PLUMAS BANK
Salary Continuation Agreement
PLUMAS BANK
SALARY CONTINUATION AGREEMENT
This SALARY CONTINUATION AGREEMENT (this
“Agreement”) is adopted this 1st day of April, 2008, by
and between PLUMAS BANK, a California corporation located in
Quincy, California (the “Bank”), and Rose Dembosz (the
“Executive”).
The purpose of this Agreement is to memorialize
specified salary continuation benefits that were previously
authorized by the Bank’s board of directors for the
Executive, a member of a select group of management or highly
compensated employees who contribute materially to the continued
growth, development and future business success of the Bank. This
Agreement shall be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974
(“ERISA”), as amended from time to time.
The American Jobs Creation Act of 2004 added new
section 409A to the Internal Revenue Code of 1986 (Code
Section 409A), which imposes additional requirements on
nonqualified deferred compensation amounts that are deferred or
vested after December 31, 2004.
The salary continuation benefits set forth in
this Agreement are considered deferred compensation under Code
Section 409A.
On April 10, 2007, the United States
Department of the Treasury issued final regulations under Internal
Revenue Code (Code) section 409A, effective January 1,
2009.
This Agreement
is intended to comply with the final regulations under Code section
409A.
Whenever used in this Agreement, the following
words and phrases shall have the meanings specified:
|
1.1
|
|
“ Accrual Balance
” means the liability that should be accrued by the Bank,
under Generally Accepted Accounting Principles
(“GAAP”), for the Bank’s obligation to the
Executive for the Normal Retirement Benefit under this Agreement,
by applying Accounting Principles Board Opinion Number 12 as
amended by Statement of Financial Accounting Standards Number 106
and the Discount Rate as of the last day of the month prior to
Separation from Service or as of the end of the month preceding the
Executive’s death, as the case may be. Any one of a variety
of amortization methods may be used to determine the Accrual
Balance. Once chosen, the method must be consistently
applied.
|
|
1.2
|
|
“ Beneficiary ”
means each designated person or entity, or the estate of the
deceased Executive, entitled to any benefits upon the death of the
Executive pursuant to Article 4.
|
|
1.3
|
|
“ Beneficiary Designation
Form ” means the form established from time to time by
the Plan Administrator that the Executive completes, signs and
returns to the Plan Administrator to designate one or more
Beneficiaries.
|
|
1.4
|
|
“ Board ” means
the Board of Directors of the Bank as from time to time
constituted.
|
|
1.5
|
|
“ Change in Control
” means a change in the ownership or effective control of the
Bank, or in the ownership of a substantial portion of the assets of
the Bank, as such change is defined in Code Section 409A and
regulations thereunder.
|
|
1.6
|
|
“ Code ” means
the Internal Revenue Code of 1986, as amended, and all regulations
and guidance thereunder.
|
|
1.7
|
|
“ Discount Rate
” means the rate used by the Plan Administrator for
determining the Accrual Balance. The initial Discount Rate is six
percent (6%). However, the Plan Administrator shall adjust the
Discount Rate in order to maintain the Discount Rate within
reasonable standards according to GAAP and/or applicable bank
regulatory guidance, as passed on by the Bank’s independent
auditor engaged to audit the financial statements of the Bank. The
Discount Rate will be reviewed at least annually, and if and when
changed will be applicable as to the determination of a benefit
calculation under this Agreement on a prospective basis only.
Executive acknowledges that a change in the Discount Rate may
increase or decrease the Accrual Balance which may affect her
benefits hereunder.
|
|
1.8
|
|
“ Early Termination
” means Separation from Service before attainment of Normal
Retirement Age except when such Separation from Service occurs
within twenty-four (24) months following a Change in Control
or due to death or Termination for Cause.
|
|
1.9
|
|
“ Effective Date
” means April 1, 2008.
|
|
1.10
|
|
“ Normal Retirement
Age ” means the Executive’s age sixty-five
(65).
|
|
1.11
|
|
“ Plan Administrator
” means the Board or such committee or person as the Board
shall appoint.
|
|
1.12
|
|
“ Plan Year ”
means each twelve (12) month period commencing on January 1
and ending on December 31 of each year. The initial Plan Year
shall commence on the Effective Date of this Agreement and end on
the following December 31.
