FIRST STATE BANCORPORATION
DEFERRED COMPENSATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>5
<FILENAME>d05963exv10w2.txt
<DESCRIPTION>DEFERRED COMPENSATION AGREEMENT
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.2

                           FIRST STATE BANCORPORATION
                      EXECUTIVE DEFERRED COMPENSATION PLAN

         WHEREAS, First State Bancorporation ("the Company"), a New Mexico
corporation, recognizes the valuable services performed by certain of its
executive employees, executive employees of related companies and its outside
Directors, and wishes to encourage these employees to continue their employment
with their respective employers and to encourage these Directors to continue to
serve on the Board of Directors of the Company; and

         WHEREAS, the Company now wishes to set forth the terms and conditions
upon which compensation or stock awards of the executive employees and fees of
the Directors may be deferred or additional compensation may be paid to the
employees or Directors to the employees' or Directors' beneficiaries after an
employee's termination without cause, retirement, disability, or death or a
Director's cessation of service or death.

         NOW, THEREFORE, the Company adopts this Plan.

                                   ARTICLE 1.
                                   DEFINITIONS

         For purposes of this Plan, unless the context requires otherwise, the
following words and phrases shall have the meanings indicated below:

1.1      ACCOUNT means the account established for each Employee pursuant to
         Section 2.1.

1.2      ADMINISTRATOR means the Compensation Committee of First State
         Bancorporation. The Administrator shall have the right to delegate
         certain responsibilities under the Plan and to engage agents as it sees
         fit to provide assistance with the Plan, including legal, accounting or
         other service providers.

1.3      BENEFICIARY(IES) means (a) the person or persons, natural or otherwise,
         so designated in writing by the Employee in a form provided for this
         purpose and filed with the Administrator (and, in the event that more
         than one person is so designated, benefits shall be allocated equally
         among such persons unless another allocation method acceptable to the
         Administrator is specified in such designation) or (b) the Employee's
         estate in the event no such designation is made or no person so
         designated survives the Employee.

1.4      CHANGE IN CONTROL means the date on which one of the following shall
         have occurred with respect to the Company, but not with respect to any
         other Employer:

         (a)      A person [as that term is used in Section 13d of the
                  Securities Exchange At of 1934, as amended (the "Exchange
                  Act") becomes the beneficial owner (as defined in Rule 13d-3
                  under the Exchange Act) of shares of the Company having
                  twenty-five percent (25%) or more of the total number of votes
                  that may be cast for the election of directors of the Company
                  without the prior approval of at least two-thirds of the
                  members of the Board unaffiliated with that person; or

         (b)      Persons who constitute the directors of the Company at the
                  beginning of a 24-month period cease to constitute at least
                  two-thirds of all directors at any time during the period,
                  unless the election of any new of replacement directors was
                  approved by a vote of at least a majority of the members of
                  the Board in office immediately before the period and of the
                  new and replacement directors so approved;

         (c)      The adoption of any plan or proposal to liquidate or dissolve
                  the Company; or



<PAGE>

         (d)      Any merger or consolidation of the Company unless thereafter
                  (1) directors of the Company immediately prior thereto
                  continue to constitute at least two-thirds of the directors of
                  the surviving entity or transferee, or (2) the Company's
                  securities continue to represent or are converted into
                  securities that represent more than eighty percent (80%) of
                  the combined voting power of the surviving entity or
                  transferee.

         The Administrator's reasonable determination as to whether such an
event has occurred shall be final and conclusive. A Change in Control shall not
occur with respect to an Employee if, in advance of such event, the Employee
agrees in writing that such event shall not constitute a Change in Control.
Notwithstanding anything to the contrary in this Section 1.4, no rights under
this Plan shall accrue to the Employee because of a Change in Control if the
Employee or any group of which the Employee is a member, is the person whose
acquisition constitutes the Change in Control.

1.5      CODE means the Internal Revenue Code of 1986, as amended at the
         particular time applicable.

1.6      COMPENSATION means the Employee's wages, salaries, fees, for
         professional services and other amounts received (whether or not an
         amount is paid in cash) for personal services actually rendered in the
         course of employment with the Employer to the extent the amounts are
         includable in gross income, including but not limited to commissions,
         compensation for services on the basis of a percentage of profits,
         bonuses, fringe benefits, reimbursements and expense allowances, but
         not including those items excludable for the definition of compensation
         under Treas. Reg. Section 1.415-2(d)(3). For Directors, COMPENSATION
         means the annual fees paid as compensation to the Director by the
         Company for serving on its Board of Directors, including retainer fees
         and meeting fees.

