PLUMAS
BANK
EXECUTIVE SALARY CONTINUATION AGREEMENT
This
Amended and Restated Executive Salary Continuation Agreement
governing benefits accrued after December 31, 2004 (Agreement)
is entered into this 17th day of December, 2008 by and between
Plumas Bank, a corporation organized under the laws of the state of
California (the “Employer”), and Robert T. Herr, an
individual residing in the state of California (hereinafter
referred to as the “Executive”).
WHEREAS,
the Executive is in the employ of the Employer, and has faithfully
served the Employer for many years. It is the consensus of the
Board of Directors (Board) and its compensation committee that the
Executive’s services have been of exceptional merit and an
invaluable contribution to the profits and position of the Employer
in its field of activity; and
WHEREAS,
the Employer and the Executive are parties to that certain
Executive Salary Continuation Agreement, dated June 4, 2002,
and amended September 15, 2004, which provides for the payment
of certain benefits; and
WHEREAS, it
is deemed to be in the best interests of the Employer to provide
the Executive with certain salary continuation benefits, on the
terms and conditions set forth herein, in order to reasonably
induce the Executive to remain in the Employer’s employment;
and
WHEREAS,
section 885 of the American Jobs Creation Act of 2004 amended the
Internal Revenue Code (Code) to add section 409A implementing
detailed rules regarding deferred compensation; and
WHEREAS,
Notice 2005-1 was subsequently issued by the Treasury Department
providing additional guidance on transitioning a plan of deferred
compensation, such as this Agreement, into compliance with Code
section 409A. Notice 2005-1 announced that a deferred compensation
plan subject to Code section 409A must be operated in good faith
compliance with the provisions of Code section 409A and Notice
2005-1 during the 2005 calendar year. Supplemental guidance from
the IRS has extended the good faith compliance period through
December 31, 2008. Final Treasury Regulations were issued on
April 10, 2007 and are effective January 1, 2009;
and
WHEREAS,
pursuant to the Treasury regulations and other published IRS
guidance, benefits vested under the agreement between the Employer
and the Executive as of December 31, 2004 (Grandfathered
Agreement) are eligible for grandfather treatment and shall not be
subject to Code section 409A; and
WHEREAS,
the Grandfathered Agreement is being amended by a Second Amendment
to the Executive Salary Continuation Agreement for Robert T. Herr
of even date herewith (Second Amendment) to attach a notice of its
grandfathered status and to clarify that the benefits vested under
the Grandfathered Agreement are not subject to Code section 409A;
and
WHEREAS,
since such Second Amendment is not a material modification of the
Grandfathered Agreement that would subject it to Code section 409A;
and
WHEREAS,
the terms of the Grandfathered Agreement in effect on
December 31, 2004, as clarified by the Second Amendment shall
(i) remain in full force and effect, and (ii) govern all
benefits vested as of December 31, 2004. This Agreement shall
in no way be construed to limit, replace or abridge benefits
payable thereunder.
ACCORDINGLY,
it is the desire of the Employer and the Executive to enter into
this amended and restated Agreement, covering benefits accrued on
or after January 1, 2005, in good faith compliance with the
requirements of Code section 409A, and the final Treasury
regulations; and its terms shall apply only to benefits under the
Agreement deferred after December 31, 2004.
NOW,
THEREFORE, in consideration of the services to be performed in the
future, as well as the mutual promises and covenants contained
herein, the Executive and the Employer agree as follows:
ARTICLE I.
TERMS AND DEFINITIONS
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1.01
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Administrator
.
The Employer shall be
the “Administrator” and, solely for the purposes of
ERISA, the “fiduciary” of this Agreement where a
fiduciary is required by ERISA.
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1.02
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Annual Benefit
.
The term “Annual
Benefit” shall mean an annual sum of sixty-two thousand
dollars ($62,000) multiplied by the Applicable Percentage (defined
below) less the annual benefit payable under the Grandfathered
Agreement and then reduced to the extent required: (i) under
the other provisions of this Agreement; (ii) by reason of the
lawful order of any regulatory agency or body having jurisdiction
over the Employer; and (iii) in order for the Employer to
properly comply with any and all applicable state and federal laws,
including, but not limited to, income, employment and disability
income tax laws (e.g., FICA, FUTA, SDI).
