with a resulting increase in our capital ratios.  This reduction was intentional and in exchange for the prudent usage of balance sheet leverage, as investment opportunities were not always balanced with the cost of funding.  As a result, the Bank’s sensitivity to changes is lower than one year ago.

Net income for fiscal year 2007 was $32.3 million compared to $48.1 million in the prior fiscal year. The $15.8 million decrease in net income was primarily a result of a $21.2 million increase in interest expense and a $4.9 million increase in other expenses, offset by a $10.0 million decrease in income tax expense as a result of decreased earnings.  The increase in interest expense was mainly attributable to higher rates on the certificate of deposit and money market portfolios, and the interest rate swaps which are all generally priced based upon short-term interest rates (two year and shorter maturities).  The $4.9 million increase in non-interest expense was primarily a result of a $1.8 million increase in regulatory and outside services and a $1.2 million increase in salaries and employee benefits.

The Bank’s loan portfolio increased $69.0 million during fiscal year 2007 to $5.29 billion at September 30, 2007.  The increase in the portfolio was largely a result of the origination and purchase of mortgage loans, and a slowdown in prepayment speeds as a result of higher long-term interest rates during fiscal year 2007 compared to fiscal year 2006.  Prepayments on loans generally decline as long-term rates rise because borrowers are less likely to refinance their current mortgage or move into more expensive homes due to costs associated with higher rates on new mortgages.

During fiscal year 2007, $750.0 million of FHLB advances matured, of which management elected not to renew $600.0 million.  The weighted average renewal rate on the FHLB advances was approximately 5.23% compared to 3.50% on the maturing advances. The FHLB advances were not renewed because the interest rate available on the Bank’s short-term investment opportunities for these funds were less than or equal to the rate that would have been available on the new FHLB advances, and the Bank had sufficient liquidity to repay the maturing FHLB advances.   The remaining $150.0 million of maturing FHLB advances were renewed at a weighted average rate of 5.40% and are scheduled to mature during fiscal year 2011.  Management elected to renew $150.0 million as a result of the amount of liquidity available at the time of maturity, and to extend the maturity date to better match the interest rate risk profile of the loan portfolio as fixed-rate loans continue to comprise a larger part of that portfolio.  During fiscal year 2008, $1.13 billion of FHLB advances are scheduled to mature.  At each FHLB advance maturity date in fiscal year 2008, management will continue to balance the yield spread on assets generally funded by the maturing FHLB advances relative to the cost of new FHLB advances or alternative funding strategies, the amount of liquidity available to repay maturing FHLB advances or invest, and the interest rate risk profile of funding alternatives and their impact on the overall interest rate risk profile of the Bank.  Based upon these factors, management may repay some or all maturing FHLB advances in fiscal year 2008.  See additional discussion of interest rate risk in "Quantitative and Qualitative Disclosure About Market Risk."

The Bank experienced continued high levels of competition for retail deposit dollars due to aggressive pricing by other financial institutions in its local markets.  The Bank increased the average rates on its money market and certificate of deposit portfolios to remain competitive, with an emphasis on the mid-term maturity certificate of deposit market.  The Bank’s entire deposit portfolio increased $22.4 million during fiscal year 2007 to $3.92 billion at September 30, 2007 which was primarily a result of an increase in the certificate of deposit portfolio.  The increase in certificates was partially offset by a $18.6 million decrease in the money market portfolio.  Management continues to monitor the Bank’s local deposit market pricing environment for its impact on the Bank’s operations and will adjust the Bank’s pricing on deposit accounts accordingly.  Management actively looks for pricing opportunities that will allow the Bank to maintain its current size or grow in a profitable manner.

The Bank opened a new traditional branch in November 2007 in Topeka, Kansas.  Management will continue to explore branch expansion opportunities in the Bank’s market areas.

Critical Accounting Policies

Our most critical accounting policies are the methodologies used to determine the allowance for loan losses, other than temporary declines in the value of securities, the valuation of mortgage servicing rights (“MSR”), and our policy regarding derivative instruments.  These policies are important to the presentation of our financial condition and results of operations, involve a high degree of complexity, and require management to make difficult and subjective judgments that may require assumptions or estimates about highly uncertain matters.  The use of different judgments, assumptions, and estimates could cause reported results to differ materially.  These critical accounting policies and their application are reviewed at least annually by our audit committee and board of directors.  The following is a description of our critical accounting policies and an explanation of the methods and assumptions underlying their application.

10

Allowance for Loan Losses.  Management maintains an allowance for loan losses to absorb losses known and inherent in the loan portfolio based upon ongoing quarterly assessments of the loan portfolio.  Our methodology for assessing the appropriateness of the allowance consists of several key elements, which includes a formula allowance, specific allowances for identified problem loans and portfolio segments, and knowledge of economic conditions that may lead to credit risk concerns about the loan portfolio or segments of the loan portfolio. In addition, the allowance incorporates the results of measuring impaired loans as provided in Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures.”  These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans.

One- to four-family mortgage loans and consumer loans that are not impaired, as defined in SFAS No. 114 and No. 118, are collectively evaluated for impairment using a formula allowance as permitted by SFAS No. 5, “Accounting for Contingencies”.  Loans on residential properties with greater than four units, residential construction loans and commercial properties that are delinquent or where the borrower’s total loan concentration balance is greater than $1.5 million (excluding one- to four-family mortgage loans) are evaluated for impairment on a loan by loan basis at least annually.  If no impairment exists, these loans are included in the formula allowance.  The formula allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of pools of loans.  Changes in risk evaluations of both performing and non-performing loans affect the amount of the formula allowance. Loss factors are based both on our historical loss experience and on significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date.  Loan loss factors for portfolio segments are representative of the credit risks associated with loans in those segments.  The greater the credit risks associated with a particular segment, the greater the loss factor.  Loss factors increase as individual loans become classified, delinquent, the foreclosure process begins, or as economic conditions warrant.

Management reviews the appropriateness of the allowance based upon its evaluation of then-existing economic and business conditions affecting our key lending areas.  Other conditions management considers in determining the appropriateness of the allowance include, but are not limited to, changes in our underwriting standards, credit quality trends (including changes in the balance and characteristics of non-performing loans expected to result from existing national and local economic conditions), trends in collateral values, loan volumes and concentrations, and recent loss experience in particular segments of the portfolio as of the evaluation date.  Management also measures the impact that such conditions were believed to have had on the collectibility of impaired loans.

Senior management reviews these conditions quarterly.  To the extent that any of these conditions are evidenced by a specifically identifiable problem loan or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such loan or loans. Where any of these conditions are not evidenced by a specifically identifiable problem loan or portfolio segment as of the evaluation date, management’s evaluation of the loss related to these conditions is reflected in the allowance associated with our homogeneous population of loans.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem loans or portfolio segments.

