Exhibit 10.16

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made effective as of February 9,
2017 (the “Effective Date”), by and between Bank 34 (the “Bank”) and Jill
Gutierrez (“Executive”). Any reference to the “Company” shall mean Bancorp 34,
Inc., the stock holding company of the Bank.

 

WHEREAS, the Bank wishes to assure itself of the continued services of Executive
for the period provided in this Agreement; and

 

WHEREAS, in order to induce Executive to remain in the employ of the Bank and to
provide further incentive for Executive to achieve the financial and performance
objectives of the Bank, the parties desire to enter into this Agreement; and

 

WHEREAS, the Bank desires to set forth the rights and responsibilities of
Executive and the compensation payable to Executive, as modified from time to
time.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

 

1.POSITION AND RESPONSIBILITIES.

 

During the term of this Agreement, Executive agrees to serve as Chief Executive
Officer of the Bank (the “Executive Position”), and will perform the duties and
will have all powers associated with such position as set forth in any job
description provided to Executive by the Bank, and as may be set forth in the
bylaws of the Bank. During the period provided in this Agreement, Executive also
agrees to serve, if elected, as an officer of any subsidiary or affiliate of the
Bank and in such capacity carry out such duties and responsibilities reasonably
appropriate to that office.

 

2.TERM AND DUTIES.

 

(a)          The term of this Agreement and the period of Executive’s employment
hereunder shall begin as of the Effective Date and shall continue through
January 1, 2019. Commencing on January 1, 2018 (the “Renewal Date”) and
continuing on each January 1st thereafter (each a “Renewal Date”), this
Agreement shall renew for an additional year such that the remaining term shall
be twenty-four (24) months, provided, however, that in order for this Agreement
to renew, the disinterested members of the Board of Directors of the Bank (the
“Board”) must take the following actions within the time frames set forth below
prior to each Renewal Date: (i) at least sixty (60) days prior to the Renewal
Date, conduct a comprehensive performance evaluation and review of Executive for
purposes of determining whether to extend this Agreement; and (ii) affirmatively
approve the renewal or non-renewal of this Agreement, which such decision shall
be included in the minutes of the Board’s meeting. If the decision of such
disinterested members of the Board is not to renew this Agreement, then the
Board shall provide Executive with a written notice of non-renewal (“Non-Renewal
Notice”) at least thirty (30) days and not more than sixty (60) days prior to
any Renewal Date, such that this Agreement shall terminate at the end of
twenty-four (24) months following such Renewal Date. The failure of the
disinterested members of the Board to take the actions set forth herein before
any Renewal Date will result in the automatic non-renewal of this Agreement,
even if the Board fails to affirmatively issue the Non-Renewal Notice to
Executive. If the Board fails to inform Executive of its determination regarding
the renewal or non-renewal of this Agreement, the Executive may request, in
writing, the results of the Board’s action (or non-action) and the Board shall,
within thirty (30) days of the receipt of such request, provide a written
response to Executive. Reference herein to the term of this Agreement shall
refer to both such initial term and such extended terms.

 

 

 

 

(b)          Notwithstanding the foregoing, in the event that the Bank or the
Company has entered into an agreement to effect a transaction which would be
considered a Change in Control as defined under Section 5 hereof while the
Executive is employed pursuant to this Agreement, then the term of this
Agreement shall automatically be extended for twenty-four (24) months following
the date on which the Change in Control occurs.

 

(c)          During the period of her employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive will devote all of her business time, attention,
skill and efforts to the faithful performance of her duties under this
Agreement, including activities and duties related to the Executive Position.
Notwithstanding the preceding sentence, subject to the approval of the Board,
Executive may serve as a member of the board of directors of business, community
and charitable organizations, provided that in each case such service shall not
materially interfere with the performance of her duties under this Agreement,
adversely affect the reputation of the Bank or any other affiliates of the Bank,
or present any conflict of interest.