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1.03
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Applicable
Percentage . The term “Applicable
Percentage” shall mean that percentage listed on Schedule
“A” attached hereto which is adjacent to the number of
complete years (with a “year” being the performance of
personal services for or on behalf of the Employer as an employee
for a period of three hundred sixty-five (365) days) which
have elapsed starting from the Effective Date of this Agreement and
ending on the date payments are to first begin under the terms of
this Agreement. In the event that Executive’s employment with
Employer is terminated other than by reason of death, disability,
Retirement or voluntary termination on the part of Executive,
Executive shall be deemed for purposes of determining the number of
complete years to have completed a year of service in its entirety
for any partial year of service after the last anniversary date of
the Effective Date during which the Executive’s employment is
terminated.
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1.04
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Code . “Code” shall mean the
Internal Revenue code of 1986, as amended.
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1.05
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Disability/Disabled
.
The term
“Disability” or “Disabled” shall mean the
Executive: (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months; or (ii) is, by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months
under an accident and health plan covering employees or directors
of the Employer. Medical determination of Disability may be made by
either the Social Security Administration or by the provider of an
accident or health plan covering employees or directors of the
Employer provided that the definition of “disability”
applied under such disability insurance program complies with the
requirements of the preceding sentence. Upon the request of the
plan administrator, the Executive must submit proof to the plan
administrator of the Social Security Administration’s or the
provider’s determination.
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1.06
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Early Retirement
Date . The term “Early Retirement
Date” shall mean the Retirement (as defined below) of the
Executive on a date which occurs after the date upon which the
Executive has, measured in the aggregate and from the date of this
Agreement to the date of the Executive’s Retirement, been
employed by the Employer for no less than seven
(7) years.
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1.07
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Effective Date
.
The term
“Effective Date” shall mean the date upon which this
Agreement was entered into by the parties, as first written
above.
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1.08
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ERISA
.
The term
“ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended.
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1.09
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Plan Year
.
The term “Plan
Year” shall mean the Employer’s calendar
year.
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1.10
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Retirement/Retires
.
The term
“Retirement” or “Retires” shall mean the
date acknowledged in Executive’s written notice to the
Employer of the Executive’s Termination of
Employment.
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1.11
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Specified Employee
.
The term
“Specified Employee” shall mean an employee who at the
time of Termination of Employment is a key employee of the
Employer, if any stock of the Employer is publicly traded on an
established securities market or otherwise. For purposes of this
Agreement, an employee is a key employee if the employee meets the
requirements of Code section 416(i)(1)(A)(i), (ii), or (iii)
(applied in accordance with the regulations thereunder and
disregarding section 416(i)(5)) at any time during the twelve
(12) month period ending on December 31 (the
“identification period”). If the employee is a key
employee during an identification period, the employee is treated
as a key employee for purposes of this Agreement during the twelve
(12) month period that begins on the first day of April
following the close of the identification period.
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1.12
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Termination of
Employment . “Termination of
Employment” shall mean termination of the Executive’s
employment with the Employer for reasons other than death or
Disability. Whether a Termination of Employment has occurred is
determined based on whether the facts and circumstances indicate
that the Employer and the Executive reasonably anticipated that no
further services would be performed after a certain date or that
the level of bona fide services the Executive would perform after
such date (whether as an employee or as an independent contractor)
would permanently decrease to no more than twenty percent (20%) of
the average level of bona fide services performed (whether as an
employee or an independent contractor) over the immediately
preceding thirty-six (36) month period (or the full period of
services to the Employer if the Executive has been providing
services to the Employer less than thirty-six
(36) months).
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1.13
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Unforeseeable
Emergency . The term “Unforeseeable
Emergency” shall mean a severe financial hardship to the
Executive resulting from an illness or accident of the Executive,
the Executive’s spouse, the Beneficiary, or the
Executive’s dependent (as defined in section 152(a) of the
Code), loss of the Executive’s property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the
Executive.
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ARTICLE II.
