Exhibit 10.07

EMPLOYMENT AGREEMENT{PRIVATE}

This Agreement is made and entered into as of the 27th day of June 2013 by and
between BANK OF GUAM, a Guam corporation (herein called the “Bank”) and WILLIAM
D. LEON GUERRERO, (herein called the “Executive Vice President”) (herein called
“Agreement”).

NOW, THEREFORE, in consideration of the mutual promises of the parties to the
Agreement, it is hereby agreed as follows:

1. Employment. Bank hereby designates and employs Executive Vice President, and
Executive Vice President hereby accepts employment with Bank, as its Executive
Vice President and Chief Operating Officer.

2. Term. This Agreement shall be effective from June 1, 2013 and terminating on
May 31, 2018.

3. Duties. Executive Vice President shall be the Chief Operating Officer of the
Bank, and shall, subject to the control of the Board of Directors of said Bank,
have general supervision, direction and control of the business and affairs of
the Bank. Executive Vice President shall have the general powers and duties of
management usually vested in the office of the Executive Vice President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors of the Bank, or the By-Laws. In connection therewith,
upon direction of the Board of Directors, Executive Vice President shall make
necessary and reasonable business trips for which he will be reimbursed or
expenses will be provided in accordance with such regulations as may be
established by the Board of Directors. Included herewith shall be trips to visit
with officials of correspondent banks and technical seminars as may be
available.

4. Extent of Services. Executive Vice President shall devote his full time,
attention and energy to the business of Bank and shall not, during the term of
this Agreement, be engaged in any other business activities, unless such
activities are reasonably determined by the Board of Directors of Bank not to be
in competition or in conflict with the commercial banking business of Bank.

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5. Base Compensation. As regular compensation for Executive Vice President’s
services hereunder, Bank shall pay Executive Vice President an annual base
salary of Two Hundred Fifty Two Thousand Dollars and 00/100 ($252,000.00) during
each year of the term hereof, payable in equal installments not less frequently
than monthly (herein called “Base Compensation”).

6. Adjustments to Base Compensation. The Base Compensation shall be adjusted
annually to reflect the increase, if any, in the cost-of-living by adding
thereto an amount obtained by multiplying the Base Compensation by the
percentage of which the level of the Consumer Price Index for the United States
has increased over its level as of the date of commencement of the term of
Agreement (herein called, together with Base Compensation, the “Adjusted Base
Compensation”).

Following the end of each year of this Agreement and within thirty (30) days
after the release of the United States Bureau of Labor Statistics of the figures
for such year, Bank shall pay to the Executive Vice President the amount of any
additional compensation to which he is entitled as a result of such
cost-of-living adjustment.

7. Incentive Bonus. As an incentive to Executive Vice President for his
continuing services and contributions to the growth and profitability of Bank,
Executive Vice President shall be paid, in addition to his Adjusted Base
Compensation, an Incentive Bonus as follows:

(a) Subject to the quarterly adjustments at Section 8 below, an amount equal to
one hundred seventy-five basis points (1.75%) of current net profits of the Bank
after taxes or One Hundred Fifty Thousand Dollars ($150,000.00), whichever is
less, payable in capital stocks of the Bank or in cash, or combination, at the
option of Executive Vice President. The maximum amount shall be subject to
review by the Board of Directors of Bank annually and appropriate adjustments
shall then be made.

 

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(b) The Incentive Bonus shall be computed and payable quarterly, within fifteen
(15) days following each quarter except that each of the first quarterly
payments of the Incentive Bonus shall be subject to adjustment, either increase
or decrease, depending on the Bank’s final audited financial statements of the
preceding year by the Bank’s independent accountants.

(c) At the option of the Executive Vice President, the Board of Directors are
authorized to defer up to One Hundred Thousand Dollars ($100,000) of the annual
incentive bonuses payable by receiving, in lieu of cash, fully vested Phantom
Stock Units paying dividend equivalents, such Phantom Stock Units to equal the
amount deferred, coupled with an option to purchase at the then fair market
value three (3) shares of the Common Stock of the Bank of Guam for each one
Phantom Stock Unit granted.

(d) Executive Vice President shall have the right to (1) continue to hold both
the Phantom Stock Units and the Stock Options and receive on each Phantom Stock
Unit an amount equivalent to the dividend paid on each share of Common Stock
(the “Dividend Equivalent”); or (2) tender his Phantom Stock Units to the Bank
for purchase by the Bank at the then fair market value; or (3) exercise his
Stock Options. Upon tender by Executive Vice President of his Phantom Stock
Units for cash he will forfeit his rights to the Stock Options; or upon exercise
of his Stock Options he will forfeit his rights to the Phantom Stock Units and
the Dividend Equivalents.