 

(d)          Nothing in this Agreement shall mandate or prohibit a continuation
of Executive’s employment following the expiration of the term of this
Agreement.

 

3.COMPENSATION, BENEFITS AND REIMBURSEMENT.

 

(a)          Base Salary. In consideration of Executive’s performance of the
responsibilities and duties set forth in this Agreement, the Bank will provide
Executive the compensation specified in this Agreement. The Bank will pay
Executive a salary of $238,703.00 per year (“Base Salary”). Such Base Salary
will be payable in accordance with the customary payroll practices of the Bank.
During the term of this Agreement, the Board may consider increasing, but not
decreasing (other than a decrease which is applicable to all senior officers of
the Bank and in a percentage not in excess of the percentage decrease for other
senior officers), Executive’s Base Salary as the Board deems appropriate. Any
change in Base Salary will become the “Base Salary” for purposes of this
Agreement.

 

(b)          Bonus. Executive shall be entitled to participate in any bonus plan
or arrangements of the Bank in which senior management is eligible to
participate. Nothing paid to Executive under any such plan or arrangement will
be deemed to be in lieu of the other compensation to which Executive is entitled
under this Agreement.

 

(c)          Benefit Plans. Executive will be entitled to participate in all
employee benefit plans, arrangements and perquisites offered to employees and
officers of the Bank. Without limiting the generality of the foregoing
provisions of this Section 3(c), Executive also will be entitled to participate
in any employee benefit plans including but not limited to retirement plans,
pension plans, profit-sharing plans, health-and-accident plans, or any other
employee benefit plan or arrangement made available by the Bank in the future to
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.

 

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(d)          Vacation. Executive will be entitled to paid vacation time each
year during the term of this Agreement measured on a calendar year basis, in
accordance with the Bank’s customary practices, as well as sick leave, holidays
and other paid absences in accordance with the Bank’s policies and procedures
for officers. Any unused paid time off during an annual period will be treated
in accordance with the Bank’s personnel policies as in effect from time to time.

 

(e)          Expense Reimbursements. The Bank will reimburse Executive for all
reasonable travel, entertainment and other reasonable expenses incurred by
Executive during the course of performing her obligations under this Agreement,
including, without limitation, fees for memberships in such organizations as
Executive and the Board mutually agree are necessary and appropriate in
connection with the performance of her duties under this Agreement, upon
substantiation of such expenses in accordance with applicable policies and
procedures of the Bank. All reimbursements pursuant to this Section 3(e) shall
be paid promptly by the Bank and in any event no later than thirty (30) days
following the date on which the expense was incurred.

 

(f)          To the extent not specifically set forth in this Section 3, any
compensation payable or provided under this Section 3 shall be paid or provided
no later than two and one-half (2.5) months after the calendar year in which
such compensation is no longer subject to a substantial risk of forfeiture
within the meaning of Treasury Regulation Section 1.409A-1(d).

 

4.TERMINATION AND TERMINATION PAY.

 

Subject to Section 5 of this Agreement which governs the occurrence of a Change
in Control, Executive’s employment under this Agreement may be terminated in the
following circumstances:

 

(a)          Death. Executive’s employment under this Agreement will terminate
upon her death during the term of this Agreement, in which event Executive’s
estate or beneficiary shall be paid Executive’s Base Salary at the rate in
effect at the time of Executive’s death for a period of one (1) year following
Executive’s death (payable in accordance with the regular payroll practices of
the Bank). In addition, for one (1) year following Executive’s death, the Bank
will continue to provide medical, dental and vision coverage substantially
comparable to the coverage, if any, maintained by the Bank for Executive and her
family immediately prior to Executive’s death. Such continued benefits will be
fully paid for by the Bank.