The amounts actually observed with respect to these losses can vary significantly from the estimated amounts. Our methodology permits adjustments to any loss factor used in the computation of the formula allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the portfolio, as of the evaluation date, are not reflected in the current loss factors.  By assessing the estimated losses inherent in our loan portfolios on a quarterly basis, we can adjust specific and inherent loss estimates based upon more current information.

Assessing the adequacy of the allowance for loan losses is inherently subjective as it requires making material estimates, including the amount and timing of future cash flows expected to be received on impaired loans, and changes in the market value of collateral securing loans, which may be susceptible to volatility. In the opinion of management, the allowance, when taken as a whole, is adequate to absorb reasonable estimated loan losses inherent in our loan portfolio at each evaluation date.

Securities Impairment.  Management continually monitors the investment and mortgage-related security portfolios for impairment on a security by security basis.  Many factors are considered in determining whether the impairment is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a market value less than the cost basis, the severity of the loss, the intent and ability of the Bank to hold the security for a period of time sufficient for a substantial recovery of its investment, recent events specific to the issuer or industry including the issuer’s financial condition and current ability to make future payments in a timely manner, external credit ratings, and recent downgrades in such ratings.  If management deems such decline to be other-than-temporary, the carrying value of the security is adjusted and an impairment amount is recorded in the consolidated statements of income.  Currently, all securities are rated investment grade, and there is a market for the securities.

11

Valuation of Mortgage Servicing Rights.  The Bank records MSR as a result of retaining the servicing of loans that are owned by another entity.  Impairment exists if the carrying value of MSR exceeds the estimated fair value of the MSR.  MSR are stratified by the underlying loan term and by interest rate. Individual impairment allowances for each stratum are established when necessary and then adjusted in subsequent periods to reflect changes in the measurement of impairment.  The estimated fair value of each MSR stratum is determined through analysis of future cash flows incorporating numerous assumptions including: servicing income, servicing costs, market discount rates, prepayment speeds and other market driven data.

The fair value of MSR is highly sensitive to changes in assumptions. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSR.  Generally, as interest rates decline, prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSR.  As interest rates rise, prepayments slow which generally results in an increase in the fair value of MSR.  All assumptions are reviewed for reasonableness on a quarterly basis and adjusted as necessary to reflect current and anticipated market conditions. Thus, any measurement of the fair value of MSR is limited by the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if applied at a different point in time.  Annually, we receive an independent appraisal of the fair value of our MSR.  At  September 30, 2007 the independent valuation exceeded our calculated MSR fair value.

Derivative Instruments.  The Bank has entered into interest rate swap agreements to hedge certain FHLB advances (“swapped FHLB advances”).  When the Bank entered into the interest rate swap agreements, they were designated as fair value hedges.  All terms of the interest rate swap agreements relating to the pay, fixed-rate components and timing of cash flows match the terms of the swapped FHLB advances.  Therefore, the Bank has assumed no ineffectiveness in the hedging relationship and accounts for the interest rate swaps using the shortcut method, under which any gain or loss in the fair value of the interest rate swaps is recorded as an other asset or liability and is offset by a gain or loss on the hedged FHLB advances.

Before entering into the interest rate swap agreements, management formally documented its risk management objectives and strategy, and the relationship between the interest rate swap agreements and the swapped FHLB advances.  To qualify for hedge accounting, the interest rate swaps and the related FHLB advances must be designated as a hedge.  Both at the inception of the hedge and on an ongoing basis, management assesses whether the hedging relationship is expected to be highly effective in offsetting changes in fair values of the swapped FHLB advances.  If at some point it is determined that the interest rate swaps are not highly effective as a hedge, hedge accounting will be discontinued.  If hedge accounting is discontinued, changes in the fair value of the interest rate swaps will be recorded in earnings and the swapped FHLB advances will no longer be adjusted for changes in fair value.

         Recent Accounting Pronouncements.  In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments.”  SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”  SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation, if the holder irrevocably elects to account for the whole instrument on a fair value basis, and clarifies various aspects of SFAS No. 133 and SFAS No. 140 relating to derivative financial instruments and qualifying special-purpose entities holding derivative financial instruments.  The Company’s adoption of SFAS No. 155, effective October 1, 2006, had no impact on its financial condition or results of operations.

In March 2006, FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140.”  SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract as defined in the SFAS.  It requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and allows an entity to choose between amortization or fair value measurement methods for each class of separately recognized servicing assets and servicing liabilities.  It also permits a one-time reclassification of available-for-sale securities to trading without tainting the investment portfolio, provided the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities.  The Company’s adoption of SFAS No. 156, effective October 1, 2006, had no impact on its financial condition or results of operations, as management will continue to value MSR at the lower of cost or market.

In July 2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.”  The interpretation clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.”  The interpretation prescribes a process by which the likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the degree of likelihood to determine the amount of benefit to recognize in the financial statements.  The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.  FIN

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No. 48 is effective for fiscal years beginning after December 15, 2006, which for the Company is October 1, 2007.  The Company’s adoption of FIN 48 is not expected to have a material impact on its financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements.”  SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures regarding fair value measurements.  The statement applies whenever other standards require or permit that assets or liabilities be measured at fair value.  The statement does not require new fair value measurements, but rather provides a definition and framework for measuring fair value which will result in greater consistency and comparability among financial statements prepared under GAAP. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company is October 1, 2008.  The Company has not yet completed its assessment of the impact of SFAS No. 157.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” which permits an entity to measure certain financial assets and financial liabilities at fair value. The objective of SFAS No. 159 is to improve financial reporting by allowing entities to mitigate volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting provisions.  When a company elects to apply the fair value option to existing specific items, the company reports the difference between the items’ carrying value and their fair value as a cumulative-effect adjustment to the opening balance of retained earnings upon adoption of the standard, with subsequent changes in fair value being charged to earnings.  When a company elects to apply the fair value option to new items, the company reports the change in the items value through current period income.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, which for the Company is October 1, 2008.  An entity may elect to early adopt SFAS No. 159 if, among a number of conditions, it has not issued financial statements for any interim period within the fiscal year SFAS No. 159 is first adopted.  The Company has not yet completed its assessment of the impact of SFAS No. 159.

Management Strategy

Our strategy is to operate a retail-oriented financial institution dedicated to serving the needs of customers in our market areas. Our commitment is to provide the broadest possible access to home ownership through our mortgage lending programs and to offer a complete set of personal banking products and services.  We strive to enhance stockholder value while maintaining a strong capital position.  To achieve our strategy, we focus on the following:

·   Portfolio Lending.  We are one of the largest originators of one- to four-family mortgage loans in the State of Kansas.  We have primarily originated these loans for our own portfolio, rather than for sale, and generally we service the loans we originate.  We provide retail customers with alternatives for their borrowing needs by offering both fixed- and adjustable-rate products with various terms to maturity and pricing alternatives.  We offer special programs to individuals who may be first time home buyers, have low or moderate incomes or may have certain credit risk concerns in order to maximize our ability to deliver home ownership opportunities.  Through our strong relationships with real estate agents and marketing efforts which reflect our reputation and pricing, we attract mortgage loan business from walk-in customers, customers that apply online, and existing customers.   We also purchase one- to four-family mortgage loans from correspondent lenders secured by property primarily located within our market areas and select market areas in Missouri and nationwide lenders.

