DEFERRED COMPENSATION AGREEMENT
PACIFIC STATE BANK PRESIDENT
THIS AGREEMENT, made and entered into this 16th day of. December, 1995 by
and between PACIFIC STATE BANK, an Oregon banking corporation, hereinafter
called "Bank", and X.X. Xxxxx, hereinafter called "C.E.O.";
WITNESSETH:
WHEREAS, C.E.O. has been continuously employed by Bank as its Chief
Executive Officer, since 5-1-95; and
WHEREAS, the Board of Directors of Bank believe that C.E.O.'s continued
services to Bank in that capacity will be extremely valuable to Bank; and
WHEREAS, it is Bank's desire to provide C.E.O. with incentive for exemplary
performance, and, therefore, to provide C.E.O. compensation in addition to
existing compensation arrangements including future adjustments thereto as a
post retirement income (or preretirement death benefits to his designated
beneficiary) over and above what will be available to him under Bank's general
employee profit sharing plan;
NOW, THEREFORE, Bank and C.E.O. mutually agree as follows:
1. DEFERRED COMPENSATION ACCOUNT, Bank shall establish a general ledger
account referred to as Performance Deferred Compensation Account #2, for the
purpose of reflecting the deferred compensation credits to which C.E.O. shall be
entitled under the terms of this agreement.
(a) Credits to cc un . At the conclusion of each calendar year, including
1996 and thereafter, in which C.E.O. shall have remained in Bank's employ for
such year when Bank's after tax profit and loss statement has been calculated,
there shall be credited to this account the sum of the amounts determined under
(i), (ii) and (iii) as follows:
(i) For each $1.00 of after tax profit above $700,000 (hereafter referred
to as the profit base) as adjusted for extraordinary items and
voluntarily deferred compensation as provided for in (vi) of this
paragraph credit $.125 to the account up to a maximum of $20,000. The
profit base may from time to time be adjusted for economic and other
such items as the Bank and C.E.O. may find appropriate.
(ii) For each year in which the Bank's Return on Assets (ROA) falls in the
upper 25% of its peer group the Bank shall credit to the account
$2500,00. For each year in which the Bank's Return on Equity (XXX)
falls in the upper 25% of its peer group the Bank shall credit to the
account $2500,00.
Peer group standing for purposes of this paragraph shall be measured by
reference to Oregon and Washington banks that are included in the $50 million to
$100 million - asset range as reported by Sheshunoff in their calendar year end
reports. Normally such reports are issued
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DEFERRED COMPENSATION AGREEMENT
in February of each year.
(iii) The Bank in conjunction with the C.E.O will annually establish
certain short-term and long-term goals. Such goals when
established shall be summarized in writing and attached to
this agreement as Exhibit A for the current year. The Board
will assess the progress towards such goals during each
calendar year and credit to the account an amount from $-0- to
$25,000. The determination of this amount shall be entirely at
the Board's discretion and not arrived at by mathematical
computation.
(iv) Such credit shall be deemed to have been made upon computation as of
December 31 of the computation year.
(v) The balance of such account as of December 31 of each year shall be
augmented at the close of each year by an amount equal to the Bank's
passbook savings account interest rate prevailing during the
terminating year applied to such balance.
(vi) Within the scope of C.E.O.'s personal financial planning, C.E.O. may
find it of benefit to defer some portion of his regular compensation.
In addition to any amount -credited to the account under (i), (ii) and
(iii), C.E.0. shall be entitled to defer up to 20% of his regular
pretax salary and bonus amounts granted under other compensation
arrangements.
2. BENEFITS, The benefits to be paid as deferred compensation are as
follows:
(a) Retirement, If C.E.O.'s employment is terminated on or after his 65th
birthday, the Bank shall pay to him in ten substantially equal annual
installments the amount of the deferred compensation account as of that date.
Thereafter, the total amount payable to C.E.O. shall be appropriately increased
to reflect the appreciation of the deferred compensation account as provided in
paragraph l(a) (v) above. Each annual installment shall include said annual
appreciation on the remaining balance during the preceding year until the
account shall have been paid out in full. If C.E.O. should die on or after his
65th birthday and before the ten annual payments ar made, the unpaid balance
shall continue to be paid in installments for the unexpired portion of the
ten-year period to his designated beneficiary in the same manner as set forth
above.
(b) Termination of Employment. If C.E.O.'s employment is terminated for any
reason other than death and disability but before C.E.O. shall have reached the
age of 65, then the amount in the deferred compensation account shall freeze. In
the event no payments shall be made until the C.E.O. shall have reached the age
of 65, at which time payments as provided in paragraph 2(a) above shall be made.
After such termination if prior to reaching age 65 C.E.O. should die, or if
prior to reaching age 65 C.E.O. should become disabled, then payments from such
adjusted balance shall be made in the same manner and to the same extent as set
forth in paragraph 2(c) below.
(C) Disability or Death, If C.E.O.'s employment is terminated because of
disability or death before he has reached the age of 65, and while he is in the
Board's employ, the Board
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DEFERRED COMPENSATION AGREEMENT
shall make ten substantially equal annual payments to him (in the event of his
disability) or his designated beneficiary (in the event of his death) in the
same manner and to the same extent as provided in paragraph 2(a) above.
(d) Death, Lump-Sum n If both C.E.O. and his designated beneficiary should
die before the Bank makes a total of ten annual payments, the remaining balance
of the deferred compensation account shall be determined as of the date of the
designated beneficiary's death and shall be paid as promptly as possible in one
lump sum to the designated beneficiary's estate or as specified in the
beneficiary's Last Will and Testament, as the case may be.