SCOPE, PURPOSE AND EFFECT
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2.01
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Contract of
Employment . Although this Agreement is intended
to provide the Executive with an additional incentive to remain in
the employ of the Employer, this Agreement shall not be deemed to
constitute a contract of employment between the Executive and the
Employer nor shall any provision of this Agreement restrict or
expand the right of the Employer to terminate the Executive’s
employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have
with the Employer, it being the parties’ intention and
agreement that unless this Agreement is specifically referenced in
said Employment Agreement (or any modification thereto), this
Agreement (and the Employer’s obligations hereunder) shall
stand separate and apart and shall have no effect upon, nor be
affected by, the terms and provisions of said Employment
Agreement.
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2.02
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Fringe Benefit
.
The benefits provided by
this Agreement are granted by the Employer as a fringe benefit to
the Executive and are not a part of any salary reduction plan or
any arrangement deferring a bonus or a salary increase. The
Executive has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
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ARTICLE
III. PAYMENTS UPON OR AFTER RETIREMENT
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3.01
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Payments Upon
Retirement . If the Executive shall remain in
the continuous employment of the Employer until attaining
sixty-five (65) years of age, the Executive shall be entitled
to be paid, as his normal retirement benefit, the Annual Benefit,
as defined above, for a period of fifteen (15) years, in one
hundred eighty (180) equal monthly installments, with each
installment to be paid on the first day of each month, beginning
with the month following the month in which the Executive
Retires.
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3.02
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Payments in the Event of Death
After Retirement . In the event of Executive’s
death following Retirement, benefits shall cease under this
Agreement and no death benefit shall be provided under this
Agreement.
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ARTICLE IV.
PAYMENTS IN THE EVENT DEATH OR DISABILITY
OCCURS PRIOR TO RETIREMENT
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4.01
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Payments in the Event of Death
Prior to Retirement . In the event of the
Executive’s death prior to Retirement, no death benefit shall
be provided under this Agreement.
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4.02
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Payments in the Event of Disability
Prior to Retirement . In the event the Executive becomes
Disabled while actively employed by the Employer at any time after
the date of this Agreement but prior to Retirement, the Executive
shall: (i) continue to be treated during such period of
Disability as being gainfully employed by the Employer, but shall
not add applicable years of service for the purpose of determining
the Annual Benefit; and (ii) be entitled to be paid the Annual
Benefit for fifteen (15) years, as determined by the
applicable years of service at the time of Disability in one
hundred eighty (180) equal monthly installments, with each
installment to be paid on the first day of each month, beginning
with the month following the earlier of (1) the month in which
the Executive attains sixty-five (65) years of age; or
(2) the date upon which the Executive is no longer entitled to
receive disability benefits under the Executive’s principal
disability insurance policy. Upon Executive’s death, no
further payments will be made under this
Article 4.02.
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ARTICLE V.
PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED
OTHER THAN BY DEATH, DISABILITY, RETIREMENT
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5.01
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Payments in the Event Employment is
Terminated Other than by Disability, Retirement or a Change of
Control of the Employer . As indicated in Article II
above, the Employer reserves the right to terminate the
Executive’s employment, with or without cause, but subject to
any written employment agreement which may then exist, at any time
prior to the Executive’s Retirement. In the event that the
employment of the Executive shall be terminated for any reason,
including voluntary Termination of Employment by the Executive, but
other than by reason of Disability, Retirement or a Change of
Control of the Employer as set forth in Article 5.02, the
Executive or his legal representative shall be entitled to be paid
the Annual Benefit for a period of fifteen (15) years, as
determined by the applicable years of service at the time of the
Executive’s Termination of Employment with the Employer, in
one hundred eighty (180) equal monthly installments, with each
installment to be paid on the first day of each month, beginning
with the month following the month in which the Executive attains
sixty-five (65) years of age.
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5.02
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Termination of Employment in the
Event of a Change of Control . A “Terminating Event”
shall be defined as a change in the ownership or effective control
of the Employer, or in the ownership of a substantial portion of
the assets of the Employer, as such change is defined in section
409A of the Code and regulations thereunder.
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In the
event the Executive’s employment terminates with the Employer
or Employer’s successor within twenty-four
(24)&nb
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