 

(b)          Disability. Termination of Executive’s employment based on
“Disability” shall mean termination because of any permanent and totally
physical or mental impairment that restricts Executive from performing all the
essential functions of normal employment. In the event of Executive’s
termination due to Disability, Executive will be entitled to disability
benefits, if any, provided under a long term disability plan sponsored by the
Bank, if applicable. In addition, for one (1) year following Executive’s
Disability, the Bank will continue to provide medical, dental and vision
coverage substantially comparable to the coverage, if any, maintained by the
Bank for Executive and her family immediately prior to Executive’s disability.
Such continued benefits will be fully paid for by the Bank.

 

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(c)          Termination for Cause. The Board may immediately terminate her
employment at any time for “Cause.” Executive shall have no right to receive
compensation or other benefits for any period after termination for Cause,
except for already vested benefits. Termination for “Cause” shall mean
termination because of, in the good faith determination of the Board,
Executive’s:

 

  (i) personal dishonesty;         (ii) incompetence;         (iii) willful
misconduct;         (iv) breach of fiduciary duty involving personal profit;    
    (v) intentional failure to perform stated duties;         (vi) willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order: or         (vii) material
breach by Executive of any provision of this Agreement.

 

(d)          Voluntary Termination by Executive. In addition to her other rights
to terminate her employment under this Agreement, Executive may voluntarily
terminate employment during the term of this Agreement (other than “With Good
Reason” as defined below) upon at least thirty (30) days prior written notice to
the Board. Upon Executive’s voluntary termination, Executive will receive only
her earned but unpaid compensation and vested rights and benefits as of the date
of her termination.

 

(e)          Termination Without Cause or With Good Reason.

 

(i)The Board may immediately terminate her employment at any time for a reason
other than Cause (a termination “Without Cause”), and Executive may, by written
notice to the Board, terminate this Agreement at any time within ninety (90)
days following an event constituting “Good Reason,” as defined below (a
termination “With Good Reason”); provided, however, that the Bank shall have
thirty (30) days to cure the “Good Reason” condition, but the Bank may waive its
right to cure. Any termination of Executive’s employment, other than Termination
for Cause shall have no effect on or prejudice the vested rights of Executive
under the Bank’s qualified or non-qualified retirement, pension, savings,
thrift, profit-sharing or bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or other employee benefit plans or programs, or
compensation plans or programs in which Executive was a participant.

 

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(ii)In the event of termination as described under Section 4(e)(i) and subject
to the requirements of Section 4(e)(v), the Bank shall pay Executive, or in the
event of Executive’s subsequent death, Executive’s beneficiary or estate, as the
case may be, as severance pay, a cash lump sum payment equal to the Base Salary
(at the rate in effect as of her date of termination) that Executive would have
earned had she remained employed with the Bank from her date of termination
until, and including, the last day of the remaining term of this Agreement. Such
payment shall be made to Executive within ten (10) days following Executive’s
date of termination, or if later, following the seventh (7th) day after
Executive’s execution of the Release required under Section 4(e)(v) hereof.

 

(iii)“Good Reason” exists if, without Executive’s express written consent, any
of the following occurs:

 

(A)the failure of the Bank to appoint or re-elect Executive to the Executive
Position;

 

(B)a material reduction in Executive’s Base Salary or benefits provided in this
Agreement (other than a reduction or elimination of Executive’s benefits under
one or more benefit plans maintained by the Bank as part of a good faith,
overall reduction or elimination of such plans or benefits applicable to all
participants in a manner that does not discriminate against Executive (except as
such discrimination may be necessary to comply with applicable law));

 

(C)a change in Executive’s Executive Position to be one of lesser authority or a
material reduction in Executive’s authority, duties or responsibilities from the
position and attributes associated with the Executive Position;

 

(D)a relocation of Executive’s principal place of employment by more than
twenty-five (25) miles from Executive’s principal place of employment as of the
initial Effective Date of this Agreement; or

 

(E)a material breach of this Agreement by the Bank.