8. Adjustments To Bonus. On an annual basis, the Executive Vice President shall
submit an annual budget and strategic plan to the Board. Based upon the criteria
contained within the budget and strategic plan, the Incentive Bonus of the
Executive Vice President shall be adjusted on a quarterly basis as follows:

(a) If the then current Return on Equity (ROE) of the Bank is below the
preceding three-year average ROE of the Bank, then the Incentive Bonus shall be
reduced by ten percent (10%);

 

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(b) If the then current Return on Assets (ROA) of the Bank is less than that of
the Bank’s peer group as published in the Federal Deposit Insurance
Corporation’s (FDIC) Uniform Bank Performance Report, then the Incentive Bonus
shall be reduced by ten percent (10%);

(c) If the then current Bank’s FDIC Commercial Examination Composite Rating
(FDIC Rating) is 2 or better, there shall be no reduction to the Incentive
Bonus; if the FDIC Rating is 3, then Incentive Bonus shall be reduced by fifteen
percent (15%); if the FDIC Rating is 4, then the Incentive Bonus shall be
reduced by fifty percent (50%); if the FDIC Rating is 5, then the Incentive
Bonus shall be reduced by one-hundred percent (100%);

(d) If the then current Total Adversely Classified Items to Tier 1 Capital of
the Bank plus the Allowance for Loan and Lease Losses is greater than
twenty-five percent (25%), then the Incentive Bonus shall be reduced by ten
percent (10%);

(e) If the Efficiency Ratio of the Bank does not meet the following goals of the
Bank, the Incentive Bonus shall be reduced by five percent (5%):

 

Year

   Goal  

2013

     75 % 

2014

     74 % 

2015

     73 % 

2016

     72 % 

2017

     71 % 

For purposes of this Section 8, the ROA, ROE, FDIC Rating, Total Adversely
Classified Items to Tier 1 Capital, Allowance for Loan and Lease Losses and
Efficiency Ratio shall all be derived from any report of management submitted to
the Board of Directors at the Board Meeting immediately preceding the date of
any adjustment. If any dispute arises as to the calculations of any

 

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of such figures, the Compensation Committee, subject to Board approval, shall
make the sole determination of such figures using whatever resources the
Committee shall deem reasonably necessary. Attached to this Agreement and made a
part hereof by this reference as Exhibit A, is a worksheet, which shall be used
by the Bank to calculate the Incentive Bonus of the Executive Vice President.

9. Other Compensation or Benefits. In addition to the Adjusted Base Compensation
and Incentive Bonus and any other compensation provided hereunder, Bank shall
provide Executive Vice President with the following:

(a) A one-month vacation, at full pay.

(b) A health insurance, an accident insurance and disability insurance of a type
and in an amount generally made available by Bank to its executive employees, at
Bank’s sole cost and expense.

(c) A group term life insurance that is generally available to Bank’s executive
employees, at Bank’s sole expense and cost. As additional consideration for the
making of this Agreement by the Executive Vice President, the Bank agrees that
such policy shall at Bank’s sole cost and expense be maintained in full force
and effect at all times from the date hereof, if conditions of Bank’s group
insurance coverage permit, during the remaining life of the Executive Vice
President, and until his death, notwithstanding and regardless of the conclusion
of term of this Agreement, the termination of employment of the Executive Vice
President by the Bank in the capacity of Executive Vice President or any change
in the capacity of his employment or the terms or conditions thereof, and
without any condition whatsoever other than the making of this Agreement.

(d) A motor vehicle, at Bank’s sole cost and expense, together with
comprehensive insurance including public liability, in amounts not less than the
amount required by law. All reasonable operating expenses shall be paid by Bank.

 

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(e) A membership in a golf and country club located within the Bank’s service
area, at Bank’s sole cost and expense. Upon termination of this Agreement,
Bank’s obligation to pay the fixed monthly dues for such membership shall cease
and the ownership of such membership shall vest in the Executive Vice President,
provided, however, that Executive Vice President continues to pay such fixed
monthly dues from the date of termination.

(f) Free utilities—power, water, sewer, telephone—at the Executive Vice
President’s primary residence.

(g) A life insurance on such terms as is mutually agreeable between the parties,
at Bank’s sole expense and cost, in the sum of $500,000.00.

(h) A bank owned life insurance that offers retirement benefits that is or will
be made generally available to Bank’s executive employees, at Bank’s sole
expense and cost.

10. Business Expenses. Bank shall pay or reimburse Executive Vice President upon
submission of an itemized account by him for all reasonable business expenses
incurred by Executive Vice President in promoting, pursuing or otherwise
furthering the business of Bank, including, but not limited to expenses for
travel, meals, hotel accommodations, entertainment, gifts and the like.

11. Payments Following Disability. Upon the permanent disability of the
Executive Vice President, Bank shall pay to the Executive Vice President, or his
assigns, the Adjusted Base Compensation, together with all Incentive Bonuses,
for the remainder of the term of this Contract.

12. Successors and Assigns. This Agreement and all the terms and conditions
hereof shall be binding upon and inure to the benefit of the Bank, including any
successor entity to Bank by liquidation, merger, consolidation, reorganization,
sale of assets or otherwise, and to the Executive Vice President, and when
applicable, to his heirs, successors and assigns.

 

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13. Retirement Plans. Executive Vice President may participate in any retirement
plan of Bank and to receive payments thereunder. In addition, the bank will
provide employee with a Supplemental Executive Retirement Plan as described in
the attached Exhibit B.

14. Non-Assumption. The services to be performed by Executive Vice President
under this Agreement are personal to him, and may not be assumed by any other
party except with Bank’s prior written consent.