·   Retail Financial Services.  We offer a wide array of deposit products and retail services for our customers.  These products include checking, savings, money market, certificates of deposit and retirement accounts.  These products and services are provided through a branch network of 38 locations which includes traditional branch and retail store locations, our call center which operates on extended hours, telephone bill payment services and Internet-based transaction services.

·   Cost Control.  We generally are very effective at controlling our costs of operations, outside of the expense portion of our employee benefit plans that are tied to the Company’s stock price.  By using technology, we are able to centralize our lending and deposit support functions for efficient processing.  Our retail orientation allows us to serve a broad range of customers through relatively few branch locations.  Our average deposit base per traditional branch at September 30, 2007 and 2006 was over $123.3 million and $121.8 million, respectively.  This large average deposit base helps to control costs.  Our one- to four-family mortgage lending strategy, through effective management of credit risk, allows us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.

·   Asset Quality.  We utilize underwriting standards for our lending products that are designed to limit our exposure to credit risk, and have a portfolio of predominately one- to four-family mortgage loans which has resulted in minimal levels of delinquent and non-performing loans.  At September 30, 2007, our ratio of non-performing assets to total assets was 0.12%.  See additional discussion of asset quality in Part I, Item 1 of the Annual Report on Form 10-K.

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·   Capital Position.  Our policy has always been to protect the safety and soundness of the Bank through conservative credit and operational risk management, balance sheet strength, and sound operations.  The end result of these activities is a capital ratio that is in excess of the well-capitalized standards set by the Office of Thrift Supervision (“OTS”).  We believe that maintaining a strong capital position safeguards the long-term interests of the Bank, the Company and our stockholders.

·   Stockholder Value.  We strive to enhance stockholder value while maintaining a strong capital position.  We continue to provide returns to stockholders through our dividend payments.  Total dividends declared during fiscal year 2007 were $2.09 per share.  In October 2007, the board of directors declared a $0.50 per share dividend which was paid on November 16, 2007 to holders of record on November 2, 2007.  Due to MHC's waiver of dividends, the dividend of $0.50 per share was paid only on public shares.  The Company’s cash dividend payout policy is reviewed continually by management and the board of directors, and the ability to pay dividends under the policy depends upon a number of factors including the Company’s financial condition, results of operations, regulatory capital requirements of the Bank, other regulatory limitations on the Bank’s ability to make capital distributions to the Company and the continued waiver of dividends by MHC.

·   Interest Rate Risk Management.  Changes in interest rates are our primary risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities.  As such, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.  To manage interest rate risk, the Asset and Liability Committee (“ALCO”) meets weekly to discuss and monitor the current interest rate environment compared to interest rates offered on our loan and deposit products.  Additionally, ALCO meets once a month to review information regarding the sensitivity of our assets and liabilities to changes in rates.  The members of ALCO are the Chairman, the Chief Executive Officer, the Chief Financial Officer (chair of ALCO), the Executive Vice President for Corporate Services, the Chief Lending Officer and the Executive Vice President for Retail Operations.

·   Cash Flow Management.  The Bank must manage its daily cash flows.  Cash flow management is accomplished through:

·   establishing interest rates on loan and deposit products;

·   investing cash flows not placed into mortgage loans;

·   purchasing securities that meet the long term objectives of earnings, liquidity management and interest rate risk management; and

·   borrowing funds if cash flows are not sufficient to meet local loan demand or to leverage excess capital.

Generally, management manages the Bank’s asset and liability portfolios, including the available-for-sale securities portfolio, as held-to-maturity portfolios.  As such, changes in the balance or mix of products in these portfolios typically do not occur quickly, especially in a rising rate environment.  Because of this, management looks at changes over a period of time to determine trends that can be changed through various strategies in our local markets, by the investments and mortgage loans we purchase or by borrowings we incur.

Quantitative and Qualitative Disclosure about Market Risk

Asset and Liability Management and Market Risk

The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time.  Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows of those assets and liabilities and the market value of our assets and liabilities.  Our results of operations, like those of other financial institutions, are impacted by these changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities.  The risk associated with changes in interest rates on the earnings of the Bank and the market value of its financial assets and liabilities is known as interest rate risk.  Interest rate risk is our most significant market risk and our ability to adapt to these changes is known as interest rate risk management.

Based upon management’s recommendations, the board of directors sets the asset and liability management policies of the Bank.  These policies are implemented by ALCO.  The purpose of ALCO is to communicate, coordinate and control asset and liability management consistent with the business plan and board-approved policies.  ALCO sets goals for and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs.  The objectives are to manage assets and funding sources to produce the highest profitability balanced against liquidity, capital adequacy and risk management objectives.  At each monthly meeting, ALCO recommends appropriate strategy changes.  The Chief Financial Officer, or his designee, is responsible for executing, reviewing and reporting on the results of the policy recommendations and strategies to the board of directors, generally on a monthly basis.

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The ability to maximize net interest income is dependent largely upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates.  The asset and liability repricing gap is a measure of the difference between the amount of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time.  The difference provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates.  A gap is considered positive when the amount of interest-earning assets exceeds the amount of interest-bearing liabilities, maturing or repricing during the same period. A gap is considered negative when the amount of interest-bearing liabilities exceeds the amount of interest-earning assets maturing or repricing during the same period.  Generally, during a period of rising interest rates, a negative gap within shorter repricing periods adversely affects net interest income, while a positive gap within shorter repricing periods results in an increase in net interest income.  During a period of falling interest rates, the opposite would generally be true.  As of September 30, 2007, the ratio of our one-year gap to total assets was a negative 11.57%, which primarily was a result of the monthly repricing of our interest rate swaps.

Management recognizes that dramatic changes in interest rates within a short period of time can cause an increase in our interest rate risk relative to the balance sheet.  At times, ALCO may recommend increasing our interest rate risk position in an effort to increase our net interest margin.  Management believes that maintaining and improving earnings is the best way to preserve a strong capital position.  Conversely, management recognizes the need, in certain interest rate environments, to limit the Bank's exposure to changing interest rates and may implement strategies to reduce our interest rate risk which could, as a result, reduce earnings in the short-term.  To minimize the potential for adverse effects of material and prolonged changes in interest rates on our results of operations, we have adopted asset and liability management policies to better balance the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities based on existing local and national interest rates.

During periods of economic uncertainty, rising interest rates or extreme competition for loans, the Bank’s ability to originate or purchase loans may be adversely affected.  In such situations, the Bank alternatively may invest its funds into investment or mortgage-related securities.  These alternate investments may have rates of interest lower than rates we could receive on loans, if we were able to originate or purchase them, potentially reducing the Bank’s interest income.