 

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(iv)Notwithstanding the foregoing, Executive shall not be entitled to any
payments or benefits under this Section 4(e) unless and until Executive executes
a release of her claims (“Release”), satisfactory in form to the Bank and the
Company, against the Bank, the Company and any affiliate, and their officers,
directors, successors and assigns, releasing said persons from any and all
claims, rights, demands, causes of action, suits, arbitrations or grievances
relating to the employment relationship, including claims under the Age
Discrimination in Employment Act (“ADEA”), but not including claims for benefits
under tax-qualified plans or other benefit plans in which Executive is vested,
claims for benefits required by applicable law or claims with respect to
obligations set forth in this Agreement that survive the termination of this
Agreement. In order to comply with the requirements of Code Section 409A and the
ADEA, the Release shall be provided to Executive no later than the date of her
Separation from Service and Executive shall have no fewer than twenty-one (21)
days to consider the Release, and following Executive’s execution of the
Release, Executive shall have seven (7) days to revoke said Release.

 

5.CHANGE IN CONTROL.

 

(a)          Change in Control Defined. For purposes of this Agreement, the term
“Change in Control” shall mean the occurrence of any of the following events:

 

(i)Merger: The Company or the Bank merges into or consolidates with another
entity, or merges another bank or corporation into the Bank or the Company, and
as a result, less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who
were stockholders of the Company or the Bank immediately before the merger or
consolidation;

 

(ii)Acquisition of Significant Share Ownership: There is filed, or is required
to be filed, a report on Schedule 13D or another form or schedule (other than
Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial owner of 25% or more
of a class of the Company’s or the Bank’s voting securities; provided, however,
this clause (ii) shall not apply to beneficial ownership of the Company’s or the
Bank’s voting shares held in a fiduciary capacity by an entity of which the
Company directly or indirectly beneficially owns 50% or more of its outstanding
voting securities;

 

(iii)Change in Board Composition: During any period of two consecutive years,
individuals who constitute the Company’s or the Bank’s Board of Directors at the
beginning of the two-year period cease for any reason to constitute at least a
majority of the Company’s or the Bank’s Board of Directors; provided, however,
that for purposes of this clause (iii), each director who is first elected by
the board (or first nominated by the board for election by the stockholders or
corporators) by a vote of at least two-thirds (2/3) of the directors who were
directors at the beginning of the two-year period or who is appointed to the
Board as the result of a directive, supervisory agreement or order issued by the
primary federal regulator of the Company or the Bank or by the Federal Deposit
Insurance Corporation (“FDIC”) shall be deemed to have also been a director at
the beginning of such period; or

 

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(iv)Sale of Assets: The Company or the Bank sells to a third party all or
substantially all of its assets.

 

(b)          Change in Control Benefits. Upon the occurrence of Executive’s
termination Without Cause or With Good Reason on or after the effective time of
a Change in Control, the Bank (or any successor) shall pay Executive, or in the
event of Executive’s subsequent death, Executive’s beneficiary or estate, as
severance pay, an amount equal to two (2) times the sum of her (i) highest rate
of Base Salary, and (ii) the highest annual bonus paid to, or earned by,
Executive during the current calendar year of Executive’s date of termination or
either of the two (2) calendar years immediately preceding Executive’s date of
termination. Such payment shall be made in a lump sum within ten (10) days
following Executive’s date of termination. Notwithstanding the foregoing, the
payment provided in this Section 5(b) shall be payable to Executive in lieu of
any payment that is payable under Section 4(e).

 

(c)          Termination within Six Months Prior to Change in Control. In the
event of Executive’s termination of employment under Section 4(e) within six (6)
months prior to a Change in Control, Executive shall be entitled to the
difference, if any, between the benefit received under Section 4(e) and the
benefit available to Executive under this Section 5 upon the effective date of
the Change in Control. Such benefit shall be payable in a cash lump sum payment
to the former Executive within ten (10) days following the effective date of the
Change in Control.