15. Entire Agreement. The making and execution of this Agreement by the parties
hereto have been induced by no representations, statements, warranties or
agreements other than those expressed herein. This Agreement embodies the entire
understanding of the parties, and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof, unless specifically referred to herein by reference.

16. Amendments. This Agreement and any term hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against whom enforcement of such change, waiver, discharge or termination is or
would be sought and without the necessity of additional consideration.

17. Notices. All communications and notices hereunder shall be deemed to have
been properly given or served for all purposes when personally delivered to the
party to whom it is directed, or in lieu of such personal service, if received
by certified or registered United States mail, postage prepaid, at the following
addresses:

 

If to Bank at:    P.O. Box BW    Hagatna, Guam 96932

 

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If to Executive Vice President at:    P.O. Box 92    Hagatna, Guam 96932

Either party may change the address provided above by giving written notice of
such change to the other party as herein provided.

18. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited or invalid under such
law, such provision shall be ineffective to the extent of the prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement.

19. Law. This Agreement shall be governed under and construed in accordance with
the laws of Guam.

20. Attorney’s Fees. In the event of any action, suit or proceeding brought
under or in connection with this Agreement, the prevailing party therein shall
be entitled to recover, and the other party thereto agrees to pay, costs and
expenses in connection therewith including reasonable attorney’s fees,
disbursements and expenses.

21. Board Approval. This Contract is made pursuant to the Resolution of the
Board of Directors adopted unanimously at its regular monthly meeting on
April 22, 2013.

22. Headings. The headings of the sections of this Agreement have been included
for convenience of reference only and shall in no way restrict or modify any of
the terms or provisions thereof.

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

 

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BANK OF GUAM, a Guam corporation (herein called the “Bank”) By:  

/s/ LOURDES A. LEON GUERRERO

  Lourdes A. Leon Guerrero,   Its Authorized Representative

/s/ WILLIAM D. LEON GUERRERO

William D. Leon Guerrero, (“herein called the Executive Vice President”)

 

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“EXHIBIT A”

William D. Leon Guerrero

Period Calculated:

Process Date:

 

Net Income

        Bonus                        —        

Incentive Parameters

       Reduce Total Incentive by:   

(Bonus = 1.75% of Net Income)

        

ROE

       10 %              

ROA

       10 %              

Composite Rating

     2        3=15 %      4=50 %      5=100 % 

Parameters:

   Actual      Reductions      

Total Adversely Classified Items/Tier 1 Capital + ALLL greater than:

     25.00 %      10 %     

ROE (=IF(B11<G7, C6*0.1,0)

        —        

Efficiency Ratio (2013)

     75.00 %      5 %     

ROA (=IF(B11<G8, C6*0.1,0)

        —                 

Composite

                 

TACI/T1C+ALLL

        —        

ROE

        

Efficiency Ratio

        —                 

Total Reductions

        —                          

Prior Three Year Average

     0.00 %       

Total Bonus

        —        

* UBPR ROA

        

Total Bonus

   (A)      —                          —        

* Change upon Availability

                 

Net Profit 2013

        

Paid Y-T-D

        

1st Qtr

                 

2nd Qtr

     —           

1st Qtr Bonus

        —        

3rd Qtr

     —           

2nd Qtr Bonus

        

4th Qtr

     —                       

 

 

       

3rd Qtr Bonus

        

Total Full Year

     —                       

 

 

       

4th Quarter Bonus

                          —                       

 

 

             

Annual Incentive Bonus Limitation

        150,000.00               

Divided by 4 Quarters

        4                     

 

 

             

If (A) is greater than or equal to (B) then (B)

If (A) is lesser than or equal to (B) then (A)

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   “EXHIBIT B”   

Bank of Guam

Salary Continuation Agreement

     

 

 

Revised 03.30.11

 

© 2011 Clark Consulting

This document is provided to assist your legal counsel in documenting your
specific arrangement. The laws of the various states may differ considerably,
and this specimen is for general information only. It is not a form to be
signed, nor is it to be construed as legal advice. Failure to accurately
document your arrangement could result in significant losses, whether from
claims of those participating in the arrangement, from the heirs and
beneficiaries of participants, or from regulatory agencies such as the Internal
Revenue Service, the Department of Labor, or bank examiners. License is hereby
granted to your legal counsel to use these materials in documenting solely your
arrangement.

In general, if your bank is subject to SEC regulation, implementation of this or
any other executive or director compensation program may trigger rules requiring
certain disclosures on Form 8-K within four days of implementing the program.
Consult with your SEC attorney, if applicable, to determine your
responsibilities under the disclosure rules.

 

 

IMPORTANT NOTICE ON CODE SECTION 409A COMPLIANCE

It is critical that you consult with your legal and tax advisors to determine
the impact of Internal Revenue Code Section 409A to your particular situation.
On April 10, 2007 the Treasury Department issued final regulations implementing
the requirements of Section 409A which apply to nonqualified deferred
compensation arrangements.