1.7      DIRECTOR means a member of the Company's Board of Directors who is not
         an employee of the Company or an Employer.

1.8      DISABILITY DATE means the date on which the Administrator makes a final
         determination that the Employee is suffering from a physical or mental
         incapacity as a result of which the Employee has been absent from the
         full-time performance of the Employee's duties with an Employer for
         period of six (6) consecutive months, the Employer has given the
         Employee a notice of termination of employment due to disability, and,
         within thirty (30) days after such notice is given, the Employee shall
         not have returned to the full-time performance of his or her duties. To
         the extent required by law and to the extent the Administrator is
         ruling on a claim for benefits on account of a disability, the Plan
         will follow, with respect to that claim, claims procedures required by
         law for plans providing disability benefits.

1.9      EFFECTIVE DATE means February 15, 2002.

1.10     EMPLOYEE means an individual employed by an Employer as a highly
         compensated and/or management level employee and who is selected by the
         Administrator in its sole discretion to participate in this Plan.

1.11     EMPLOYER means the Company, its successor and parent and any successor
         to all or a major portion of the Company's assets or business which
         assumes the obligations of the Company, and each other related entity
         that may adopt this Plan from time to time with the consent of the
         Company. For Directors, EMPLOYER means the Company.

1.12     ERISA means the Employee Retirement Income Security Act of 1974, as
         amended at the particular date applicable.

1.13     FAIR MARKET VALUE means the closing price of a share of Stock as
         reported by the National Market System or any national securities
         exchange which may then be the primary trading market for the Stock on
         a particular date. In the event that there are no Stock transactions on



                                      -2-

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         such date, the Fair Market Value shall be determined as of the
         immediately preceding date on which there were Stock transactions.

1.14     HARDSHIP means an unforeseeable event that imposes an immediate and
         severe financial burden upon a Participant and that is incapable of
         being ameliorated through other resources available to the Participant,
         including insurance or borrowing from commercial lenders. Such hardship
         may include payment of a Participant's medical expenses, eviction from
         his or her primary residence, or other circumstances. The Administrator
         in its sole, absolute and unfettered discretion in a reasonable and
         nondiscriminatory manner shall determine whether or not an event
         constitutes a "hardship" under the Plan.

1.15     PARTICIPANT means an Employee or Director.

1.16     PLAN means the First State Bancorporation Executive Deferred
         Compensation Plan as adopted herein and all amendments thereto.

1.17     PLAN YEAR means the 12 consecutive month period ending each December
         31, except the first Plan Year shall begin February 15, 2003 and end on
         December 31, 2003.

1.18     RETIREMENT DATE means the first day of the first month which coincides
         with, or immediately follows, the date on which the Employee reaches 65
         years of age or, if later, the date upon which the Employee actually
         retires.

1.19     STOCK shall mean shares of common stock of First State Bancorporation.

1.20     STOCK AWARD means all or any portion of an award based on Stock (which
         may be in the form of incentive stock options, nonqualified stock
         options, restricted stock, restricted stock units or other awards
         similar in nature) granted to an Employee pursuant to the Company's
         equity compensation plan in existence as of the date of the initial
         grant of the award.

1.21     STOCK AWARD UNITS means the amount of Stock Awards elected to be
         deferred by an Employee as provided in Section 2.3(b)(2).

1.22     TERMINATION DATE means the first day of the first month that coincides
         with, or immediately follows, the date on which the Employee terminates
         service with his or her Employer (without being immediately employed by
         another Employer) and has not forfeited benefits pursuant to Article 5.
         TERMINATION DATE shall not include the date on which an Employee begins
         an approved leave of absence from the Employer; provided that, failure
         to return from such leave of absence on a timely basis shall result in
         a Termination Date of the date on which the Employee was scheduled to
         return. For Directors, TERMINATION DATE mean the date on which the
         Director resigns or is removed from service on the Company's Board of
         Directors for any reason, including death or disability.

1.23     TRUST means the trust executed by and between the Company and such
         trustee as may be chosen by the Administrator. The trust shall be a
         "rabbi trust" established in accordance with Internal Revenue Service
         Revenue Procedure 94-52.