|
|
1.13
|
|
“ Schedule A
” means the schedule attached to this Agreement and made a
part hereof illustrating the current calculation of
Executive’s benefits under this Agreement. Schedule A
shall be updated upon a change in any of the benefits under
Articles 2 or 3 as a result of a change in the Discount
Rate.
|
|
1.14
|
|
“ Separation from
Service ” means termination of the Executive’s
employment with the Bank for reasons other than death. Whether a
Separation from Service has occurred is determined in accordance
with the requirements of Code Section 409A based on whether
the facts and circumstances indicate that the Bank and 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 Bank
if the Executive has been providing services to the Bank less than
thirty-six (36) months).
|
|
1.15
|
|
“ Specified Employee
” means an employee who at the time of Separation from
Service is a key employee of the Bank, if any stock of the Bank 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.
|
|
1.16
|
|
“ Termination for
Cause ” means Separation from Service for:
|
|
|
(a)
|
|
Gross negligence or gross neglect
of duties to the Bank;
|
|
|
(b)
|
|
Conviction of a felony or of a
gross misdemeanor involving moral turpitude in connection with the
Executive’s employment with the Bank; or
|
|
|
(c)
|
|
Fraud, disloyalty, dishonesty or
willful violation of any law or significant Bank policy committed
in connection with the Executive’s employment and resulting
in a material adverse effect on the Bank.
|
Article 2
Distributions During Lifetime
|
2.1
|
|
Normal Retirement
Benefit .
Upon Separation from Service after attaining Normal Retirement Age,
the Bank shall distribute to the Executive the benefit described in
this Section 2.1 in lieu of any other benefit under this
Article.
|
|
|
2.1.1
|
|
Amount of Benefit
. The annual benefit
under this Section 2.1 is Sixty-Two Thousand Dollars
($62,000).
|
|
|
2.1.2
|
|
Distribution of Benefit
. The Bank shall
distribute the annual benefit to the Executive in twelve
(12) equal monthly installments commencing on the first day of
the month following Separation from Service. The annual benefit
shall be distributed to the Executive for fifteen
(15) years.
|
|
2.2
|
|
Early Termination
Benefit . If
Early Termination occurs, the Bank shall distribute to the
Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Article.
|
|
|
2.2.1
|
|
Amount of Benefit
. The benefit under
this Section 2.2 is the Accrual Balance calculated as of the
last day of the month prior to Separation from Service. An
illustration of the year-end Accrual Balance using the current
Discount Rate is set forth in Schedule A.
|
|
|
2.2.2
|
|
Distribution of Benefit
. The Bank shall
distribute the benefit to the Executive in one hundred eighty
(180) equal monthly installments commencing on the first day
of the month following Normal Retirement Age. The Accrual Balance
shall continue to accrue earnings at the Discount Rate until all
monthly installments are completely distributed.
|
|
2.3
|
|
Change in Control
Benefit . If
a Change in Control occurs followed within twenty-four
(24) months by Separation from Service, the Bank shall
distribute to the Executive the benefit described in this
Section 2.3 in lieu of any other benefit under this
Article.
|
|
|
2.3.1
|
|
Amount of Benefit
. The annual benefit
under this Section 2.3 is the Normal Retirement Benefit amount
described in 2.1.1.
|
|
|
2.3.2
|
|
Distribution of Benefit
. The Bank shall
distribute the annual benefit to the Executive in twelve
(12) equal monthly installments commencing on the first day of
the month following Separation from Service. The annual benefit
shall be distributed to the Executive for fifteen
(15) years.
|
|
2.4
|
|
Restriction on Commencement of
Distributions . Notwithstanding any provision of
this Agreement to the contrary, if the Executive is considered a
Specified Employee at the time of her Separation from Service the
provisions of this Section 2.4 shall govern distributions on
account of such Executive’s Separation from Service. If
benefit distributions which would otherwise be made to the
Executive due to Separation from Service are limited because the
Executive is a Specified Employee, then such distributions shall
not be made during the first six (6) months following
Separation from Service. Rather, any distribution which would
otherwise be paid to the Executive during such period shall be
accumulated and paid to the Executive in a lump sum on the first
day of the seventh month following Separation from Service. All
subsequent distributions shall be paid in the manner
specified.
