Exhibit 10.5

 

EESA SECTION 111(b) MODIFICATION AGREEMENT

 

THIS EESA SECTION 111(b) MODIFICATION AGREEMENT (“Agreement”) is made as of the
date first written below (“Effective Date”), by and between, Oak Valley Bancorp,
a California corporation (the “Company”) and the parent corporation of Oak
Valley Community Bank (the “Bank”), and the highly compensated employee whose
name is set forth on the signature page below (“Executive”).

 

RECITALS

 

WHEREAS, Employee is employed as a “senior executive officer” of the Company, as
such term is defined in section 111(b)(3) of the Emergency Economic
Stabilization Act of 2008, as amended by the American Recovery and Reinvestment
Act of 2009 (“EESA”), or as a highly compensated employee;

 

WHEREAS, the Company has participated in the Capital Purchase Program (CPP)
implemented under the Troubled Assets Relief Program (TARP), and the Treasury
currently holds an equity position in the Company pursuant to the CPP pursuant
to which each of the Company and the Bank is considered a TARP Recipient, as
such term is defined in 31 CFR Part 30;

 

WHEREAS, the Standards for Compensation and Corporate Governance (the “TARP
Standards”) published on the Federal Register on June 15, 2009 as 31 CFR Part 30
and promulgated pursuant to sections 101(a)(1), 101(c)(5) and 111 of EESA impose
certain limitations on payments to certain highly compensated employees;

 

WHEREAS, the Company, the Bank and Employee are parties to one or more
employment agreement, salary continuation plan or agreement, incentive plan or
agreement, severance plan or agreement, change-in-control agreement, stock
option plan or grant agreement, restricted stock plan or grant agreement, equity
compensation plan or agreement, phantom stock plan or award, split dollar
agreement, supplemental retirement plan and/or any other agreement or plan,
whether or not written, intended to compensate Employee for services rendered as
a senior executive officer of the Bank and the Company (such agreements, plans
and arrangements referred to collectively herein as the “Employee Compensation
Agreements”) pursuant to which Employee may be eligible to receive, from time to
time, certain cash and non-cash consideration, bonuses, accruals and other
compensation (“Compensation”);

 

WHEREAS, the parties desire to amend each of the Employee Compensation
Agreements to insert a “savings clause” with regard to the limitations on
payments of certain benefits and to provide, in certain instances, for the
forfeiture or recovery of certain payments or awards by the Company while the
Company has outstanding certain equity or debt securities (including warrants to
purchase such securities) owned by the United States Department of the Treasury
pursuant to the EESA and acquired pursuant to that certain Letter Agreement
(including the Schedules thereto) and Securities Purchase Agreement (the
“Purchase Agreement”) — Standard Terms (including the Annexes thereto), between
the Company and the United States Department of the Treasury; and

 

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WHEREAS, the execution of this Agreement to cause the Employee Compensation
Agreements to be in compliance with the provisions of EESA and with the TARP
Standards, and to memorialize that Employee acknowledges and agrees to the
potential for a recovery by the Company from the Employee of certain cash and
non-cash compensation pursuant to EESA is deemed by the Employee to be in his or
her best interest as well as the best interest of the Company and its
shareholders.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises and agreements of the
parties hereto as set forth herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Employee Compensation Agreements as follows:

 

A. Each Employee Compensation Agreement, whether now existing or executed
subsequent to the date hereof, shall be amended by adding a new paragraph or
section to read in its entirety as follows:

 

Savings Clause Pursuant to Emergency Economic Stabilization Act of 2008, as
amended (“EESA”)

 

Notwithstanding any provision hereof to the contrary, and notwithstanding any
prior or prospective amendment hereto, the fulfillment of the financial
obligations to the Employee hereunder by the Company, as such term is defined in
section 111(b)(3) of the EESA, shall be modified, amended and otherwise
curtailed and/or limited, as applicable to the Employee, if any payments or
accruals hereunder or pursuant hereto would be contrary to the provisions of
Section 111(b) of EESA as implemented by guidance or regulation thereunder,
including but not limited to the Standards for Compensation and Corporate
Governance published on the Federal Register on June 15, 2009 as 31 CFR Part 30
and promulgated pursuant to sections 101(a)(1), 101(c)(5) and 111 of EESA while
the United States Department of the Treasury owns any debt or equity securities
of the Company acquired pursuant to EESA or any warrants to purchase equity
securities of the Employer issued pursuant to the provisions of EESA.

 

B. Employee acknowledges and agrees, that should Employee be in receipt of any
Compensation from the Company, that such Compensation shall be subject to
claw-back and shall be repaid or forfeited by the Employee if such compensation
is proven to be, or have been, based on materially inaccurate financial
statements or on any other materially inaccurate performance criteria in
contravention of the provisions of EESA or any rules, regulations or guidance
promulgated thereunder.

 

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C. Employee acknowledges and agrees that by executing this Agreement, Employee
waives all rights to the receipt of, and objection to, any recovery of any
Compensation to the extent necessary, during the period that the United States
Department of the Treasury owns any debt or equity securities of the Company
acquired pursuant to the Purchase Agreement or any warrants issued in connection
therewith, in order for the Company to comply with Section 111(b) of EESA as
implemented by rules, regulations, or guidance thereunder.

 

D.  Except as provided herein, all other terms of the Employee Compensation
Agreements shall remain in full force and effect.

 

E.  This Agreement constitutes the valid, legal and binding obligation of the
parties enforceable against each of them in accordance with its terms.  This
Agreement shall inure to the benefit of and be binding upon any corporate
successor of the Company.  This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date first written below.

 

Company

 

Employee

 

 

 

Oak Valley Bancorp

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Title:

 

 

 

Effective Date: September 14, 2009

 

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