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Bank of Guam

Salary Continuation Agreement

 

 

BANK OF GUAM

SALARY CONTINUATION AGREEMENT

This SALARY CONTINUATION AGREEMENT (this “Agreement”) is entered into this 1 day
of April, 2011, by and between Bank of Guam, a commercial bank located in
Hagatna, Guam (the “Bank”), and William D. Leon Guerrero (the “Executive”).

The purpose of this Agreement is to provide specified benefits to the Executive,
a member of a select group of management or highly compensated employees who
contribute materially to the continued growth, development and future business
success of the Bank. This Agreement shall be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974
(“ERISA”), as amended from time to time.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:

 

1.1 “Accrual Balance” means the liability that should be accrued by the Bank,
under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s
obligation to the Executive under this Agreement, by applying Accounting
Standards Codification 710-10 and the Discount Rate. Any one of a variety of
amortization methods may be used to determine the Accrual Balance. However, once
chosen, the method must be consistently applied.

 

1.2 “Beneficiary” means each designated person or entity, or the estate of the
deceased Executive entitled to benefits, if any, upon the death of the
Executive.

 

1.3 “Beneficiary Designation Form” means the form established from time to time
by the Plan Administrator that the Executive completes, signs and returns to the
Plan Administrator to designate one or more Beneficiaries.

 

1.4 “Board” means the Board of Directors of the Bank as from time to time
constituted.

 

1.5 “Change in Control” means a change in the ownership or effective control of
the Bank, or in the ownership of a substantial portion of the assets of the
Bank, as such change is defined in Code Section 409A and regulations thereunder.

 

1.6 “Code” means the Internal Revenue Code of 1986, as amended, and all
regulations and guidance thereunder, including such regulations and guidance as
may be promulgated after the Effective Date.

 

1.7

“Disability” means the Executive: (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months; or (ii) is, by
reason of any medically determinable physical

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Bank of Guam

Salary Continuation Agreement

 

 

 

  or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than three
(3) months under an accident and health plan covering employees or directors of
the Bank. Medical determination of Disability may be made by either the Social
Security Administration or by the provider of disability insurance covering
employees or directors of the Bank provided that the definition of “disability”
applied under such insurance program complies with the requirements of the
preceding sentence. Upon the request of the Plan Administrator, the Executive
must submit proof to the Plan Administrator of the Social Security
Administration’s or the provider’s determination.

 

1.8 “Discount Rate” means the rate used by the Plan Administrator for
determining the Accrual Balance. The initial Discount Rate is six percent (6%).
However, the Plan Administrator, in its discretion, may adjust the Discount Rate
to maintain the rate within reasonable standards according to GAAP and/or
applicable bank regulatory guidance.

 

1.9 “Early Termination” means the Executive’s Separation from Service before
attainment of Normal Retirement Age except when such Separation from Service
occurs within twenty-four (24) months following a Change in Control or due to
death or Termination for Cause.

 

1.10 “Effective Date” means April 1, 2011.

 

1.11 “Normal Retirement Age” means ten (10) Years of Participation.

 

1.12 “Plan Administrator” means the Board or such committee or person as the
Board shall appoint.

 

1.13 “Plan Year” means each twelve (12) month period commencing on April 1 and
ending on March 31 of each year. The initial Plan Year shall commence on the
Effective Date of this Agreement and end on the following March 31.

 

1.14 “Separation from Service” means termination of the Executive’s employment
with the Bank for reasons other than death or Disability. Whether a Separation
from Service has occurred is determined in accordance with the requirements of
Code Section 409A based on whether the facts and circumstances indicate that the
Bank and Executive reasonably anticipated that no further services would be
performed after a certain date or that the level of bona fide services the
Executive would perform after such date (whether as an employee or as an
independent contractor) would permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed (whether as
an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the Bank if the
Executive has been providing services to the Bank less than thirty-six
(36) months).

 

1.15

“Specified Employee” means an employee who at the time of Separation from
Service is a key employee of the Bank, if any stock of the Bank is publicly
traded on an established securities market or otherwise. For purposes of this
Agreement, an employee is a key

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  employee if the employee meets the requirements of Code
Section 416(i)(l)(A)(i), (ii), or (iii) (applied in accordance with the
regulations thereunder and disregarding section 416(i)(5)) at any time during
the twelve (12) month period ending on December 31 (the “identification
period”). If the employee is a key employee during an identification period, the
employee is treated as a key employee for purposes of this Agreement during the
twelve (12) month period that begins on the first day of April following the
close of the identification period.

 

1.16 “Termination for Cause” means Separation from Service for:

 

  (a) Gross negligence or gross neglect of duties to the Bank;

 

  (b) Conviction of a felony or of a gross misdemeanor involving moral turpitude
in connection with the Executive’s employment with the Bank; or

 

  (c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Bank policy committed in connection with the Executive’s employment
and resulting in a material adverse effect on the Bank.

 

1.17 “Years of Participation” means the consecutive twelve (12) month period
beginning on the Effective Date of this Agreement and any twelve (12) month
anniversary thereof during the entirety of which time the Executive is a
participant in this Agreement.

Article 2

Distributions During Lifetime

 

2.1 Normal Retirement Benefit. Upon Separation from Service on or after Normal
Retirement Age, the Bank shall distribute to the Executive the benefit described
in this Section 2.1 in lieu of any other benefit under this Article.