|
|
2.5
|
|
Distributions Upon Taxation of
Amounts Deferred . If, pursuant to Code
Section 409A, the Federal Insurance Contributions Act or other
state, local or foreign tax laws, the Executive becomes subject to
tax on the amounts deferred hereunder, then the Bank may make a
limited distribution to the Executive in a manner that conforms to
the requirements of Code section 409A. Any such distribution will
decrease the Executive’s benefits distributable under this
Agreement.
|
|
2.6
|
|
Change in Form or Timing of
Distributions . For distribution of benefits under
this Article 2, the Executive and the Bank may, subject to the
terms of Section 8.1, amend this Agreement to delay the timing
or change the form of distributions. Any such amendment:
|
|
|
(a)
|
|
may not accelerate the time or
schedule of any distribution, except as provided in Code
Section 409A;
|
|
|
(b)
|
|
must, for benefits distributable
under Section 2.2, be made at least twelve (12) months
prior to the first scheduled distribution;
|
|
|
(c)
|
|
must, for benefits distributable
under Sections 2.1, 2.2 and 2.3, delay the commencement of
distributions for a minimum of five (5) years from the date
the first distribution was originally scheduled to be made;
and
|
|
|
(d)
|
|
must take effect not less than
twelve (12) months after the amendment is made.
|
Article 3
Distribution at Death
|
3.1
|
|
Death During Active
Service . If
the Executive dies prior to Separation from Service, the Bank shall
distribute to the Beneficiary the benefit described in this
Section 3.1. This benefit shall be distributed in lieu of any
benefit under Article 2.
|
|
|
3.1.1
|
|
Amount of Benefit
. The benefit under
this Section 3.1 is the Executive’s Accrual Balance
calculated as of the end of the month preceding the
Executive’s death. An illustration of the year-end Accrual
Balance using the current Discount Rate is set forth in
Schedule A.
|
|
|
3.1.2
|
|
Distribution of Benefit
. The Bank shall
distribute the benefit to the Beneficiary in one hundred eighty
(180) equal monthly installments commencing on the first day
of the fourth month following the Executive’s death. The
Accrual Balance shall continue to accrue earnings at the Discount
Rate until the installments are completely distributed. The
Beneficiary shall be required to provide the Executive’s
death certificate to the Bank.
|
|
3.2
|
|
Death During Distribution of a
Benefit . If
the Executive dies after any benefit distributions have commenced
under this Agreement but before receiving all such distributions,
the Bank shall distribute to the Beneficiary the remaining benefits
at the same time and in the same amounts they would have been
distributed to the Executive had the Executive survived.
|
|
3.3
|
|
Death Before Benefit Distributions
Commence . If
the Executive is entitled to benefit distributions under this
Agreement but dies prior to the date of commencement of said
benefit distributions, the Bank shall distribute to the Beneficiary
the same benefits to which the Executive was entitled prior to
death, except that the benefit distributions shall be paid in the
manner specified in Section 3.1.2 and shall commence on the
first day of the fourth month following the Executive’s
death.
|
|
4.1
|
|
In General . The Executive shall have the
right, at any time, to designate a Beneficiary to receive any
benefit distributions under this Agreement upon the death of the
Executive. The Beneficiary designated under this Agreement may be
the same as or different from the beneficiary designated under any
other plan of the Bank in which the Executive
participates.
|
|
4.2
|
|
Designation . The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation
Form and delivering it to the Plan Administrator or its designated
agent. If the Executive names someone other than the
Executive’s spouse as a Beneficiary, the Plan Administrator
may, in its sole discretion, determine that spousal consent is
required to be provided in a form designated by the Plan
Administrator, executed by the Executive’s spouse and
returned to the Plan Administrator. The Executive’s
beneficiary designation shall be deemed automatically revoked if
the Beneficiary predeceases the Executive or if the Executive names
a spouse as Beneficiary and the marriage is subsequently dissolved.
However, nothing in the foregoing sentence shall preclude the
Executive from executing a new Beneficiary Designation Form after
the date the marriage is dissolved that names her former spouse as
a Beneficiary. The Executive shall h
|
|