Qualitative Disclosure about Market Risk

For each period presented in the following table, the estimated percentage change in the Bank’s net interest income based on the indicated instantaneous, parallel and permanent change in interest rates are presented.  The percentage change in each interest rate environment represents the difference between estimated net interest income in the 0 basis point interest rate environment (“base case”, assumes market and product interest rates do not materially change from the as-of date) and estimated net interest income in each alternative interest rate environment (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates).  Estimations of net interest income used in preparing the table below are based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change materially, that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented and that the existing interest rate swaps that expire during the period considered are not renewed.  The estimation of net interest income does not include any projected gain-on-sale related to the sale of loans or securities or the effect of the use of new interest rate swaps or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate environments.  It is important to consider that the estimated changes in net interest income are for a cumulative four-quarter period.  These do not reflect the earnings expectations of management.

Percentage Change in Net Interest Income (next four quarters)
Change
(in Basis Points)	At September 30,
in Interest Rates(1)	2007	2006
-200 bp	15.98%	9.98%
-100 bp	14.10%	8.58%
000 bp	--	--
+100 bp	-8.31%	-12.54%
+200 bp	-23.10%	-27.20%
+300 bp	-38.32%	-42.87%

(1)   Assumes an instantaneous, permanent and parallel change in interest rates at all maturities.

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The primary drivers for the decrease in the estimated net interest income in the increasing rate environments are anticipated increases in costs of deposits and interest rate swaps in excess of the increases in yields in the loan and investment and mortgage-related securities portfolios.  The increase in the cost of deposits is primarily a result of the relatively short average maturity of the Bank’s certificate of deposit portfolio due to our customer’s propensity to shorten the maturities of the certificates they invest in.  The increase in the costs of the interest rate swaps is due to the immediate repricing nature of the interest rate swaps, which would result in the interest rate swaps experiencing the full impact of the rate change immediately.  Changes in the rates on the mortgage loan and mortgage-related securities portfolios happen at a slower pace, compared to the interest-bearing liabilities, because only the amount of cash flow received on the repayment of these portfolios is reinvested at the higher rates or caps on adjustable-rate products limit the increase in rates in these assets when rates rise   The decrease in the sensitivity to earnings in increasing rate environments, compared to the previous year, is primarily due to the assumption that the interest rate swaps that mature during the next four-quarter period are not renewed.

The increase in the estimated net interest income if interest rates were to decrease is primarily the result of the immediate decrease in the cost of our interest rate swaps and the decrease in the cost of deposits compared to a slower decrease in the yield on our interest-earning assets. The increase in the sensitivity to earnings in decreasing rate environments, compared to the previous year, is primarily due to the assumption that the interest rate swaps that mature during the next four-quarter period are not renewed.

As a result of the flat or slightly inverted yield curve during the majority of fiscal year 2007 and the relatively short term to repricing of our liabilities compared to our assets, the Bank’s net interest margin was lower in fiscal year 2007 compared to fiscal year 2006.  The forward yield curve generally indicates that the market expects the yield curve to continue to assume a positive shape, with additional rate cuts by the FOMC expected, during fiscal year 2008.  Net margin compression could continue in fiscal year 2008.  The extent of net interest income compression will be determined primarily by the level of the one-month LIBOR rate, our ability to lower the costs of our deposits, and our ability to manage the spread on the maturing FHLB advances relative to possible decreasing yields received on new loans and investments.  The cost of deposits will be driven by both competitors’ willingness to lower their deposit rates in reaction to lower market rates and our depositors’ acceptance of lower rates, reflective of decreased market rates, rather than withdrawing their accounts.  However, there could be events that cause interest rates to return to levels seen during the prior fiscal year.  If that happens, the impact of those events on market interest rates, and thereby on our net interest margin, could be more severe than the current rate environment.  Due to the increased awareness of credit risk in lending nationwide, credit spreads have widened during the fourth quarter of fiscal year 2007, allowing loan rates to not decrease as fast as market rates of interest.  However, stabilization in the credit markets could cause our loan rates to decrease as credit concerns ease.  Our ability to maintain our current level of borrowings will be based upon our ability to replace maturing FHLB advances with borrowings at a cost that allows us to invest those proceeds at an acceptable spread without taking undo interest rate risk.

The following table sets forth the estimated percentage change in market value of portfolio equity (“MVPE”) of the Bank at each period presented based on the indicated instantaneous, parallel and permanent change in interest rates.  The MVPE is defined as the net of the present value of the cash flows of an institution’s existing assets, liabilities and off-balance sheet instruments.  The percentage change in each interest rate environment represents the difference between MVPE in the base case and MVPE in each alternative interest rate environment.  The estimations of MVPE used in preparing the table below are based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented and that different prepayment rates are used in each alternative interest rate environment.  The estimated MVPE results from the valuation of cash flows from financial assets and liabilities over the anticipated lives of each for each interest rate environment.  The table presents the effects of the change in interest rates on our assets and liabilities as they mature, repay or reprice, as shown by the change in the MVPE in changing interest rate environments.

Percentage Change in MVPE
Change
(in Basis Points)	At September 30,
in Interest Rates(1)	2007	2006
-200 bp	-1.89%	6.69%
-100 bp	4.77%	8.09%
000 bp	--	--
+100 bp	-13.05%	-15.59%
+200 bp	-29.99%	-34.07%
+300 bp	-49.00%	-54.36%

(1)   Assumes an instantaneous, permanent and parallel change in interest rates at all maturities.

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Changes in the estimated market values of our financial assets and liabilities drive changes in estimates of MVPE.  The market value of shorter term-to-maturity financial instruments is less sensitive to changes in interest rates than the market value of longer term-to-maturity financial instruments.  Because of this, our certificates of deposit (which have relatively short average lives) tend to display less sensitivity to changes in interest rates than do our mortgage-related assets (which have relatively long average lives).  However, the average life expected on our mortgage-related assets varies under different interest rate environments because of the ability of customers to prepay their mortgage loans.  Prepayment assumptions change on mortgage-related assets under various interest rate environments because many customers with mortgage debt look to obtain financing at the lowest cost available.  Generally, there is no penalty to prepay a mortgage loan we have originated or purchased.  If rates decrease,  customers have an economic incentive to lower the cost of their mortgage (through a lower interest rate) with only the fees associated with the new mortgage or loan modification as a cost to obtain the lower cost mortgage.  In a decreasing rate environment, prepayments generally increase and the average life of a mortgage shortens compared to higher rate environments.  When interest rates increase, the economic incentive for customers to modify their mortgage debt is reduced, resulting in lower prepayment speed assumptions.  In an increasing rate environment, prepayments decrease and the average life of the mortgage lengthens compared to lower rate environments.  Holders of certificates of deposit have the ability to modify the terms of their deposits by withdrawing before maturity the balance in their account.  Generally a penalty is assessed for such early withdrawal.  In a decreasing rate environment the economic incentive to the depositor probably does not exist because the rate on the new account would likely be lower than they are currently receiving.  Given the short term nature of our certificates of deposit, in an increasing rate environment customers will likely wait until maturity to change the terms of their deposit, which would result in no change to the expected lives of our certificates of deposit in a rising rate environment.  In rising rate environments, these characteristics of our financial assets and liabilities result in a decrease in the estimated value of the Bank’s MVPE and increases our estimates of sensitivity to changes in MVPE.