 

(d)          280G Cutback. Notwithstanding anything in this Agreement to the
contrary, in no event shall the aggregate payments or benefits to be made or
afforded to Executive under this Agreement, either as a stand-alone benefit or
when aggregated with other payments to, or for the benefit of, Executive
(collectively referred to as the “Change in Control Benefits”) that are
contingent on a change in control (as defined under Code Section 280G),
constitute an “excess parachute payment” under Code Section 280G or any
successor thereto, and in order to avoid such a result, Executive’s benefits
payable under this Agreement shall be reduced by the minimum amount necessary so
that the Change in Control Benefits that are payable to Executive are not
subject to penalties under Code Sections 280G and 4999.

 

6.COVENANTS OF EXECUTIVE.

 

(a)          Non-Solicitation/Non-Compete. Executive hereby covenants and agrees
that, for a period of one (1) year following her termination of employment with
the Bank (other than a termination of employment following a Change in Control),
Executive shall not, without the written consent of the Bank, either directly or
indirectly:

 

(i)solicit, offer employment to, or take any other action intended (or that a
reasonable person acting in like circumstances would expect) to have the effect
of causing any officer or employee of the Bank, or any of its respective
subsidiaries or affiliates, to terminate her employment and accept employment or
become affiliated with, or provide services for compensation in any capacity
whatsoever to, any business whatsoever that competes with the business of the
Bank, or any of their direct or indirect subsidiaries or affiliates, that has
headquarters or offices within twenty-five (25) miles of any location(s) in
which the Bank has business operations or has filed an application for
regulatory approval to establish an office (the “Restricted Territory”);

 

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(ii)become an officer, employee, consultant, director, independent contractor,
agent, joint venturer, partner or trustee of any savings bank, savings and loan
association, savings and loan holding company, commercial bank, credit union,
bank or bank holding company, insurance company or agency, any mortgage or loan
broker or any other entity that competes with the business of the Bank or any of
their direct or indirect subsidiaries or affiliates, that: (i) has a
headquarters within the Restricted Territory or (ii) has one or more offices,
but is not headquartered, within the Restricted Territory, but in the latter
case, only if Executive would be employed, conduct business or have other
responsibilities or duties within the Restricted Territory; or

 

(iii)solicit, provide any information, advice or recommendation or take any
other action intended (or that a reasonable person acting in like circumstances
would expect) to have the effect of causing any customer of the Bank to
terminate an existing business or commercial relationship with the Bank.

 

(b)          Non-disparagement. Executive agrees that, during the term and
thereafter, she will not, directly or indirectly, alone or in conjunction with
any other party, make statements to customers or suppliers of the Company and/or
the Bank or to other members of the public that are in any way disparaging or
negative towards the Company or the Bank, or the products or services of either,
or the Company’s or the Bank’s representatives, directors, or employees. The
Bank agrees that, during the term and thereafter, the Bank will not, directly or
indirectly, alone or in conjunction with any other party, make statements to
customers or suppliers of the Company and/or the Bank or to other members of the
public that are in any way disparaging or negative towards the Executive.

 

(c)          Confidentiality. Executive recognizes and acknowledges that the
knowledge of the business activities, plans for business activities, and all
other proprietary information of the Bank, as it may exist from time to time,
are valuable, special and unique assets of the business of the Bank. Executive
will not, during or after the term of her employment, disclose any knowledge of
the past, present, planned or considered business activities or any other
similar proprietary information of the Bank to any person, firm, corporation, or
other entity for any reason or purpose whatsoever unless expressly authorized by
the Board or required by law. Notwithstanding the foregoing, Executive may
disclose any knowledge of banking, financial and/or economic principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Bank. Further, Executive may disclose information
regarding the business activities of the Bank to any bank regulator having
regulatory jurisdiction over the activities of the Bank pursuant to a formal
regulatory request. In the event of a breach or threatened breach by Executive
of the provisions of this Section, the Bank will be entitled to an injunction
restraining Executive from disclosing, in whole or in part, the knowledge of the
past, present, planned or considered business activities of the Bank or any
other similar proprietary information, or from rendering any services to any
person, firm, corporation, or other entity to whom such knowledge, in whole or
in part, has been disclosed or is threatened to be disclosed. Nothing herein
will be construed as prohibiting the Bank from pursuing any other remedies
available to the Bank for such breach or threatened breach, including the
recovery of damages from Executive.