                                   ARTICLE 2.
                                     BENEFIT

2.1      ENROLLMENT. As a condition of participation, each Participant shall
         complete, execute and return to the Administrator within 30 days of the
         date of selection, an election form, a beneficiary designation form,
         and any other enrollment documentation that may be required by the
         Administrator from time to time in its sole discretion. Participation
         in the Plan shall begin as of the first day of the first payroll period
         following receipt by the Administrator of such forms or as soon as
         practicable thereafter.



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<PAGE>

2.2      PARTICIPANT ACCOUNTS. Each Participant shall have an Account
         established in his or her name under the Plan to which his or her
         Employer shall credit an annual benefit as specified in Section 2.3.
         The Administrator shall cause benefit statements reflecting the current
         amount in the Participant's Account to be distributed to the Employees
         on an annual basis.

2.3      BENEFIT. The Employer of the Participant shall contribute and each
         Participant's Account shall be credited with an amount equal to the sum
         of (a) and (b), as follows:

                  (A)      Employer Contribution. The Employer may contribute an
                           amount to each Employee's Account determined in the
                           sole discretion of the Administrator. The
                           contribution may be different with respect to each
                           Employee, and may, without limitation, be calculated
                           in accordance with certain pre-established
                           performance goals or with reference to the amount of
                           the Employee's contribution. The contribution shall
                           be made on a date at the beginning of each Plan Year
                           in respect of the immediately preceding Plan Year, or
                           at such other time as the Administrator may determine
                           in its sole discretion. No Employer Contribution
                           shall be made on behalf of Directors.

                  (B)      Participant Contribution.

                              (1)  Compensation Deferral Election. The
                                   Participant may elect, on the form provided
                                   by the Administrator, to contribute a dollar
                                   amount or percentage of Compensation that
                                   otherwise would be payable to the Participant
                                   by the Employer. The minimum amount of
                                   Compensation that may be deferred under the
                                   Plan for any Plan Year by an Employee is 5%
                                   of an Employee's base pay or 5% of an
                                   Employee's bonus compensation. The maximum
                                   amount of Compensation that may be deferred
                                   under the Plan for any Plan Year by an
                                   Employee is 50% of the Employee's base pay
                                   and 100% of the Employee's bonus
                                   compensation. The maximum amount of
                                   Compensation that may be deferred under the
                                   Plan for any Plan Year by a Director is 100%
                                   of the Director's Compensation. Any election
                                   to defer receipt of Compensation by the
                                   Participant must be made before the beginning
                                   of the period of service for which the
                                   compensation is payable. A Participant's
                                   contribution will be made on each date on
                                   which the Participant receives a check for
                                   Compensation from the Employer.
                                   Notwithstanding the foregoing, not more
                                   frequently than once per Plan Year, the
                                   Employee may revoke, in the form provided by
                                   the Administrator, his or her deferral
                                   election with respect to Compensation not yet
                                   earned by the Employee. Such revocation must
                                   be made before the Employee performs the
                                   service for which the Compensation is payable
                                   and shall remain in effect until the end of
                                   the Plan Year in which the revocation is
                                   made. Any subsequent election to defer
                                   receipt of compensation shall not apply until
                                   the calendar year following the calendar year
                                   in which the Employee made the revocation.

                              (2)  Stock Award Units Deferral Election. To the
                                   extent permitted by the plan or agreement
                                   under which the Stock Award was granted, an
                                   Employee with a vested but unexercised stock
                                   option or restricted stock, restricted stock
                                   units, or other Stock Awards retaining
                                   characteristics that prevent the application
                                   of the constructive receipt rules of Code
                                   section 451 may elect to defer all or any
                                   portion of the Stock Award to the Employee's
                                   Account hereunder in the form of Stock Award
                                   Units; provided, that such election to defer
                                   must occur at least six (6) months prior to
                                   the date of such exercise or lapse of




                                       -4-
<PAGE>

                                   restrictions. Any such election made by the
                                   Employee is irrevocable; however, in the
                                   event of an Employee's death prior to the
                                   exercise or lapse of restrictions, the
                                   deferral election shall not become effective.
                                   A Stock Award Units Deferral election shall
                                   not count toward the minimum or maximum
                                   Compensation Deferral election under Section
                                   2.3(b)(1). This Plan governs the deferral of
                                   the delivery and receipt of Stock Award Units
                                   upon the exercise of options or on restricted
                                   stock units only. The options and restricted
                                   Stock themselves, including any requirements
                                   as to exercise, are governed by the terms of
                                   the plan under which they were granted.

