Exhibit 10.5 Salary Continuation Agreement for Xxxxxxx Xxxxxxxxx
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 31st day of August, 2000, by and
between Redlands Centennial Bank, a California state banking corporation (the
"Employer"), and Xxxxxxx Xxxxxxxxx, an individual residing in the State of
California (hereinafter referred to as the "Executive").
RECITALS
WHEREAS, the Executive is an employee of the Employer and is serving as its
Executive Vice President and Chief Credit Officer;
WHEREAS, the Executive's experience and knowledge of the affairs of the Employer
and the banking industry are extensive and valuable;
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, the Executive and the Employer wish to specify in writing the terms and
conditions upon which this additional compensatory incentive will be provided to
the Executive, or to the Executive's spouse or the Executive's designated
beneficiaries, as the case may be;
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:
AGREEMENT
1. TERMS AND DEFINITIONS.
1.1. 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.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean an annual sum of
seventy five thousand dollars ($75,000), increased by 3% on each anniversary of
the date of this Agreement until the date of the first payment hereunder,
multiplied by the Applicable Percentage (defined below) 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 (eg., FICA, FUTA, SDI).
1.3. 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
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"year" being the performance of personal services for or on behalf of the
Employer as an employee for a period of 365 days) which have elapsed starting
from the Effective Date of this Agreement and ending on the date the Executive's
employment is terminated for purposes of this Agreement. In the event the
Executive's employment with the Employer is terminated other than by reason of
death, termination for cause or Retirement on the part of the Executive, the
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, provided that in no event shall the
Executive be deemed to have completed a year of service for the partial year
that occurs prior to the first anniversary date of this Agreement.
1.4. BENEFICIARY. The term "beneficiary" or "designated beneficiary" shall
mean the person or persons whom the Executive shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Exhibit "B", to
receive the benefits provided hereunder. A Beneficiary Designation shall be
valid only if it is in the form attached hereto and made a part hereof and is
received by the Administrator prior to the Executive's death.
1.5. THE CODE. The "Code" shall mean the Internal Revenue Code of 1986, as
amended (the "Code").
1.6. EFFECTIVE DATE. The term "Effective Date" shall mean the date upon
which this Agreement was entered into by the parties, as first
written above.
1.7. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.8. PLAN YEAR. The term "Plan Year" shall mean the Employer's calendar
year.
1.9. RETIREMENT. The term "Retirement" or "Retires" shall refer to the date
on which the Executive attains the age of at least sixty-five (65) and
acknowledges in writing to the Employer to be the last day he will provide any
significant personal services, whether as an employee, director or independent
consultant or contractor, to the Employer. For purposes of this Agreement, the
phrase "significant personal services" shall mean more than ten (10) hours of
personal services rendered to one or more individuals or entities in any thirty
(30) day period.
1.10 SALE OF BUSINESS. The term "Sale of Business" shall mean any (i)
merger, consolidation or reorganization of the Employer in which (A) the
Employer does not survive or (B) the Employer survives with a resulting change
in beneficial ownership of the Employer of more than 50% of the voting shares of
the Employer, (ii) sale of more than 50% of the beneficial ownership of the
voting shares of the Employer to any person or group of persons acting in
concert, or (iii) transfer or sale of more than 50% of the total market value of
the assets of the Employer as reflected in the most recent published balance
sheet of the Employer.
1.11. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean the person,
if any, who shall be legally married to the Executive on the
date of the Executive's death.
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1.12. TERMINATION FOR CAUSE. The term "Termination for Cause" shall mean
the termination of the Executive by the Employer upon the occurrence of any of
the following events:
(i) the Executive is convicted of illegal activity by a court of competent
jurisdiction or pleads guilty to or nolo contendere to illegal activity, which
activity materially adversely affects the Employer's reputation in the community
or which evidences the lack of the Executive's fitness or ability to perform the
Executive's duty as determined by the Board of Directors in good faith;
(ii) the Executive has committed any illegal or dishonest act which would
cause termination of coverage under the Employer's Bankers' Blanket Bond as to
the Executive, as distinguished from termination of coverage as to the Employer
as a whole;
(iii) the Executive materially fails to perform, or habitually neglects,
the Executive's duties or commits a material act of malfeasance or misfeasance
in connection therewith; or
(iv) an action is commenced by any bank regulatory agency having
jurisdiction, to remove or suspend the Executive from office, or a cease and
desist order under 12 U.S.C. 1818(b) or any similar Federal or state statute is
issued against the Executive or the Employer which calls for the Executive's
suspension or removal from office.
2. SCOPE, PURPOSE AND EFFECT.
2.1. 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.
2.2. 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.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall remain in the
continuous employment of the Employer until Retirement, the Executive shall be
entitled to be paid the Annual Benefit, with the Applicable Percent equal to
100% 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 or upon such
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later date as may be mutually agreed upon in writing by the Executive and the
Employer in advance of said Retirement Date.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The Employer agrees
that if the Executive Retires, but shall die before receiving all of the one
hundred eighty (180) monthly payments described in paragraph 3.1 above, the
Employer will make the remaining monthly payments, undiminished and on the same
schedule as if the Executive had not died, to the Executive's designated
beneficiary. If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Executive under the term of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Executive's estate.
4. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the event the
Executive should die while actively employed by the Employer at any time after
the Effective Date of this Agreement, but prior to Retirement, the Employer
agrees to pay the Annual Benefit with the Applicable Percentage equal to 100%
for a period of fifteen (15) years in one hundred eighty (180) equal monthly
installments, with each installment to be paid on the first of each month
beginning with the month following the Executive's death, to the Executive's
designated beneficiary. If a valid Beneficiary Designation is not in effect,
then the amounts due to the Executive under the terms of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED
OTHER THAN BY DEATH, TERMINATION FOR CAUSE OR RETIREMENT.
As indicated in Paragraph 2 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 by the Executive, but
other than by reason of (i) death, (ii) Termination for Cause, or (iii)
Retirement, the Executive or his legal representative shall be entitled to be
paid the Annual Benefit, with the Applicable Percentage as set forth in Schedule
A and as determined by the applicable years of service at the time of
termination of employment with the Employer, 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 terminates employment and attains sixty-five (65)
years of age, provided that in the event the Executive dies after such
termination but prior to age 65 then such benefits are to be paid beginning with
the month following the Executive's death.
5.1 TERMINATION IN A SALE OF BUSINESS. In the event there is a Sale of
Business, following which Executive is not retained in the same or comparable
position, the Executive shall be entitled to be paid in cash in a lump sum on
the date of the consummation of the Sale of Business, the present value of the
aggregate amount of: the Annual Benefit, with the Applicable Percentage being
100%, being paid for a period of fifteen (15) years in one hundred eighty (180)
monthly
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installments beginning on the first day of the month following the
consummation of the Sale of Business. The present value of the amount shall be
determined using the long term monthly Applicable Federal Rate at the time of
the consummation of the Sale of Business.
If the Internal Revenue Service or any other tax authority makes any claim,
demand or assessment in any form based directly or indirectly, in whole or in
part, on the allegation that any payment under this Agreement and/or any other
payment by Employer to or for the benefit of the Executive at any time
constitutes a "parachute payment" under Section 280G of the Code or any similar
or successor provision of federal or state law, Employer and Executive agree
that Employer, its successors and/or assigns shall reimburse Executive for any
monies paid in satisfaction of such claim, demand or assessment.
6. TERMINATION FOR CAUSE. Notwithstanding anything to the contrary, in the
event the termination of employment of the Executive is Termination for Cause as
defined in Paragraph 1.13, the Executive shall not be entitled to any benefits
pursuant to this agreement.
7. NO OWNERSHIP RIGHTS TO THE EMPLOYER'S ASSETS. The Employer reserves the
right to determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts which may
be payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement ("Benefits"). The rights of the
Executive or any beneficiary of the Executive under this Agreement shall be
solely those of an unsecured creditor of the Employer.
In the event that the Employer, in its sole and absolute discretion, elects to
acquire an insurance policy, an annuity or any other asset to recoup the costs
or any portion thereof of the Benefits, then such insurance policy, annuity or
other asset shall not be deemed to be held under any trust for the benefit of
the Executive or his beneficiaries or to be security for the performance of the
obligations of the Employer under this Agreement, but shall be, and remain, a
general unpledged, unrestricted asset of the Employer. The Executive and his
beneficiaries shall have no rights whatsoever with respect to, or any claim
against, any such insurance policy, annuity or other asset. In connection with
the Employer electing to acquire any such insurance policy or annuity, the
Executive agrees to cooperate to facilitate such acquisition, and pursuant
thereto shall execute such documents and undergo such medical examinations or
tests as the Employer may reasonably request.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent necessary to
comply with ERISA, be designated as the named fiduciary under this Agreement and
shall have authority to control and manage the operation and administration of
this Agreement. Consistent therewith, the Employer shall make all determinations
as to the rights to benefits under this Agreement. Any decision by the Employer
denying a claim by the Executive, the Executive's spouse, or the Executive's
beneficiary for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Executive, the
Executive's spouse or the Executive's beneficiary, as the case may be. Such
decision shall set forth the specific reasons for the denial of a claim. In
addition, the Employer shall provide the Executive, the Executive's spouse or
the Executive's beneficiary with a reasonable opportunity for a full and fair
review of the decision denying such claim.
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9. STATUS OF AN UNSECURED GENERAL CREDITOR. Notwithstanding anything contained
herein to the contrary: (i) neither the Executive, the Executive's spouse nor
the Executive's beneficiary shall have any legal or equitable rights, interests
or claims in or to any specific property or assets of the Employer; (ii) none of
the Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's beneficiary or held in any
way as security for the fulfillment of the obligations of the Employer under
this Agreement; (iii) all of the Employer's assets shall be and remain the
general unpledged and unrestricted assets of the Employer; (iv) the Employer's
obligation under this Agreement shall be that of an unfunded and unsecured
promise by the Employer to pay money in the future; and (v) the Executive, the
Executive's spouse and the Executive's beneficiary shall be unsecured general
creditors with respect to any benefits which may be payable under the terms of
this Agreement.
