Accrual Balance. The term “Accrual Balance” as used throughout this Agreement means the liability that should be accrued by the Bank under accounting principles generally accepted in the United States (“GAAP”) for the Bank’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be determined by the liability accrued by the Bank as of the Effective Date. The projected Accrual Balance is detailed on Schedule A including annual accruals. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at retirement, in accordance with Paragraph 3, equals the present value of the retirement benefits described in Paragraph 4(a). At the end of each Plan Year, the Accrual Balance shall be adjusted to reflect the Employer’s obligation under Paragraph 4(a) in terms of the Executive’s actual base salary for that Plan Year. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20- year corporate bond rated Aa by Moody’s, rounded to the nearest 1/4%, or as otherwise determined by the governing Regulatory body. The initial discount rate is 6.50%. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP and consistent with the Interagency Advisory on Accounting for Deferred Compensation Agreements which states that the “cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.”
Accrual Balance. Tenant and Landlord agree that, as of December --------------- 31, 1994, the Accrual Balance equals $988,250.