                                     (A)  Calculation of Units upon Exercise of
                                          Options under the Plan, Other Awards.
                                          An Employee shall not hold Stock in
                                          his or her Account under the Plan.
                                          Immediately upon transfer of a Stock
                                          Award in the form of Stock or upon
                                          exercise of a Stock Award in the form
                                          of an option, the Stock Award shall be
                                          converted to Stock Award Units. The
                                          number of Stock Award Units credited
                                          to an Employee's Account upon the
                                          exercise of the option previously
                                          transferred to the Plan shall equal
                                          the difference between (1) the number
                                          of shares of Stock subject to the
                                          Employee's option, and (2) the number
                                          of shares of Stock delivered by the
                                          Employee in payment of the option
                                          exercise price, less any shares of
                                          Stock withheld in accordance with the
                                          plan under which the option was
                                          granted to satisfy FICA, Medicare or
                                          any other taxes due upon the exercise
                                          of such Stock Option. The number of
                                          Stock Award Units credited to an
                                          Employee's account upon an Employee's
                                          election to convert restricted stock
                                          to restricted stock units shall equal
                                          the number of shares of Stock
                                          originally granted as restricted
                                          stock.

                                     (B)  Conversion of Stock Award Units.
                                          Stock Award Units shall remain in an
                                          Employee's Account until such time as
                                          the Employee becomes eligible to
                                          receive a distribution of his or her
                                          Account. The number of shares of Stock
                                          that an Employee will receive at the
                                          time of distribution shall be equal to
                                          the number of Stock Award Units in the
                                          Employee's Account as of the date the
                                          Employee becomes eligible to receive a
                                          distribution of his or her Account.

                                     (C)  No Rights as Shareholder. An Employee
                                          who has elected to defer a Stock Award
                                          into the Plan shall have no rights as
                                          a shareholder of the Company with
                                          respect to the Stock Award Units in
                                          his or her Account.

                                     (D)  Dividend Equivalent Allocation. As of
                                          each dividend payment date with
                                          respect to shares of Stock, the
                                          Administrator shall credit each
                                          Employee's Account with an amount
                                          equivalent to the dividends paid by
                                          the Company on the number of shares of
                                          Stock equal to the number of Stock
                                          Award Units in the Participant's
                                          Account. Such dividend equivalent
                                          amounts credited to a Participant's
                                          Account shall be "reinvested" in
                                          additional Stock Award Units at a
                                          price equal to the Fair Market Value
                                          of such Stock as of the dividend
                                          payment date.

                                     (E)  Adjustments. In the event that the
                                          Administrator determines that any
                                          dividend or other distribution with
                                          respect to shares



                                       -5-

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                                          of Stock (whether in the form of cash,
                                          stock, securities of a subsidiary of
                                          the Company, other securities or other
                                          property), any recapitalization, stock
                                          split, reverse stock split,
                                          reorganization, merger, consolidation,
                                          split-up, spin-off, combination,
                                          repurchase or exchange of Stock or
                                          other securities of the Company,
                                          issuance of warrants or other rights
                                          to purchase Stock or other securities
                                          of the Company, or any other similar
                                          corporate transaction or event affects
                                          the Stock such that an adjustment to
                                          the Employee's allocations to their
                                          Accounts is appropriate to prevent
                                          reduction or enlargement of the
                                          benefits or potential benefits
                                          intended to be made available under
                                          the Plan, then the Administrator may,
                                          in its sole discretion and in a manner
                                          it deems equitable, adjust the Stock
                                          Units allocated to Employee Accounts.


2.14     INVESTMENT OF ACCOUNT. To the extent the Participant's Account is held
         in the Trust, the Participant shall have the right, consistent with the
         terms of the Trust, to invest the amounts deferred into his or her
         Account as a Compensation Deferral among the investment vehicles
         selected by the Administrator in its sole discretion, which may
         include, without limitation, variable life insurance products and
         mutual funds. Any losses incurred or gains realized by the Participant
         shall be subtracted from or added to the amount in the Participant's
         Account on a regular frequency as determined by the Administrator. A
         Participant may choose to reallocate the amounts in his or her Account
         among the investment alternatives on a regular frequency as determined
         solely by the Administrator. A Participant's Stock Award Units may not
         be invested.