The Bank’s measure of its MVPE sensitivity to decreases in interest rates indicates little change at September 30, 2007.  The increase in MVPE, if interest rates drop 100 basis points, is primarily driven by the short-term nature of our liabilities compared to the decrease in the expected lives of our assets, relative to the base case rate scenario, as a result of an assumed increase in prepayment speeds on mortgage-related assets, primarily our fixed-rate loan portfolio.  Given the current composition of our loan portfolio and the current interest rate environment, it is likely that many of our customers would be economically enticed to refinance or modify their mortgage loans with a 100 basis point decline in rates compared to the base case scenario.  The Bank’s MVPE is negatively impacted in a down 200 basis points rate environment because of an increase in cash flows from mortgage prepayments or refinances of loans to lower market rates.  The higher prepayment assumptions shorten the expected average lives on our fixed-rate assets thereby decreasing the sensitivity of the present value of their cash flows to changes in interest rates, while the expected average lives of our liabilities remains largely unchanged.

The Bank’s estimate of its changes in MVPE from the base case in rising rate environments continued its trend towards more sensitivity.  This was primarily driven by the increase in the 30-year fixed-rate loan portfolio, the trend for customers to shorten the maturities of their certificates of deposit, and the shorter term average lives of our FHLB advances as they move toward maturity.  As rates increase, the estimated fair values of the liabilities with short average lives do not respond to rates in the same manner as the longer maturity loans, such as our fixed-rate loans, which have longer average lives.  The prepayment assumptions on the fixed-rate loans in particular, and all loans in general, anticipate slower prepayment rates in the increasing rate environments.  The lower prepayment assumptions extend the expected average lives on these assets thereby increasing their sensitivity to changes in interest rates.  The net effect of these characteristics of short-lived liabilities and long-lived assets is to increase the sensitivity of the Bank to changes in interest rates.

Management realizes that this level of sensitivity, while in compliance with limits established by the board of directors, exposes the Bank to significant challenges in its operations.  Management intends to continue purchasing shorter duration securities for the foreseeable future.  Additionally, management believes in fiscal year 2008, the opportunity will exist to borrow funds to purchase securities at spreads acceptable to management and consistent with historical average spreads for these types of transactions.  Management believes that such transactions, if completed, will improve the earnings of the Company and not create excessive interest rate risk exposure and could improve the Bank’s interest rate risk exposure.

The assumptions used by management to evaluate the sensitivity of our financial performance to changes in interest rates presented in the tables above are utilized in, and set forth under, the gap table and related notes beginning on page 18.  Although management finds these assumptions reasonable given the constraints described above, the interest rate sensitivity of our assets and liabilities and the estimated effects of changes in interest rates on our net interest income and MVPE indicated in the above tables could vary substantially if different assumptions were used or actual experience differs from these assumptions.

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Gap Table:  The gap table summarizes the anticipated maturities or repricing of our interest-earning assets and interest-bearing liabilities as of September 30, 2007, based on the information and assumptions set forth in the notes below.

	Within Three  Months	Three to Twelve Months	More Than  One Year to Three Years	More Than Three Years  to Five Years	Over Five Years	Total
Interest-Earning Assets:			(Dollars in thousands)
Loans receivable(1) (2):
Mortgage loans:
Fixed	$      147,232	$      481,781	$   1,093,447	$      675,843	$      975,557	$   3,373,860
Adjustable	127,123	627,133	819,117	155,039	8,263	1,736,675
Other loans	135,449	5,560	11,720	7,781	58,336	218,846
Securities:
Non-mortgage(3)	177,727	311,494	13,144	3,325	18,385	524,075
Mortgage-related(4)	155,856	638,441	341,500	118,353	158,140	1,412,290
Other interest-earning assets	126,272	--	--	--	--	126,272
Total interest-earning assets	869,659	2,064,409	2,278,928	960,341	1,218,681	7,392,018
Interest-bearing liabilities:
Deposits:
Savings(5)	138,865	6,580	14,852	11,395	65,456	237,148
Checking(5)	10,826	36,736	69,811	52,400	224,336	394,109
Money market(5)	33,930	94,507	176,341	99,325	386,174	790,277
Certificates	358,141	1,388,882	683,716	68,644	1,865	2,501,248
Borrowings(6)	1,053,609	700,000	870,000	176,000	--	2,799,609
Total interest-bearing liabilities	1,595,371	2,226,705	1,814,720	407,764	677,831	6,722,391
Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$     (725,712)	$     (162,296)	$      464,208	$      552,577	$      540,850	$      669,627
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities	$     (725,712)	$     (888,008)	$     (423,800)	$      128,777	$      669,627
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities as a
percent of total assets at September 30, 2007	(9.45)%	(11.57)%	(5.52)%	1.68%	8.72%
Cumulative one-year gap at September 30, 2006		(13.62)%
Cumulative one-year gap at September 30, 2005		(4.01)%

18

(1)Adjustable-rate loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur prior to their next rate adjustment, rather than in the period in which the loans are due.  Fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization and prepayment assumptions.

(2)Balances have been reduced for non-performing loans, which totaled $7.4 million at September 30, 2007.

(3)Based on contractual maturities, terms to call date or pre-refunding dates as of September 30, 2007, and excludes the unrealized gain adjustment of $93 thousand on AFS investment securities.

(4)Reflects estimated prepayments of mortgage-related securities in our portfolio, and excludes the unrealized gain adjustment of $2.0 million on AFS mortgage-related securities.

(5)Although our checking, savings and money market accounts are subject to immediate withdrawal, management considers a substantial amount of such accounts to be core deposits having significantly longer effective maturities.  The decay rates (the assumed rate at which the balance of existing accounts would decline) used on these accounts are based on assumptions developed based upon our actual experience with these accounts.  If all of our checking, savings and money market accounts had been assumed to be subject to repricing within one year, interest-bearing liabilities which were estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $1.99 billion, for a cumulative one-year gap of (25.9)% of total assets.

(6)Borrowings exclude the $13.8 million unrealized loss adjustment on the swapped FHLB advances and $85 thousand of capitalized debt issuance costs on other borrowings.

The decrease in the negative cumulative one-year gap from September 30, 2006 to September 30, 2007 was a  result of investment securities moving closer to maturity, the purchase of investment securities during fiscal year 2007 with weighted average lives less than one year, and adjustable-rate mortgage-related securities and loans moving closer to their repricing date.  The increase in interest-earning assets in the one year or less category more than offset the increase in interest-bearing liabilities in the one year or less category between the two period ends.  The increase in interest-bearing liabilities in the one year or less category between the two period ends was due to a larger dollar amount of FHLB advances scheduled to mature during fiscal year 2008 compared to fiscal year 2007 and customers continuing to shift from medium and long-term to short-term certificates of deposit.