 

  2.1.1 Amount of Benefit. If Separation of Service occurs at Normal Retirement
Age, the annual benefit under this Section 2.1 is One Hundred Thousand Dollars
($100,000). If Separation from Service occurs after Normal Retirement Age, the
Bank shall credit interest on the Accrual Balance at the Discount Rate until
Separation from Service. Upon Separation from Service after Normal Retirement
Age the annual benefit under this Section 2.1 is the amount necessary to
amortize the Accrual Balance as of the date of Separation from Service over
fifteen (15) years.

 

  2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to
the Executive in twelve (12) equal monthly installments commencing on the first
day of the month following Separation from Service. The annual benefit shall be
distributed to the Executive for fifteen (15) years.

 

2.2 Early Termination Benefit. If Early Termination occurs, the Bank shall
distribute to the Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Article.

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 shall be
the Normal Retirement Benefit described in Section 2.1.1 above multiplied by the
vesting percentage below.

 

Date on Which Separation from Service Occurs

   Vesting
Percentage  

On or prior to 3/30/2016

     0 % 

3/31/2016 to 3/30/2017

     50 % 

3/31/2017 to 3/30/2018

     60 % 

3/31/2018 to 3/30/2019

     70 % 

3/31/2019 to 3/30/2020

     80 % 

3/31/2020 to 3/30/2021

     90 % 

On or after 3/31/2021

     100 % 

 

  2.2.2 Distribution of Benefit. The Bank shall distribute the annual benefit to
the Executive in twelve (12) equal monthly installments commencing on the first
day of the month following Normal Retirement Age. The annual benefit shall be
distributed to the Executive for fifteen (15) years.

 

2.3 Disability Benefit. If the Executive experiences a Disability prior to
Normal Retirement Age, the Bank shall distribute to the Executive the benefit
described in this Section 2.3 in lieu of any other benefit under this Article.

 

  2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is one
hundred percent (100%) of the Accrual Balance determined as of the end of the
Plan Year preceding such Disability.

 

  2.3.2 Distribution of Benefit. The Bank shall distribute the benefit to the
Executive in one hundred eighty (180) equal monthly installments commencing on
the first day of the month following the determination of Disability.

 

2.4 Change in Control Benefit. If a Change in Control occurs followed within
twenty-four (24) months by Separation from Service prior to Normal Retirement
Age, the Bank shall distribute to the Executive the benefit described in this
Section 2.4 in lieu of any other benefit under this Article.

 

  2.4.1 Amount of Benefit. The benefit under this Section 2.4 is one hundred
percent (100%) of the Accrual Balance determined as of the end of the Plan Year
preceding Separation from Service.

 

  2.4.2 Distribution of Benefit. The Bank shall distribute the benefit to the
Executive in a lump sum within sixty (60) days following Separation from
Service.

 

  2.4.3

Parachute Payments. Notwithstanding any provision of this Agreement to the
contrary, and to the extent allowed by Code Section 409A, if any benefit payment

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  under this Section 2.4 would be treated as an “excess parachute payment” under
Code Section 280G, the Bank shall reduce such benefit payment to the extent
necessary to avoid treating such benefit payment as an excess parachute payment.

 

2.5 Restriction on Commencement of Distributions. Notwithstanding any provision
of this Agreement to the contrary, if the Executive is considered a Specified
Employee, the provisions of this Section 2.5 shall govern all distributions
hereunder. If benefit distributions which would otherwise be made to the
Executive due to Separation from Service are limited because the Executive is a
Specified Employee, then such distributions shall not be made during the first
six (6) months following Separation from Service. Rather, any distribution which
would otherwise be paid to the Executive during such period shall be accumulated
and paid to the Executive in a lump sum on the first day of the seventh month
following Separation from Service. All subsequent distributions shall be paid in
the manner specified.

 

2.6 Distributions Upon Taxation of Amounts Deferred. If, pursuant to Code
Section 409A, the Federal Insurance Contributions Act or other state, local or
foreign tax, the Executive becomes subject to tax on the amounts deferred
hereunder, then the Bank may make a limited distribution to the Executive in a
manner that conforms to the requirements of Code section 409A. Any such
distribution will decrease the Executive’s benefits distributable under this
Agreement.

 

2.7 Change in Form or Timing of Distributions. For distribution of benefits
under this Article 2, the Executive and the Bank may, subject to the terms of
Section 8.1, amend this Agreement to delay the timing or change the form of
distributions. Any such amendment:

 

  (a) may not accelerate the time or schedule of any distribution, except as
provided in Code Section 409A;

 

  (b) must, for benefits distributable under Section 2.2, be made at least
twelve (12) months prior to the first scheduled distribution;

 

  (c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay
the commencement of distributions for a minimum of five (5) years from the date
the first distribution was originally scheduled to be made; and

 

  (d) must take effect not less than twelve (12) months after the amendment is
made.

Article 3

Distribution at Death

 

3.1 Death During Active Service. If the Executive dies prior to Separation from
Service, the Bank shall distribute to the Beneficiary the benefit described in
this Section 3.1. This benefit shall be distributed in lieu of any benefit under
Article 2.