2.15     OBLIGATION LIMITED TO ACCOUNT. The Employer shall have no additional
         obligation to the Participant under this Plan beyond the amounts
         credited to the Participant's Account in accordance with this Article
         2.

                                   ARTICLE 3.
                               VESTING OF BENEFITS

3.1      VESTING. All amounts contributed to a Participant's Account pursuant to
         Section 2.3 (b) of the Plan shall be immediately vested. All amounts
         contributed to an Employee's Account pursuant to Section 2.3(a) of the
         Plan shall be vested in accordance with the following schedule, subject
         to the forfeiture provisions of Article 5:

<Table>
<Caption>
             COMPLETED YEARS OF                        VESTED
                 EMPLOYMENT                          PERCENTAGE
             ------------------                      ----------
<S>                                                  <C>
                      0                                   0
                      1                                  33%
                      2                                  67%
                      3                                 100%
</Table>

         Such vesting schedule shall also apply to investment gains and
         earnings, if any, earned on the Employee's Account pursuant to Section
         2.4. "Years of Employment" shall mean 12 consecutive month periods
         measured from the later of: (a) the Effective Date of the Plan; or (b)
         the date of the Employee's initial employment with the Employer. There
         shall be no vesting credit for past employment.

3.2      SUBJECT TO TRUST. The Employer's obligation to the Participants is an
         unfunded, unsecured promise to pay compensation in the future,
         including, without limitation, all amounts held in the form of Stock
         Award Units. No Participant or Beneficiary shall acquire any property
         interest in his or her Account or any other assets of the Employer,
         their rights being limited to receiving from the Employer deferred
         payments as set forth in this Plan and the underlying Trust. All
         amounts contributed to the Trust with respect to the Participants shall
         be held in



                                       -6-

<PAGE>

         accordance with the terms of the Trust. All amounts credited to a Trust
         account shall be subject to the claims of the general creditors of the
         Employer. Nothing contained in the Plan shall constitute a guaranty by
         any person that the assets of an Employer will be sufficient to pay any
         benefit hereunder.

3.3      ACCELERATION OF VESTING. In the event of (a) a Change in Control, or
         (b) an Employee's Death, Disability Date or Retirement Date, all
         unvested amounts shall become immediately vested.

                                   ARTICLE 4.
                               PAYMENT OF BENEFIT

4.1      EMPLOYEE'S RETIREMENT OR DISABILITY. Upon the earlier of an Employee's
         Retirement Date or Disability Date, the Employee shall be entitled to
         receive a distribution equal to the Employee's vested Account balance
         under the Plan as of the date of such Retirement Date or Disability
         Date. Such distribution shall be paid in a single lump sum, or, upon
         the Employee's election, in substantially equal annual installments
         over a period of years, the number of years to be determined solely by
         the Administrator from time to time in the normal course of
         administering the plan (but not to exceed ten years); provided, that
         such election is made prior to the date on which the Employee becomes
         entitled to a distribution. Payment shall be made (or shall begin) on
         the first day of the month following the date on which the Account
         becomes payable, or as soon as administratively practicable thereafter.
         Each subsequent payment (if applicable) shall be made on the
         anniversary of the first distribution date. Notwithstanding the
         foregoing, if the Employee's Account does not exceed $10,000 (or such
         other de minimis amount as the Administrator determine in a reasonable
         and nondiscriminatory manner and calculating the Stock Award Units at
         then Fair Market Value) on the date on which the Employee becomes
         entitled to a distribution of his or her Account, the Administrator may
         elect to pay the value of the Account to the Employee in a single lump
         sum distribution.

4.2      PARTICIPANT'S TERMINATION OR DEATH. Upon the earlier of a Participant's
         Termination Date or death, the Participant's vested accrued benefit in
         his or her Account under the Plan shall be distributed to the
         Participant or, in the event of death, to the Participant's Beneficiary
         in a single lump sum as soon as practicable following the Termination
         Date or date of death.