The table on the previous page contains certain assumptions which affect the presentation.  Although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.  The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates.  Certain assets, such as adjustable–rate mortgage (“ARM”) loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset.  In the event of a change in interest rates, prepayment and early withdrawal levels likely would deviate significantly from those assumed in calculating the table.

The FHLB advances designated in hedging relationships have maturities ranging from May 2008 to August 2010.  At September 30, 2007, the Bank was in a paying position on the interest rate swaps.  If the one month LIBOR rate remains higher than 3.68% (weighted average break even LIBOR rate), then the Bank will continue to be in a paying position on the interest rate swaps. The following summarizes the interest rate swap agreements by maturity date at September 30, 2007.

Fiscal				Paying		Receiving
Year	Fair	Notional	1 Month		Interest	Interest
Maturity	Value(1)	Amount	LIBOR Rate(2)	Margin	Rate	Rate	Spread
	(Dollars in thousands)
2008	$             (2,679)	$       225,000	5.72%	2.41%	8.13%	5.68%	(2.45)%
2010	(11,138)	575,000	5.72	2.51	8.23	6.35	(1.88)
	$           (13,817)	$       800,000	5.72%	2.48%	8.20%	6.16%	(2.04)%

(1)The one month LIBOR rate as of September 28, 2007 was 5.12%.  This rate was used to calculate the fair value of the interest rate swaps at September 30, 2007.  This rate plus the margin noted above will be the paying interest rate during October 2007.

(2)The one month LIBOR rate as of August 31, 2007 was 5.72%.  This rate plus the margin noted above was the paying interest rate during September 2007.

19

Weighted Average Yields and Rates

The following table presents the weighted average yields earned on loans, securities and other interest-earning assets, the weighted average rates paid on deposits, certificates and borrowings and the resultant interest rate spreads at the dates indicated.  Yields on tax-exempt securities are not calculated on a tax-equivalent basis.

	At September 30,
	2007		2006		2005
Weighted average yield on:
Loans receivable	5.73	%	5.64	%	5.49	%
Mortgage-related securities	4.46		4.54		3.71
Investment securities	4.52		4.46		4.54
Capital stock of FHLB	6.68		6.24		4.70
Cash and cash equivalents	4.94		5.19		3.70
Combined weighted average yield on
interest-earning assets	5.41		5.29		4.96
Weighted average rate paid on:
Savings deposits(1)	2.58		0.65		0.65
Checking deposits	0.21		0.21		0.21
Money market deposits	3.18		3.31		2.06
Certificates of deposit	4.77		4.35		3.35
Borrowings	5.44		4.93		4.45
Combined weighted average rate paid on
interest-bearing liabilities	4.52		4.22		3.50
Net Interest Rate Spread	0.89	%	1.07	%	1.46	%

(1)The increase in the weighted average rate on savings deposits at September 30, 2007 is due to the reclassification of variable-rate retirement certificates of deposit to savings during fiscal year 2007.  The variable-rate retirement certificates of deposit did not have a stated maturity date as a result of changes required by the Bank’s new core information technology processing system.  The weighted average rate of savings deposits at September 30, 2007, excluding the reclassified variable-rate retirement accounts, would have been 0.65%.

20

Financial Condition

Total assets decreased $523.2 million from $8.20 billion at September 30, 2006 to $7.68 billion at September 30, 2007.  The decrease in assets was attributed mainly to a decrease in mortgage-related securities of $670.5 million which was partially offset by an increase in investment securities of $94.7 million and loans receivable of $69.0 million.

Total liabilities decreased $527.6 million from $7.34 billion at September 30, 2006 to $6.81 billion at September 30, 2007.  The decrease in liabilities was due primarily to the repayment of $600.0 million in maturing FHLB advances.  The decrease in liabilities was partially offset by an increase in deposits of $22.4 million.

Stockholders’ equity increased $4.4 million from $863.2 million at September 30, 2006 to $867.6 million at September 30, 2007.  

Loans Receivable.  The loan portfolio increased $69.0 million from $5.22 billion at September 30, 2006 to $5.29 billion at September 30, 2007.  The increase in the portfolio was primarily a result of loan originations of $803.5 million and loan purchases of $144.3 million.  The increase in the loan portfolio was mostly offset by $856.0 million in loan repayments during the year.

Purchased loans from nationwide lenders represented 17.2% of the loan portfolio at September 30, 2007 compared to 21.3% at September 30, 2006.  As of September 30, 2007, the average balance of a purchased loan was approximately $350 thousand compared to the average balance of approximately $120 thousand for an originated loan.  Purchasing mortgage loans rather than mortgage-related securities has resulted in more assets earning a higher rate with no anticipated material increase in credit risk exposure. Our purchased mortgage loans, as measured for interest rate risk sensitivity, were less sensitive to changes in rates than the fixed-rate loans we originate as the majority of our purchased loans are ARM loans.  The majority of purchased ARM loans had reprice terms of 36 months or greater at the time of purchase.  Generally, when acquired or originated, the initial rates on ARM loans are lower than the rates on fixed-rate loans.  Our purchased loans are more sensitive to changes in rates than the mortgage-related and investment securities we would have purchased, which would have likely consisted of ARMs with initial reprice terms of less than 36 months and other short duration investments.

Loans purchased from correspondent lenders during the current fiscal year totaled $129.1 million at a weighted average rate of 5.91% compared to $151.3 million at a weighted average rate of 5.90% during the prior year.  Of the loans purchased during the current and prior fiscal years, $76.0 million and $80.6 million, respectively, were adjustable-rate.

Total one- to four-family loan originations during the current fiscal year were $677.6 million at an average rate of 6.09% compared to one- to four-family loan originations of $645.4 million at an average rate of 5.96% for the prior fiscal year.  Of the one- to four- family loans originated during fiscal year 2007 and 2006, $573.2 million and $497.5 million, respectively, were fixed-rate.

The average yield on our loan portfolio increased 9 basis points from 5.64% at September 30, 2006 to 5.73% at September 30, 2007.  The increase in the yield was primarily a result of fixed-rate mortgage loans originated at rates higher than the overall loan portfolio rate, the origination and purchase of ARM loans at rates higher than the overall loan portfolio rate, and existing ARM loans in the portfolio repricing.

Generally, during the current fiscal year ended September 30, 2007, the Bank’s 30-year fixed-rate loans, with no points paid by the borrower, were priced at approximately 150 basis points above the average 10-year Treasury rate, while the Bank’s 15-year fixed-rate loans were priced approximately 110 basis points above the average 10-year Treasury rate.  The Bank’s loan pricing is comparable to the secondary mortgage market pricing.