 

  3.1.1 Amount of Benefit. The benefit under this Section 3.1 is one hundred
percent (100%) of the Accrual Balance determined as of the end of the Plan Year
preceding death.

 

  3.1.2 Distribution of Benefit. The Bank shall distribute the benefit to the
Beneficiary in a lump sum within sixty (60) days following the Executive’s
death. The Beneficiary shall be required to provide the Executive’s death
certificate to the Bank.

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

3.2 Death During Distribution of a Benefit. If the Executive dies after any
benefit distributions have commenced under this Agreement but before receiving
all such distributions, the Bank shall distribute to the Beneficiary the
remaining Accrual Balance in a lump sum within sixty (60) days following the
Executive’s death. The Beneficiary shall be required to provide the Executive’s
death certificate to the Bank.

 

3.3 Death Before Benefit Distributions Commence. If the Executive is entitled to
benefit distributions under this Agreement but dies prior to the date that
commencement of said benefit distributions are scheduled to be made under this
Agreement, the Bank shall distribute to the Beneficiary the Accrual Balance in a
lump sum within sixty (60) days following the Executive’s death. The Beneficiary
shall be required to provide the Executive’s death certificate to the Bank.

Article 4

Beneficiaries

 

4.1 In General. The Executive shall have the right, at any time, to designate a
Beneficiary to receive any benefit distributions under this Agreement upon the
death of the Executive. The Beneficiary designated under this Agreement may be
the same as or different from the beneficiary designated under any other plan of
the Bank in which the Executive participates.

 

4.2 Designation. The Executive shall designate a Beneficiary by completing and
signing the Beneficiary Designation Form and delivering it to the Plan
Administrator or its designated agent. If the Executive names someone other than
the Executive’s spouse as a Beneficiary, the Plan Administrator may, in its sole
discretion, determine that spousal consent is required to be provided in a form
designated by the Plan Administrator, executed by the Executive’s spouse and
returned to the Plan Administrator. The Executive’s beneficiary designation
shall be deemed automatically revoked if the Beneficiary predeceases the
Executive or if the Executive names a spouse as Beneficiary and the marriage is
subsequently dissolved. The Executive shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Plan Administrator’s rules and procedures.
Upon the acceptance by the Plan Administrator of a new Beneficiary Designation
Form, all Beneficiary designations previously filed shall be cancelled. The Plan
Administrator shall be entitled to rely on the last Beneficiary Designation Form
filed by the Executive and accepted by the Plan Administrator prior to the
Executive’s death.

 

4.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by the
Plan Administrator or its designated agent.

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

4.4 No Beneficiary Designation. If the Executive dies without a valid
beneficiary designation, or if all designated Beneficiaries predecease the
Executive, then the Executive’s spouse shall be the designated Beneficiary. If
the Executive has no surviving spouse, any benefit shall be paid to the
Executive’s estate.

 

4.5 Facility of Distribution. If the Plan Administrator determines in its
discretion that a benefit is to be distributed to a minor, to a person declared
incompetent or to a person incapable of handling the disposition of that
person’s property, the Plan Administrator may direct distribution of such
benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent person or incapable person. The Plan
Administrator may require proof of incompetence, minority or guardianship as it
may deem appropriate prior to distribution of the benefit. Any distribution of a
benefit shall be a distribution for the account of the Executive and the
Beneficiary, as the case may be, and shall completely discharge any liability
under this Agreement for such distribution amount.

Article 5

General Limitations

 

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall not distribute any benefit under this Agreement if
the Executive’s employment with the Bank is terminated by the Bank or an
applicable regulator due to a Termination for Cause.

 

5.2 Suicide or Misstatement. No benefit shall be distributed if the Executive
commits suicide within two (2) years after the Effective Date, or if an
insurance company which issued a life insurance policy covering the Executive
and owned by the Bank denies coverage (i) for material misstatements of fact
made by the Executive on an application for such life insurance, or (ii) for any
other reason.

 

5.3 Removal. Notwithstanding any provision of this Agreement to the contrary,
the Bank shall not distribute any benefit under this Agreement if the Executive
is subject to a final removal or prohibition order issued by an appropriate
federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance
Act. Notwithstanding anything herein to the contrary, any payments made to the
Executive pursuant to this Agreement, or otherwise, shall be subject upon
compliance with 12 U.S.C. 1828 and FDIC Regulation 12 CFR Part 359, Golden
Parachute Indemnification Payments and any other regulations or guidance
promulgated thereunder.

Article 6

Administration of Agreement

 

6.1

Plan Administrator Duties. The Plan Administrator shall administer this
Agreement according to its express terms and shall also have the discretion and
authority to (i) make, amend, interpret and enforce all appropriate rules and
regulations for the administration of this Agreement and (ii) decide or resolve
any and all questions, including

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  interpretations of this Agreement, as may arise in connection with this
Agreement to the extent the exercise of such discretion and authority does not
conflict with Code Section 409A.

 

6.2 Agents. In the administration of this Agreement, the Plan Administrator may
employ agents and delegate to them such administrative duties as the Plan
Administrator sees fit, including acting through a duly appointed
representative, and may from time to time consult with counsel who may be
counsel to the Bank.