4.3      CHANGE IN CONTROL. Upon the occurrence of a Change in Control, a
         Participant shall be entitled to receive a distribution equal to the
         Participant's vested Account balance under the Plan (after application
         of Section 3.3). Such distribution shall be paid in a single lump sum,
         or, upon the Participant's election, in substantially equal annual
         installments over a period of three years; provided, that such election
         is made prior to the date on which the Employee becomes entitled to a
         distribution. Payment shall be made (or shall begin) on the first day
         of the month following the date on which the Change in Control occurs,
         or as soon as administratively practicable thereafter. Each subsequent
         payment (if applicable) shall be made on the anniversary of the first
         distribution date. Unless otherwise provided in an Employee's current
         employment agreement with an Employer, if payment of a Participant's
         vested account balance will, when combined with other payments to the
         Participant under other plans or agreements, create an excise tax
         liability to a Participant pursuant to Code section 280G, then the
         amount of the distribution from this Plan may be reduced by the
         Employer at the written direction of the Participant to prevent any
         imposition of such excise tax; provided that, the amount distributed to
         the Participant less any such reduction shall fully satisfy the
         Employer's obligation to the Participant under this Plan.

4.4      GENERAL IN SERVICE DISTRIBUTIONS. An Employee may elect to receive a
         distribution of his or her Account balance while still employed with
         the Employer solely under the following conditions:



                                       -7-
<PAGE>

         (A)      Hardship. With approval of the Administrator, an Employee may
                  elect to receive a lump sum distribution from his or her
                  Account in the amount necessary to eliminate a Hardship,
                  including any amount needed to pay taxes to net the amount of
                  the Hardship.

         (B)      Accelerated Distribution. An Employee may elect to receive a
                  distribution of his or her total vested Account balance at any
                  time; provided, however, that commencement of a distribution
                  under this Section 4.4(b) shall require the Employee to
                  forfeit 10% of the Employee's total vested Account balance
                  prior to such distribution. No partial distributions shall be
                  allowed.

         An Employee who receives a distribution pursuant to either subsection
         (a) or (b) of this Section 4.4 shall be prohibited from participating
         in the Plan for (1) the remainder of the Plan Year in which the
         distribution is made, and (2) the entire Plan Year following the Plan
         Year in which the distribution is made.

4.5      FORM OF PAYMENT. The portion of a Participant's Account attributable to
         Employer and Compensation Deferral amounts under Section 2.3(a) and
         2.3(b)(1) shall be payable solely in the form of cash. The portion of
         an Employee's Account attributable to an Employee's Stock Award Units
         under Section 2.3(b)(2) shall be payable solely in the form of Stock.
         If an installment distribution is in effect, the portion of the
         Employee's Account attributable to Stock Award Units shall continue to
         be credited with dividend equivalents under Section 2.3(b)(2)(C) until
         fully paid.

4.6      CONSTRUCTIVE RECEIPT. If and only to the extent this Plan is determined
         to provide the Employee benefits that are deemed to be "constructively
         received" by the Employee under the Code, as amended, the Employee's
         vested accrued benefit in his or her Account shall be distributed to
         the Employee as of the date such constructive receipt is deemed to have
         occurred.

4.7      WITHHOLDING. All amounts payable to the Employee or the Employee's
         Beneficiary shall be made subject to all applicable federal and state
         withholding requirements.

                                   ARTICLE 5.
                              FORFEITURE OF BENEFIT

         Notwithstanding any other provision of the Plan, in the event that an
Employee's employment with the Employer is terminated for cause as determined in
the sole discretion of the Administrator, the Employee shall forfeit any benefit
payment otherwise payable to the Employee under Section 2.3(a) of the Plan. For
the purpose of the Plan, "cause" shall be: (1) the definition of "cause" used in
the Employee's current employment agreement with the Employer; or, (2) if the
Participant has not entered into an employment agreement with the Employer, as
determined in the sole and absolute discretion of the Administrator: (a)
repeated refusal to obey written directions of the Board of Directors or a
superior officer (so long as such directions do not involve illegal or immoral
acts); (b) substance abuse that is materially injurious to the Employer; (c)
fraud or dishonesty that is materially injurious to the Employer; (d) breach of
any material obligation of nondisclosure or confidentiality owed to the
Employer; (e) commission of a criminal offense involving money or other property
of the Employer (excluding any traffic violations or similar violations); or (f)
commission of a criminal offense that constitutes a felony or a misdemeanor
involving moral turpitude, recklessness or fraud in the jurisdiction in which
the offense is committed. A Participant who agrees to resign from his or her
affiliation with the Employer in lieu of being terminated for Cause may be
deemed to have been terminated for cause for purposes of the Plan.