The Bank has not experienced any significant increase in the balance of non-performing assets during fiscal year 2007.  Non-performing assets at September 30, 2007 was $9.4 million compared to $8.0 million at September 30, 2006.  Non-performing assets as a percentage of total assets were 0.12% at September 30, 2007 compared to 0.10% at September 30, 2006.  Management continually monitors the circumstances surrounding loans that become non-performing.   If there is a trend toward worsening economic conditions that impairs customers’ ability to repay their loans, and as a result, losses are realized, adjustments to the formula component of our allowance for loan losses may be warranted.

21

The following tables summarize the activity in the loan portfolio for the periods indicated, excluding changes in loans in process, deferred fees and allowance for loan losses.  The weighted average contractual life of our mortgage loan portfolio at September 30, 2007 and 2006 was approximately 23 years.  Included in the year ended September 30, 2006 are repayment amounts of $47.6 million which represent loans that were repurchased by a seller.  These loans were purchased during fiscal year 2005.

		For the Three Months Ended
		September 30, 2007			June 30, 2007			March 31, 2007			December 31, 2006
		Amount	Rate		Amount	Rate		Amount	Rate		Amount	Rate
Loans receivable:		(Dollars in thousands)
	Beginning balance	$5,303,830	5.64	%	$5,249,793	5.59	%	$5,259,857	5.57	%	$5,257,473	5.55	%
	Originations and refinances	225,333	6.50		246,940	6.24		161,705	6.31		169,473	6.39
	Purchases	39,820	6.06		54,624	6.25		23,518	5.75		26,372	5.98
	Repayments	(221,075)			(246,829)			(194,085)			(193,991)
	Other	(1,282)			(698)			(1,202)			530
	Ending balance	$5,346,626	5.68	%	$5,303,830	5.64	%	$5,249,793	5.59	%	$5,259,857	5.57	%
		For the Year Ended September 30,
		2007			2006
		Amount	Rate		Amount	Rate
Loans receivable:		(Dollars in thousands)
	Beginning balance	$5,257,473	5.55	%	$5,494,387	5.39	%
	Originations and refinances	803,451	6.36		811,246	6.37
	Purchases	144,334	6.07		329,319	5.52
	Repayments	(855,980)			(973,054)
	Principal balance of loans related
	to loan swap transaction(1)	--	--		(404,819)	5.72
	Other	(2,652)			394
	Ending balance	$5,346,626	5.68	%	$5,257,473	5.55	%

⁽¹⁾During the quarter ended September 30, 2006, the Bank entered into a transaction with the Federal Home Loan Mortgage Corporation (“FHLMC”) whereby the Bank exchanged $404.8 million of fixed-rate mortgage loans for mortgage-related securities.

22

Mortgage-Related Securities.  The balance of mortgage-related securities decreased $670.5 million from $2.08 billion at September 30, 2006 to $1.41 billion at September 30, 2007.  The decrease in the portfolio was a result of maturities and repayments and the sale of the trading securities, proceeds from which were reinvested in short-term investment securities.  The decrease was partially offset by $228.1 million of purchases during fiscal year 2007.

The following tables provide a summary of the activity in our portfolio of mortgage-related securities for the periods presented.  The yields and weighted average life (“WAL”) for purchases are presented as recorded at the time of purchase.  The yields for the beginning and ending balances are as of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented.  Excluding the yield on the trading securities, the portfolio yield at September 30, 2006 would have been 4.26%.  Excluding the trading securities, the portfolio yield increased 20 basis points between September 30, 2006 and September 30, 2007.  The increase in the yield between the two periods was a result of existing adjustable-rate securities in the portfolio repricing upward.  The beginning and ending WAL is the estimated remaining maturity of the underlying collateral after projected prepayment speeds have been applied.  Excluding the WAL of the trading securities, the portfolio WAL would have been 3.74 years at September 30, 2006.  Excluding the trading securities, the WAL increased between the two periods due to the purchase of securities with a WAL greater than that of the existing portfolio.

		For the Three Months Ended
		September 30, 2007				June 30, 2007				March 31, 2007				December 31, 2006
		Amount	Yield		WAL	Amount	Yield		WAL	Amount	Yield		WAL	Amount	Yield		WAL
Mortgage-related securities:		(Dollars in thousands)
	Beginning balance	$1,466,822	4.30	%	4.89	$1,603,443	4.27	%	3.40	$1,668,548	4.26	%	3.48	$2,084,786	4.54	%	4.39
	Maturities and repayments	(126,050)				(135,905)				(112,054)				(120,737)
	Sale of securities, net of gains	--				--				--				(404,459)
	Net amortization of premiums/discounts	(783)				(1,228)				(988)				(1,075)
	Purchases:
	Fixed-rate	72,610	5.79		4.34	692	5.62		7.61	1,983	5.65		18.18	--	--		--
	Adjustable-rate	--	--		--	--	--		--	44,672	4.60		1.24	108,135	5.17		1.76
	Change in valuation on AFS securities	1,672				(180)				1,282				1,898
	Ending balance	$1,414,271	4.46	%	4.04	$1,466,822	4.30	%	4.89	$1,603,443	4.27	%	3.40	$1,668,548	4.26	%	3.48

23

		For the Year Ended September 30,
		2007				2006
Mortgage-related securities:		Amount	Yield		WAL	Amount	Yield		WAL
		(Dollars in thousands)
	Beginning balance	$2,084,786	4.54	%	4.39	$2,145,254	3.71	%	3.38
	Maturities and repayments	(494,746)				(564,355)
	Sale of securities, net of gains	(404,459)				--
	Net amortization of premiums/discounts	(4,074)				(7,032)
	Purchases:
	Fixed-rate	75,285	5.78		4.74	11,075	6.42		2.20
	Adjustable-rate	152,807	5.00		5.45	100,031	5.97		2.08
	Fair value of securities received in loan swap       transaction	--	--		--	395,828	5.73		7.15
	Other-than-temporary impairment of AFS securities	--				(472)
	Change in valuation on securities:
	Trading	--				1,076
	AFS	4,672				3,381
	Ending balance	$1,414,271	4.46	%	4.04	$2,084,786	4.54	%	4.39

24

Investment Securities.  Investment securities consist of investment grade agency bonds (primarily issued by Federal National Mortgage Association (“FNMA”) or FHLMC) and municipal investments.  Investment securities increased $94.7 million, from $429.5 million at September 30, 2006 to $524.2 million at September 30, 2007.  The increase was the result of purchases during the year, primarily using the proceeds from the sale of the trading securities, offset by maturities and calls.

The following tables provide a summary of the activity of investment securities for the periods presented.  The yields for the beginning and ending balances are as of the periods presented.  The increase in the yield at September 30, 2007 compared to September 30, 2006 was a result of purchases that had a net yield greater than that of the existing portfolio.  The beginning and ending WAL represent the estimated remaining maturity of the underlying collateral after projected call dates have been considered, based upon market rates at each date presented.  The decrease in the WAL at September 30, 2007 compared to September 30, 2006 was primarily due to the purchase of securities with a net WAL less than that of the existing portfolio.