10. COVENANT NOT TO INTERFERE. The Executive agrees not to take any action
which prevents the Employer from collecting the proceeds of any life insurance
policy which the Employer may happen to own at the time of the Executive's death
and of which the Employer is the designated beneficiary.
11. MISCELLANEOUS.
11.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The Executive
acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges that
he has read, understands and consents to all of the terms and conditions of this
Agreement, and that he enters into this Agreement with a full understanding of
its terms and conditions.
11.2. ARBITRATION OF DISPUTES. All claims, disputes and other matters in
question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Employer in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
presently located at Los Angeles, California. In the event JAMS is unable or
unwilling to conduct the arbitration provided for under the terms of this
Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), presently located at Los Angeles,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents, successors
and assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this clause shall be
specifically enforceable in accordance with, and shall be conducted consistently
with, the provisions
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of Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Northern California, unless otherwise agreed to
by the parties.
11.3. ATTORNEYS' FEES. In the event of any arbitration or litigation
concerning any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or the breach hereof, or the interpretation
hereof, the prevailing party shall be entitled to recover from the losing party
reasonable expenses, attorneys' fees and costs incurred in connection therewith
or in the enforcement or collection of any judgment or award rendered therein.
The "prevailing party" means the party determined by the arbitrator(s) or court,
as the case may be, to have most nearly prevailed, even if such party did not
prevail in all matters, not necessarily the one in whose favor a judgment is
rendered.
11.4. NOTICE. Any notice required or permitted of either the Executive or
the Employer under this Agreement shall be deemed to have been duly given, if by
personal delivery, upon the date received by the party or its authorized
representative; if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
IF TO THE EMPLOYER:
REDLANDS CENTENNIAL BANK
000 XXXX XXXXX XXXXXX
XXXXXXXX, XXXXXXXXXX 00000
ATTENTION: XXXXXXX X. XXXXXXX, PRESIDENT
IF TO THE EXECUTIVE:
XXXXXXX XXXXXXXXX
0000 XXXXXXXXXXX XXX
XXXXXXXX, XXXXXXXXXX 00000
11.5. ASSIGNMENT. Neither the Executive, the Executive's spouse, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, hypothecate, modify or otherwise encumber any part or all of
the amounts payable hereunder, nor, prior to payment in accordance with the
terms of this Agreement, shall any portion of such amounts be: (i) subject to
seizure by any creditor of any such beneficiary, by a proceeding at law or in
equity, for the payment of any debts, judgments, alimony or separate maintenance
obligations which may be owed by the Executive, the Executive's spouse, or any
designated beneficiary; or (ii) transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer
shall be void and shall terminate this Agreement, and the Employer shall
thereupon have no further liability hereunder.
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11.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement shall be
binding upon and inure to the benefit of the Executive and the Employer and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Employer shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. NONWAIVER. The failure of either party to enforce at any time or for
any period of time any one or more of the terms or conditions of this Agreement
shall not be a waiver of such term(s) or condition(s) or of that party's right
thereafter to enforce each and every term and condition of this Agreement.
11.8. PARTIAL INVALIDITY. If any term, provision, covenant or condition of
this Agreement is determined by an arbitrator or a court, as the case may be, to
be invalid, void, or unenforceable, such determination shall not render any
other term, provision, covenant or condition invalid, void or unenforceable, and
the Agreement shall remain in full force and effect notwithstanding such partial
invalidity.
11.9. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement or promise not contained in this Agreement shall be valid
or binding on either party.
11.10. MODIFICATIONS. Any modification of this Agreement shall be effective
only if it is in writing and signed by each party or such party's authorized
representative.
11.11. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement
are included solely for the convenience of the parties and shall not affect or
be used in connection with the interpretation of this Agreement.
11.12. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
11.13. GOVERNING LAW. The laws of the State of California, other than those
laws denominated choice of law rules, and, where applicable, the rules and
regulations of the Federal Deposit Insurance Corporation or any other regulatory
agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this Agreement.
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12. RIGHT OF THE EMPLOYER TO PAY A LUMP SUM. Unless expressly provided for
herein, the Employer shall at its sole discretion have the right to pay in a
lump sum the then present value using a discount rate that is to be mutually
agreed upon between the Employer and the Executive or the Executive's
beneficiary of all payments vested and due the Executive or the Executive's
beneficiary pursuant to this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this Agreement
on the date first above-written in the City of Redlands, San Bernardino County,
California.
REDLANDS CENTENNIAL BANK XXXXXXX XXXXXXXXX
"EMPLOYER" "EXECUTIVE"
/S/ XXXXXXX X. XXXXXXX /S/ XXXXXXX X. XXXXXXXXX
------------------------------- ------------------------------
Xxxxxxx X. Xxxxxxx, President Xxxxxxx X. Xxxxxxxxx
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SCHEDULE A
NUMBER OF COMPLETE APPLICABLE
YEARS OF SERVICE PERCENTAGE
---------------- ----------
1 10%
2 20%
3 30%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
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