                                   ARTICLE 6.
                        AMENDMENT OR TERMINATION OF PLAN

         The Company reserves the right to amend or terminate this Plan at any
time and from time to time for any reason by action of the Board of Directors of
the Company; provided, that no amendment



                                       -8-

<PAGE>

shall affect an Employee's right to receive benefits under Section 2.3(b) upon
termination of the Plan. The Administrator shall have the right to amend this
Plan at any time and from time to time if such amendment is necessary to comply
with ERISA or if, in the judgment of the Administrator, such amendment will not
result in any material increase in the benefits provided under or the cost of
maintaining the Plan. Any such amendment may be made retroactively effective to
the extent permitted by applicable law. No Employer other than the Company shall
have the right to amend or terminate this Plan.

                                   ARTICLE 7.
                                CLAIMS PROCEDURES

7.1      DENIAL OF BENEFITS. The following claims procedures are generally
         applicable to claims filed under the Plan. To the extent required by
         law and to the extent the Administrator is ruling on a claim for
         benefits on account of a disability, the Plan will follow, with respect
         to that claim, claims procedures required by law for plans providing
         disability benefits.

                  (A)      FILING A CLAIM. All claims shall be filed in writing
                           by the Participant, Beneficiary or the authorized
                           representative of the claimant (the "claimant") by
                           completing the procedures that the Administrator
                           requires. The procedures shall be reasonable and may
                           include the completion of forms and the submission of
                           documents and additional information. For purposes of
                           this Section, a request for a withdrawal under
                           Section 4.4 shall be considered a claim.

                  (B)      REVIEW OF CLAIM. The Administrator shall review all
                           materials and shall decide whether to approve or deny
                           the claim. If a claim is denied in whole or in part,
                           the Administrator shall provide written notice of
                           denial to the claimant within a reasonable period of
                           time no later than 90 days after the Administrator
                           receives the claims, unless special circumstances
                           require an extension of time for processing the
                           claim. If an extension is required, the Administrator
                           shall notify the claimant in writing before the end
                           of the 90-day period and indicate the special
                           circumstances requiring an extension of time and the
                           date by which the Administrator expects to render a
                           decision on the claim. The extension shall not exceed
                           an additional 90 days. The notice of denial shall be
                           written in a manner calculated to be understood by
                           the claimant and shall include the following:

                                    (1)      the specific reason(s) for the
                                             adverse determination;

                                    (2)      specific references to pertinent
                                             Plan provisions on which the
                                             adverse determination is based;

                                    (3)      a description of any additional
                                             material or information necessary
                                             for the claimant to perfect his
                                             claim and the reason why such
                                             material or information is
                                             necessary; and

                                    (4)      a description of the Plan's review
                                             procedures and 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 determination
                                             on review.

                  (C)      APPEAL PROCESS. If the claimant wishes a review of
                           the denied claim, 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 claimant may submit to the
                           Administrator in writing any issues, documents,
                           records, comments or other information he may have
                           regarding his claim for benefits under the Plan. Such
                           request for an appeal must be made by the claimant in
                           writing within 60 days after receipt of notice that
                           his claim has been denied by the Administrator.



                                       -9-

<PAGE>

                            A document, record or other information shall be
                            considered "relevant" to a claim if such document,
                            record or other information (i) was relied upon in
                            making the benefit determination, (ii) was
                            submitted, considered or generated in the course of
                            making the benefit determination, without regard to
                            whether such document, record or other information
                            was relied upon in making the benefit determination,
                            or (iii) demonstrates compliance with the
                            administrative processes and safeguards required
                            pursuant to ensure and to verify that benefit claim
                            determinations are made in accordance with the Plan
                            and that, where appropriate, the Plan provisions
                            have been applied consistently with respect to
                            similarly situated claimants.

                  (D)      REVIEW OF APPEAL. The Administrator shall make its
                           decision on review solely on the basis of the written
                           record, including documents and written materials
                           submitted by the claimant. The Administrator shall
                           make a decision on the review within a reasonable
                           period of time, not later than 60 days after the
                           Administrator receives the claimant's written request
                           for review unless special circumstances require
                           additional time for review of the claim. If an
                           extension is required, the Administrator shall notify
                           the claimant in writing before the end of the 60-day
                           period and indicate the special circumstances
                           requiring an extension of time and the date by which
                           the Administrator expects to render a decision on the
                           claim. The extension shall not exceed an additional
                           60 days. The decision on review will be written in a
                           manner calculated to be understood by the claimant.
                           If the claim is denied, the written notice shall
                           include the following:

                                    (1)      the specific reason(s) for the
                                             adverse determination;

                                    (2)      specific references to pertinent
                                             Plan provisions on which the
                                             adverse determination is based;

                                    (3)      a statement that the claimant shall
                                             be entitled, 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 (as "relevant" is
                                             defined in this section); and

                                    (4)      a statement of the claimant's right
                                             to bring a civil action under ERISA
                                             Section 502(a).