		For the Three Months Ended
		September 30, 2007				June 30, 2007				March 31, 2007				December 31, 2006
		Amount	Yield		WAL	Amount	Yield		WAL	Amount	Yield		WAL	Amount	Yield		WAL
Investment securities:		(Dollars in thousands)
	Beginning balance	$673,160	4.68	%	1.71	$773,404	4.76	%	1.72	$844,514	4.82	%	1.66	$429,480	4.46	%	2.63
	Maturities and calls	(155,250)				(158,740)				(229,500)				(57,000)
	Net amortization of premiums/discounts	334				1,303				1,572				1,042
	Purchases – fixed-rate	5,802	3.76		4.85	57,329	5.01		0.74	156,768	5.34		1.44	471,140	5.18		0.67
	Change in valuation on AFS securities	122				(136)				50				(148)
	Ending balance	$524,168	4.52	%	1.66	$673,160	4.68	%	1.71	$773,404	4.76	%	1.72	$844,514	4.82	%	1.66
		For the Year Ended September 30,
		2007				2006
		Amount	Yield		WAL	Amount	Yield		WAL
Investment securities:		(Dollars in thousands)
	Beginning balance	$429,480	4.46	%	2.63	$430,499	4.54	%	2.48
	Maturities and calls	(600,490)				(200,510)
	Net amortization of premiums/discounts	4,251				143
	Purchases – fixed-rate	691,039	5.19		0.88	199,143	5.33		1.39
	Change in valuation on AFS securities	(112)				205
	Ending balance	$524,168	4.52	%	1.66	$429,480	4.46	%	2.63

25

Liabilities.  Liabilities decreased $527.6 million from $7.34 billion at September 30, 2006 to $6.81 billion at September 30, 2007. The decrease in liabilities was due primarily to the repayment of $600.0 million in FHLB advances.  The decrease in liabilities was partially offset by an increase in deposits of $22.4 million.

During fiscal year 2007, the Company repaid $600.0 million of the $750.0 million of FHLB advances that matured during the fiscal year.  During the year, management determined that the increase in costs of the FHLB advances, without the opportunity to reinvest repayments or maturities on earning assets at higher rates than were currently being earned, would not be appropriate because it would have further reduced the Company’s net interest margin.  This was primarily due to the inverted to flat yield curve through much of fiscal year 2007.  However, management believes in fiscal year 2008, the opportunity will exist to borrow funds to purchase securities at spreads acceptable to management and consistent with historical average spreads for these types of transactions.  Management believes that such transactions, if completed, will improve the earnings of the Company and not create excessive interest rate risk exposure.

The $22.4 million increase in the deposit portfolio was primarily a result of an increase in the certificate of deposit portfolio, after taking into consideration the transfer of retirement accounts from the certificate of deposit portfolio to the savings portfolio during the first quarter of fiscal year 2007 as a result of the Bank’s new core information technology processing system.

At September 30, 2007, $193.0 million of our $2.50 billion in certificates were brokered and public unit deposits, compared to $233.5 million in brokered and public unit deposits at September 30, 2006.  The $40.5 million decrease between September 30, 2006 and September 30, 2007 was primarily attributed to a decrease in public unit deposits of $217.2 million, partially offset by an increase in brokered deposits of $176.7 million.  The decrease in public unit deposits was a result of maturities that were not retained because the Bank was not in the market for public unit deposits at the time of maturity for those deposits.  Management will continue to monitor the wholesale and public unit deposit markets.

The table below presents the Company’s deposit portfolio at the dates indicated.

	At					At
	September 30, 2007					September 30, 2006
		Average		% of			Average		% of
	Amount	Rate		Total		Amount	Rate		Total
	(Dollars in thousands)
Checking	$    394,109	0.21	%	10.05	%	$    402,898	0.21	%	10.33	%
Savings(1)	237,148	2.58		6.04		106,347	0.65		2.73
Money market	790,277	3.18		20.15		808,910	3.31		20.74
Certificates(1)	2,501,248	4.77		63.76		2,582,276	4.35		66.20
Total deposits	$ 3,922,782	3.86	%	100.00	%	$ 3,900,431	3.61	%	100.00	%

(1)During the second quarter of fiscal year 2007, variable-rate retirement certificates of deposit were reclassified to Savings as the new classifications for these accounts did not have a stated maturity date as a result of changes required by the Bank’s new core information technology processing system.  The amount of the retirement savings included in Savings at September 30, 2007 was $136.6 million.  The amount of variable-rate certificates of deposit included in Certificates at September 30, 2006 was $153.0 million.

26

Stockholders’ Equity.  Total stockholders’ equity increased $4.4 million from $863.2 million at September 30, 2006 to $867.6 million at September 30, 2007.  The increase in stockholders’ equity was a result of $32.3 million in net income, $7.5 million in Employee Stock Ownership Plan (“ESOP”) activity, $6.6 million in stock option exercise activity, and a $2.8 million increase in unrealized gains on AFS securities, which was partially offset by $43.0 million in dividend payments and $3.2 million in treasury stock activity.

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

			State of
		Percentage	Incorporation
		of	or
Parent	Subsidiary	Ownership	Organization
Capitol Federal	Capitol Federal Savings	100%	Federal
Financial	Bank
Capitol Federal	Capitol Funds, Inc.	100%	Kansas
Savings Bank
Capitol Funds,	Capitol Federal	100%	Vermont
Inc.	Mortgage Reinsurance
	Company

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-35452 on Form S-8 of our reports dated November 28, 2007, relating to the consolidated financial statements of Capitol Federal Financial and Subsidiary and management's report on the effectiveness of internal control over financial reporting incorporated by reference in the Annual Report on Form 10-K of Capitol Federal Financial and Subsidiary for the year ended September 30, 2007.

/s/ Deloitte & Touche LLP

Kansas City, Missouri

November 28, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, John B. Dicus, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Capitol Federal Financial;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 29, 2007	By:	/s/ John B. Dicus
		John B. Dicus
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Kent G. Townsend, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Capitol Federal Financial;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 29, 2007	By:	/s/ Kent G. Townsend
		Kent G. Townsend
		Executive Vice President, Chief Financial Officer and Treasurer

EX-32

EXHIBIT 32

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Capitol Federal Financial (the “Company”) on Form 10-K for the fiscal year ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John B. Dicus, Chief Executive Officer of the Company, and I, Kent G. Townsend, Chief Financial Officer and Treasurer of the Company, certify, in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.

Date:   November 29, 2007                                    By:   /s/ John B. Dicus                                         

                                                                                     John B. Dicus, President and

                                                                                     Chief Executive Officer

Date:   November 29, 2007                                   By:   /s/ Kent G. Townsend                                 

                                                                                     Kent G. Townsend, Executive Vice President,

                                                                                     Chief Financial Officer and Treasurer