 

6.3 Binding Effect of Decisions. Any decision or action of the Plan
Administrator with respect to any question arising out of or in connection with
the administration, interpretation or application of this Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in this Agreement.

 

6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless
the Plan Administrator against any and all claims, losses, damages, expenses or
liabilities arising from any action or failure to act with respect to this
Agreement, except in the case of willful misconduct by the Plan Administrator.

 

6.5 Bank Information. To enable the Plan Administrator to perform its functions,
the Bank shall supply full and timely information to the Plan Administrator on
all matters relating to the date and circumstances of the Executive’s death,
Disability or Separation from Service, and such other pertinent information as
the Plan Administrator may reasonably require.

 

6.6 Annual Statement. The Plan Administrator shall provide to the Executive,
within one hundred twenty (120) days after the end of each Plan Year, a
statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims And Review Procedures

 

7.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not
received benefits under this Agreement that he or she believes should be
distributed shall make a claim for such benefits as follows:

 

  7.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting
to the Plan Administrator a written claim for the benefits. If such a claim
relates to the contents of a notice received by the claimant, the claim must be
made within sixty (60) days after such notice was received by the claimant. All
other claims must be made within one hundred eighty (180) days of the date on
which the event that caused the claim to arise occurred. The claim must state
with particularity the determination desired by the claimant.

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall
respond to such claimant within ninety (90) days after receiving the claim. If
the Plan Administrator determines that special circumstances require additional
time for processing the claim, the Plan Administrator can extend the response
period by an additional ninety (90) days by notifying the claimant in writing,
prior to the end of the initial ninety (90) day period, that an additional
period is required. The notice of extension must set forth the special
circumstances and the date by which the Plan Administrator expects to render its
decision.

 

  7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the
claim, the Plan Administrator shall notify the claimant in writing of such
denial. The Plan Administrator shall write the notification in a manner
calculated to be understood by the claimant. The notification shall set forth:

 

  (a) The specific reasons for the denial;

 

  (b) A reference to the specific provisions of this Agreement on which the
denial is based;

 

  (c) A description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is needed;

 

  (d) An explanation of this Agreement’s review procedures and the time limits
applicable to such procedures; and

 

  (e) A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a) following an adverse benefit determination on review.

 

7.2 Review Procedure. If the Plan Administrator denies part or all of the claim,
the claimant shall have the opportunity for a full and fair review by the Plan
Administrator of the denial as follows:

 

  7.2.1 Initiation – Written Request. To initiate the review, the claimant,
within sixty (60) days after receiving the Plan Administrator’s notice of
denial, must file with the Plan Administrator a written request for review.

 

  7.2.2 Additional Submissions – Information Access. The claimant shall then
have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Plan Administrator shall also provide the
claimant, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

 

  7.2.3 Considerations on Review. In considering the review, the Plan
Administrator shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination.

 

  7.2.4

Timing of Plan Administrator Response. The Plan Administrator shall respond in
writing to such claimant within sixty (60) days after receiving the request for
review. If the Plan Administrator determines that special circumstances require

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  additional time for processing the claim, the Plan Administrator can extend
the response period by an additional sixty (60) days by notifying the claimant
in writing, prior to the end of the initial sixty (60) day period, that an
additional period is required. The notice of extension must set forth the
special circumstances and the date by which the Plan Administrator expects to
render its decision.

 

  7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in
writing of its decision on review. The Plan Administrator shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall set forth:

 

  (a) The specific reasons for the denial;

 

  (b) A reference to the specific provisions of this Agreement on which the
denial is based;

 

  (c) A statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits; and

 

  (d) A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).

Article 8

Amendments and Termination

 

8.1 Amendments. This Agreement may be amended only by a written agreement signed
by the Bank and the Executive. However, the Bank may unilaterally amend this
Agreement to conform with written directives to the Bank from its auditors or
banking regulators or to comply with legislative changes or tax law, including
without limitation Code Section 409A.

 

8.2 Plan Termination Generally. This Agreement may be terminated only by a
written agreement signed by the Bank and the Executive. The benefit shall be the
Accrual Balance as of the date this Agreement is terminated. Except as provided
in Section 8.3, the termination of this Agreement shall not cause a distribution
of benefits under this Agreement. Rather, upon such termination benefit
distributions will be made at the earliest distribution event permitted under
Article 2 or Article 3.