                            The Administrator shall have full discretion and
                            power to decide all claims and reviews of denied
                            claims, respectively, including determining
                            eligibility, status and the rights of all
                            individuals under the Plan and construing any and
                            all terms of the Plan. Following the approval of a
                            claim for benefits, the Administrator shall have the
                            authority to construe and administer the Plan in a
                            manner that is consistent with the payment of
                            benefits in accordance with the approved claim.

                            Notwithstanding anything herein to the contrary, any
                            notification from the Administrator to the claimant
                            under this Section may be made electronically,
                            provided that such notification complies with
                            Department of Labor Regulation Sections
                            2520.104b-1(c)(1)(i), (iii), and (iv).

7.2      EXHAUSTION OF REMEDIES; LIMITATION OF ACTIONS. In the event of any
         dispute over benefits under this Plan, all remedies available to the
         disputing individual under this article must be exhausted before legal
         recourse of any type is sought. No legal action at law or in equity may
         be filed against the Plan, the Employer, the Company or the
         Administrator relating to any dispute over benefits under this Plan
         more than one year after the Administrator has made a final decision
         under the claims review process described in this Article 7.



                                      -10-

<PAGE>

                                   ARTICLE 8.
                                  MISCELLANEOUS

8.1      EFFECT UPON EMPLOYMENT OR SERVICE. Nothing contained herein shall be
         construed to be a contract of employment for any term of years, and
         this Plan shall not confer upon an Employee the right to continue in
         the employ of the Employer nor the right of a Director to continue to
         serve on the Board of Directors.

8.2      NON-ASSIGNABILITY. A Participant may not voluntarily or involuntarily
         anticipate, assign, or alienate (either at law or in equity) any
         benefit under the Plan. Furthermore, a benefit under the Plan shall not
         be subject to attachment, garnishment, levy, execution, or other legal
         or equitable process.

8.3      PARTICIPATION IN OTHER PLANS. Nothing in this Plan shall affect any
         right that a Participant may otherwise have to participate in any
         retirement plan or agreement that the Employer has adopted or may adopt
         hereafter.

8.4      GOVERNING LAW. To the extent not preempted by federal law, this Plan
         shall be construed in accordance with, and shall be governed by, the
         laws of the State of New Mexico.

8.5      ENTIRE UNDERSTANDING. This instrument contains the entire understanding
         between the Employer and the Participants relating to the Plan, and
         supersedes any prior agreement between the parties, whether written or
         oral. This Plan and any provision of the Plan may be waived, modified,
         amended, changed, discharged or terminated only in writing signed by
         the Employer and the Participants.

8.6      PROVISIONS SEVERABLE. To the extent that any one or more of the
         provisions of the Plan shall be invalid, illegal or unenforceable in
         any respect, the validity, legality and enforceability of the remaining
         provisions shall not in any way be affected or impaired.

8.7      STATUS UNDER ERISA AND THE CODE. This Plan is intended to be an
         unfunded plan for the benefit of a select group of management or highly
         compensated employees (a "top hat" plan) within the meaning of the
         ERISA, only to the extent that ERISA may be deemed to apply, and shall
         be interpreted and administered to the extent possible in a manner
         consistent with that intent.

8.8      INDEMNIFICATION. The Company agrees to indemnify and defend to the
         fullest extent permitted by law all persons who are, were, or may serve
         as Administrator against any liabilities, damages, costs and expenses
         (including attorney's fees and amounts paid in settlement of any claim
         approved by the Company) occasioned by their occupying or having
         occupied an administrative position in connection with the Plan, except
         when due to their willful misconduct or recklessness.

In witness whereof, the Company has executed this Plan on the date written
below.

FIRST STATE BANCORPORATION

   By:
      ------------------------------------

   Title:
         ---------------------------------

   Date:
        ----------------------------------



                                      -11-


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</DOCUMENT>