 

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(d)          Information/Cooperation. Executive shall, upon reasonable notice,
furnish such information and assistance to the Bank as may be reasonably
required by the Bank, in connection with any litigation in which it or any of
its subsidiaries or affiliates is, or may become, a party; provided, however,
that Executive shall not be required to provide information or assistance with
respect to any litigation between Executive and the Bank or any other
subsidiaries or affiliates.

 

(e)          Reliance. Except as otherwise provided, all payments and benefits
to Executive under this Agreement shall be subject to Executive’s compliance
with this Section 6, to the extent applicable. The parties hereto, recognizing
that irreparable injury will result to the Bank, its business and property in
the event of Executive’s breach of this Section 6, agree that, in the event of
any such breach by Executive, the Bank will be entitled, in addition to any
other remedies and damages available, to an injunction to restrain the violation
hereof by Executive and all persons acting for or with Executive. Executive
represents and admits that Executive’s experience and capabilities are such that
Executive can obtain employment in a business engaged in other lines of business
than the Bank, and that the enforcement of a remedy by way of injunction will
not prevent Executive from earning a livelihood. Nothing herein will be
construed as prohibiting the Bank from pursuing any other remedies available to
them for such breach or threatened breach, including the recovery of damages
from Executive.

 

7.SOURCE OF PAYMENTS.

 

All payments provided in this Agreement shall be timely paid by check or direct
deposit from the general funds of the Bank (or any successor of the Bank).

 

8.EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

 

This Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Bank or any predecessor of
the Bank and Executive, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Executive under another plan,
program or agreement (other than an employment agreement) between the Bank and
the Executive.

 

9.NO ATTACHMENT; BINDING ON SUCCESSORS.

 

(a)          Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

 

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(b)          The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank’s obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.

 

10.MODIFICATION AND WAIVER.

 

(a)          This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.

 

(b)          No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

 

11.REQUIRED PROVISIONS.

 

Notwithstanding anything herein contained to the contrary, the following
provisions shall apply:

 

(a)          The Board may terminate Executive’s employment at any time, but any
termination by the Bank’s Board other than termination for Cause shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement. Executive shall have no right to receive compensation or other
benefits for any period after Executive’s termination for Cause.

 

(b)          If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) [12 U.S.C. §1818(e)(3)] or 8(g)(1) [12 U.S.C. §1818(g)(1)] of
the Federal Deposit Insurance Act (the “FDI Act”), the Bank’s obligations under
this Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion: (i) pay Executive all or part of the compensation
withheld while its contract obligations were suspended and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.

 

(c)          If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank’s affairs by an order issued under
Section 8(e)(4) [12 U.S.C. §1818(e)(4)] or 8(g)(1) [12 U.S.C. §1818(g)(1)] of
the FDI Act, all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the contracting parties
shall not be affected.

 

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(d)          If the Bank is in default as defined in Section 3(x)(1) [12 U.S.C.
§1813(x)(1)] of the FDI Act, all obligations of the Bank under this Agreement
shall terminate as of the date of default, but this paragraph shall not affect
any vested rights of the contracting parties.

 

(e)          All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank, (i) by the Comptroller of the Office of the
Comptroller of the Currency or his or her designee, at the time the FDIC enters
into an agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) [12 U.S.C. §1823(c)] of the FDI Act; or
(ii) by the Comptroller or his or her designee at the time the Director or his
or her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Comptroller to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.