 

8.3 Plan Terminations Under Code Section 409A. Notwithstanding anything to the
contrary in Section 8.2, if the Bank terminates this Agreement in the following
circumstances:

(a) Within thirty (30) days before or twelve (12) months after a Change in
Control, provided that all distributions are made no later than twelve
(12) months following such termination of this Agreement and farther provided
that all the Bank’s arrangements which are substantially similar to this
Agreement are terminated so the Executive and all participants in the similar
arrangements are required to receive all amounts of compensation deferred under
the terminated arrangements within twelve (12) months of such termination;

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

  (b) Upon the Bank’s dissolution or with the approval of a bankruptcy court
provided that the amounts deferred under this Agreement are included in the
Executive’s gross income in the latest of (i) the calendar year in which this
Agreement terminates; (ii) the calendar year in which the amount is no longer
subject to a substantial risk of forfeiture; or (iii) the first calendar year in
which the distribution is administratively practical; or

 

  (c) Upon the Bank’s termination of this and all other arrangements that would
be aggregated with this Agreement pursuant to Treasury Regulations
Section 1.409A-1(c) if the Executive participated in such arrangements (“Similar
Arrangements”), provided that (i) the termination and liquidation does not occur
proximate to a downturn in the financial health of the Bank, (ii) all
termination distributions are made no earlier than twelve (12) months and no
later than twenty-four (24) months following such termination, and (iii) the
Bank does not adopt any new arrangement that would be a Similar Arrangement for
a minimum of three (3) years following the date the Bank takes all necessary
action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the
termination of this Agreement, to the Executive in a lump sum subject to the
above terms.

Article 9

Miscellaneous

 

9.1 Binding Effect. This Agreement shall bind the Executive and the Bank and
their beneficiaries, survivors, executors, administrators and transferees.

 

9.2 No Guarantee of Employment. This Agreement is not a contract for employment.
It does not give the Executive the right to remain as an employee of the Bank
nor interfere with the Bank’s right to discharge the Executive. It does not
require the Executive to remain an employee nor interfere with the Executive’s
right to terminate employment at any time.

 

9.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

 

9.4 Tax Withholding and Reporting. The Bank shall withhold any taxes that are
required to be withheld, including but not limited to taxes owed under Code
Section 409A from the benefits provided under this Agreement. The Executive
acknowledges that the Bank’s sole liability regarding taxes is to forward any
amounts withheld to the appropriate taxing authorities. The Bank shall satisfy
all applicable reporting requirements, including those under Code Section 409A.

 

9.5 Applicable Law. This Agreement and all rights hereunder shall be governed by
the laws of Guam except to the extent preempted by the laws of the United States
of America.

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

9.6 Unfunded Arrangement. The Executive and the Beneficiary are general
unsecured creditors of the Bank for the distribution of benefits under this
Agreement. The benefits represent the mere promise by the Bank to distribute
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors. Any insurance on the Executive’s life or
other informal funding asset is a general asset of the Bank to which the
Executive and Beneficiary have no preferred or secured claim.

 

9.7 Reorganization. The Bank shall not merge or consolidate into or with another
bank, or reorganize, or sell substantially all of its assets to another bank,
firm or person unless such succeeding or continuing bank, firm or person agrees
to assume and discharge the obligations of the Bank under this Agreement. Upon
the occurrence of such an event, the term “Bank” as used in this Agreement shall
be deemed to refer to the successor or survivor entity.

 

9.8 Entire Agreement. This Agreement constitutes the entire agreement between
the Bank and the Executive as to the subject matter hereof. No rights are
granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

 

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this
Agreement requires and the context will permit, the use of the masculine gender
includes the feminine and use of the singular includes the plural.

 

9.10 Alternative Action. In the event it shall become impossible for the Bank or
the Plan Administrator to perform any act required by this Agreement due to
regulatory or other constraints, the Bank or Plan Administrator may perform such
alternative act as most nearly carries out the intent and purpose of this
Agreement and is in the best interests of the Bank, provided that such
alternative act does not violate Code Section 409A.

 

9.11 Headings. Article and section headings are for convenient reference only
and shall not control or affect the meaning or construction of any provision
herein.

 

9.12 Validity. If any provision of this Agreement shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Agreement shall be construed and enforced as if such
illegal or invalid provision had never been included herein.

 

9.13 Notice. Any notice or filing required or permitted to be given to the Bank
or Plan Administrator under this Agreement shall be sufficient if in writing and
hand-delivered or sent by registered or certified mail to the address below:

 

  

P.O. Box 92

     

HAGATNA GUAM

     

96932

  

 

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Bank of Guam

Salary Continuation Agreement

 

 

 

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.

Any notice or filing required or permitted to be given to the Executive under
this Agreement shall be sufficient if in writing and hand-delivered or sent by
mail to the last known address of the Executive.

 

9.14 Deduction Limitation on Benefit Payments. If the Bank reasonably
anticipates that the Bank’s deduction with respect to any distribution under
this Agreement would be limited or eliminated by application of Code
Section 162(m), then to the extent deemed necessary by the Bank to ensure that
the entire amount of any distribution from this Agreement is deductible, the
Bank may delay payment of any amount that would otherwise be distributed under
this Agreement. The delayed amounts shall be distributed to the Executive (or
the Beneficiary in the event of the Executive’s death) at the earliest date the
Bank reasonably anticipates that the deduction of the payment of the amount will
not be limited or eliminated by application of Code Section 162(m).

 

9.15 Compliance with Section 409A. This Agreement shall be interpreted and
administered consistent with Code Section 409A.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the
Bank have signed this Agreement.

 

EXECUTIVE:     BANK:     Bank of Guam LOGO [g561562ex5_02pg024a.jpg]     By:  
LOGO [g561562ex5_02pg024b.jpg]

 

     

 

William D. Leon Guerrero     Title:   President      

 

 

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