(e) Designated Beneficiary. The beneficiary referred to in this paragraph
may be designated or changed by C.E.O. (without the consent of any prior
beneficiary) on a form provided by the Bank and delivered to the Bank before his
death. If no such beneficiary shall have been designated, or if no designated
beneficiary shall survive C.E.O., the installment payments payable under
paragraph 2(c) above, shall be payable to C.E.O.'s estate.
(f) Disability Determination, C.E.O. shall be deemed to have become
disabled for the purposes of paragraph 2(c) above if the Board of Directors of
Bank shall find on the basis of medical evidence satisfactory to it that C.E.O.
is so totally mentally or physically disabled as to be unable to engage in
further employment by Bank as C.E.O. and that such disability shall be
determined by competent medical personnel as likely be permanent and continuous
during the remainder of his life or of such duration as to necessitate
replacement of the C.E.O.
(g) Payment Commencement. The installment payments to be made to C.E.O.
under paragraph 2(a) and 2(c) shall commence on the first day of the calendar
year following the date of termination of his employment. The installment
payments to be made to C.E.O. under paragraph 2(b) shall commence on the first
day of the month following the date on which C.E.O. shall have reached the age
of 65. The installment payments to be made to the designated beneficiary under
the provisions o this paragraph 2 shall commence on a date to be selected by the
Board of Directors of Bank but within six months from C.E.O.'s date of death.
3. NO TRUST Nothing contained in this agreement and no action taken
pursuant to the provisions of this agreement shall create or be construed to
create a trust of any Idnd, or a fiduciary relationship between Bank and C.E.O.,
his designated beneficiary or any other person.
4. NO ASSIGNMENT, The right of C.E.O. or any other person to the payment of
deferred compensation or other benefits under this payment of deferred
compensation or other benefits under this agreement shall not be assigned,
transferred, pledged, or encumbered except by Will or by the laws of descent and
distribution.
5. INCAPACITY OF BENEFICIARY- If the Board of Directors of Bank shall find
that any person to whom any payment is payable under this agreement is unable to
care for his affairs because of illness or accident or is a minor, any payment
due (unless a prior claim therefore shall have been made by a duly appointed
guardian, committee, or other legal
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DEFERRED COMPENSATION AGREEMENT
representative) may be paid to the spouse, a child, 'parent, or brother or
sister, or to any person deemed by the Board of Directors of Bank to have
incurred expense for such person otherwise entitle to payment, in accordance
with the applicable provisions of paragraph 2. Any such payment shall be a
complete discharge of Bank's liabilities under this agreement.
6. BOARD'S POWERS AND LIABILITIES TIE The Board of Directors of Bank shall
have full power and authority to interpret and administer this agreement. Such
Board's interpretations and construction of any provision or action taken under
this agreement, including any valuation of the deferred compensation account, or
the amount or recipient of the payment due under it, shall be binding and
conclusive on all persons for all purposes. No member of such Board shall be
liable to any person for any,action taken or omitted in connection with the
interpretation and administration of this agreement unless attributable to the
member's willful misconduct or lack of good faith.
7. BINDING EFFECT, This agreement shall be binding upon and inure to the
benefit of the Bank, its successors and assigns and C.E.O. and his heirs,
executors, administrator, and legal representatives.
8. GOVERNING LAW, This agreement shall be construed in accordance with and
governed by the law of the State of Oregon.
9. COMPLIANCE AND LAW AND REGULATIONS, The parties intend that this
agreement comply with the provisions of the Internal Revenue Code and
Regulations in effect at the time of its execution. If at a later date the laws
of the United States or the State of Oregon are construed in such a way as to
make this agreement null and void, it shall be given effect in a manner that
shall best carry out the parties' purposes and intentions.
10. SEVERABILITY, If the Internal Revenue Service shall at any time
interpret this agreement to be ineffective with regard to deferral of C.E.O.'s
income, and that interpretation becomes final and unappealable, then only those
amounts in the account which would be treated as taxable income by the Service
at the time of such final interpretation, shall be paid over to C.E.O.. The
remaining balance in the account at the time of the final interpretation shall
be distributed to C.E.O. according to paragraph 2.
11. ENTIRE AGREEMENT, This agreement supersedes all other agreements
previously made between the parties relating to its subject matter. There are no
other understandings or agreements.
12. NOTICE, Any notice to be delivered under this agreement shall be given
in writing and delivered, personally or by certified mail, postage prepaid,
addressed to Bank or C.E.O. at their last known addresses.
13. NON-WAIVER, No delay or failure by either party to exercise any right
under
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DEFERRED COMPENSATION AGREEMENT
this agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right.
14. HEADINGS, Headings in this agreement are for convenience only and shall
not be used to interpret or construe its provisions.
15. MODIFICATION OR CANCELLATION. This agreement may be modified or
canceled at any time by action of the Board of Directors.
16. COUNTERPARTS, This agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, The Board of Directors of Bank has caused this
agreement to be executed by its duly authorized officers, and C.E.O. hereunder
has set his hand and seal as of the date first above written.
PACIFIC STATE BANK
By
Xxxxxx X. Xxxxxxx, Chairman
ATTEST:
Xxxxx Xxxxxx, Secretary
"BANK"
X. X. Xxxxx, President
"C.E.O."
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