 

(f)          Notwithstanding anything else in this Agreement to the contrary
(with the exception of Section 4(c)(i)), Executive’s employment shall not be
deemed to have been terminated unless and until Executive has a Separation from
Service within the meaning of Code Section 409A. For purposes of this Agreement,
a “Separation from Service” shall have occurred if the Bank and Executive
reasonably anticipate that either no further services will be performed by
Executive after the date of termination (whether as an employee or as an
independent contractor) or the level of further services performed is less than
fifty (50) percent of the average level of bona fide services in the thirty-six
(36) months immediately preceding the termination. For all purposes hereunder,
the definition of Separation from Service shall be interpreted consistent with
Treasury Regulation Section 1.409A-1(h)(ii). Notwithstanding the foregoing, this
Section 11(b) is not applicable in the event of the Executive’s termination for
Cause.

 

(g)          Notwithstanding the foregoing, if Executive is a “specified
employee” (i.e., a “key employee” of a publicly traded company within the
meaning of Section 409A of the Code and the final regulations issued thereunder)
and any payment under this Agreement is triggered due to Executive’s Separation
from Service (other than due to Disability or death), then solely to the extent
necessary to avoid penalties under Section 409A of the Code, no payment shall be
made during the first six (6) months following Executive’s Separation from
Service. Rather, any payment which would otherwise be paid to Executive during
such period shall be accumulated and paid to Executive in a lump sum on the
first day of the seventh month following such Separation from Service. All
subsequent payments shall be paid in the manner specified in this Agreement.

 

12.SEVERABILITY.

 

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

 

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13.GOVERNING LAW.

 

This Agreement shall be governed by the laws of State of New Mexico, but only to
the extent not superseded by federal law.

 

14.ARBITRATION.

 

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by binding arbitration, as an alternative to civil
litigation and without any trial by jury to resolve such claims, conducted by a
single arbitrator mutually acceptable to the Bank and Executive, sitting in a
location selected by the Bank within fifty (50) miles from the main office of
the Bank, in accordance with the rules of the American Arbitration Association’s
National Rules for the Resolution of Employment Disputes then in effect.
Judgment may be entered on the arbitrator’s award in any court having
jurisdiction.

 

15.PAYMENT OF LEGAL FEES.

 

To the extent that such payment(s) may be made without triggering penalty under
Code Section 409A, all reasonable legal fees paid or incurred by Executive
pursuant to any dispute relating to this Agreement shall be paid or reimbursed
by the Bank, provided that the dispute is resolved in Executive’s favor, and
such reimbursement shall occur no later than sixty (60) days after the end of
the year in which the dispute is settled or resolved in Executive’s favor.

 

16.INDEMNIFICATION.

 

The Bank shall provide Executive (including her heirs, executors and
administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense, and shall indemnify Executive (and
her heirs, executors and administrators) for the term of the Agreement and for a
period of six (6) years thereafter to the fullest extent permitted under
applicable law against all expenses and liabilities reasonably incurred by her
in connection with or arising out of any action, suit or proceeding in which she
may be involved by reason of her having been a director or officer of the Bank
or the Company or any subsidiary or affiliate of the Bank or the Company
(whether or not she continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys’ fees and
the cost of reasonable settlements (such settlements must be approved by the
Board or the board of directors of the Company, as appropriate); provided,
however, neither the Bank nor Company shall be required to indemnify or
reimburse Executive for legal expenses or liabilities incurred in connection
with an action, suit or proceeding arising from any illegal or fraudulent act
committed by Executive.

 

17.NOTICE.

 

For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below:

 

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To the Bank:

Bank 34.

500 East 10th Street

Alamogordo, New Mexico 88310

Attn: Randal L. Rabon, Director 

 

To Executive: Most recent address on file with the Bank

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

  BANK 34       By: /s/ Randal L. Rabon   Name:   Randal L. Rabon   Title:
    Board Chairman       EXECUTIVE       /s/ Jill Gutierrez   Jill Gutierrez

 

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