Exhibit 10.38


 


EXECUTIVE SALARY CONTINUATION AGREEMENT


 


 


THIS EXECUTIVE SALARY CONTINUATION AGREEMENT (“Agreement”) is effective
May 16, 2002 (“Effective Date”), by and between FEATHER RIVER STATE BANK, a
California banking corporation (“Bank”), and JOHN I JELAVICH (the “Executive”).


 


W I T N E S S E T H:


 


WHEREAS, the Executive is employed by the Bank as its President and
Chief Executive Officer.


 


WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contacts in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the
Bank to arrange terms of continued employment for the Executive; and


 


WHEREAS, it is the desire of the Bank that the Executive’s services be
retained as herein provided; and


 


WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain benefits
in accordance with the terms and conditions hereinafter set forth; and


 


NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and covenants herein contained, it is
hereby agreed as follows:


 


ARTICLE 1


 


1.1           Beneficiary.  The term Beneficiary shall mean the person
or persons whom the Executive shall designate in writing to receive the
benefits provided hereunder.


 


1.2.          Disability.
The term Disability means the Executive suffers a sickness, accident or injury
that is determined by the carrier of any individual or group disability
insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled. At the Bank’s request, the Executive must submit to the
Bank proof of the carrier’s or Social Security Administration’s determination.


 


1.3.          Named Fiduciary
and Plan Administrator.  The Bank
Fiduciary and Plan Administrator of this plan shall be the Bank.


 


1.4.                              Change of
Control.  A “Change of Control” shall
be deemed to have occurred if


 


(a)           there shall be consummated any consolidation or merger of
the California Independent Bancorp (the “Company”) in which the Company is not
the continuing or surviving 


 

















 


corporation
or pursuant to which shares of the Company’s capital stock are converted into
cash, securities or other property (other than a consolidation or merger of the
Company in which the holders of the Company’s voting stock immediately prior to
the consolidation or merger shall, upon consummation of the consolidation or
merger, own at least 50% of the voting stock) or any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company; or


 


(b)           the Company shall have issued shares of its voting
securities in connection with an acquisition in an amount such that the holders
of the Company’s voting stock immediately prior to the acquisition, upon
consummation of the acquisition, own less than 50% of the voting stock; or


 


(c)           individuals who as of the Effective Date constitute the
entire Board and any new directors whose election by the Company’s
shareholders, or whose nomination for election by the Company’s Board, shall
have been approved by a vote of at least a majority of the directors then in
office who either were directors at the Effective Date or whose election or
nomination for election shall have been so approved (the “Continuing
Directors”) shall cease for any reason to constitute a majority of the members
of the Board.


 


Section 1.5.


 


(a)           Termination for
Cause.  The Bank may terminate the
Executive’s employment hereunder for cause. 
For purposes of this Agreement and subject to the Executive’s
opportunity to cure as provided in Section 1.5(c) hereof, the Bank shall have
“cause” to terminate the Executive’s employment hereunder if Executive shall
commit any of the following:


 


(i)            the
willful, intentional and material breach of duty by the Executive in the course
of his employment;


 


(ii)           the
habitual and continued neglect by the Executive of his employment duties and
obligations under this Agreement;


 


(iii)          the
Executive’s willful and intentional violation of any State of California or
federal banking laws, or of the Bylaws, rules, policies or resolutions of Bank
or its respective subsidiary, or of the rules or regulations of the Board of
Governors of the Federal Reserve System, California Department of Financial
Institutions or the Federal Deposit Insurance Corporation, or other regulatory
agency or governmental authority having jurisdiction over Bank or its
subsidiary;


 


(iv)          the
determination by a state or federal banking agency or governmental authority
having jurisdiction over the Bank that the Executive is not suitable to act in
the capacity for which he is employed by Bank;


 

















 


(v)           the
Executive is convicted of any felony or a crime involving moral turpitude or
commits a fraudulent or dishonest act;


 


(vi)          the
Executive discloses without authority any secret or confidential information
concerning Bank or its respective subsidiary or takes any action which the
Bank’s Board of Directors determines, in its sole discretion and subject to
good faith, fair dealing and reasonableness, constitutes unfair competition
with or induces any customer to breach any contract with Bank or its respective
subsidiary; or


 


(vii)         the
Executive beaches the terms or provisions of this Agreement.


 


                (b)           Termination for Good Reason.  The Executive shall have the right at any
time to terminate his employment with the Bank for any reason.  For purposes of this Agreement and subject
to the Bank’s opportunity to cure as provided in Section 1.5(c) hereof, the
Executive shall have “good reason” to terminate his employment if such
termination shall be the result of:


 


                (i)            a diminution of the Executive’s
title, duties or responsibilities as set forth in Section 2.1 hereof;


 


                (ii)           a breach by the Company of the
compensation and benefits due to Executive;


 


                (iii)          a material breach by the Company of
any material terms of this Agreement; or


 


                (iv)          a Change of Control (as defined);
provided, however, it shall only constitute “good reason” if the Executive
terminates this Agreement within 12 months of the Change in Control; or


 


                (v)           the relocation of the Executive’s
principal place of employment to any location more than 50 miles from the
Company’s present principal place of business.


 


                (c)           Notice and Opportunity to Cure.  Notwithstanding the foregoing, it shall be a
condition precedent to the Bank’s right to terminate the Executive’s employment
for “cause” and the Executive’s right to terminate his employment for “good
reason” that (1) the party seeking the termination shall first have given the
other party written notice stating with specificity the reason for the
termination (“breach”) and (2) if such breach is susceptible of cure or remedy,
a period of 30 days from and after the giving of such notice shall have elapsed
without the breaching party having effectively cured or remedied such breach
during such 30 day period, unless such breach cannot be cured or remedied
within 30 days, in which case the period for remedy or cure shall be extended
for a reasonable time (not to exceed 30 days) provided the breaching party has
made and continues to make a diligent effort to effect such remedy or cure.


 

















 


ARTICLE 2


 


2.1.          Employment.  The Bank agrees to employ the Executive as
President of the Bank with such duties and responsibilities as may be assigned
to him, and with such compensation as may be determined from time to time by
the Board of Directors of the Bank.


 


2.2.          Fringe Benefits.  The salary continuation benefits provided by
this Agreement are granted by the Bank as a fringe benefit to the Executive and
are in addition to any compensation or benefit granted to Executive by the
Bank.


 


ARTICLE 3


 


3.1.                              Retirement.


 


(a)           Retirement After
May 15, 2007.  If the Executive
shall continue in the employment of the Bank until May 15, 2007 (“Retirement
Date”), he may retire from active daily employment as of such date or upon such
later date as may be mutually agreed upon by the Executive and the Bank.  After May 15, 2007, the Bank will pay to the
Executive the annual sum of fifty thousand dollars ($50,000) for a period of
fifteen (15) years, subject to the conditions and limitations set forth in this
Agreement.  The annual fifty
thousand-dollar ($50,000) payment shall be pro rated on a monthly basis and
will be payable beginning on May 16, 2007.


 


(b)           Retirement After
May 15, 2004 and Prior to May 15, 2007. 
If the Executive shall continue in the employment of the Bank at least
until May 15, 2004, but retires prior to May 15, 2007, Executive shall be
entitled to receive the product of the “Benefit Liability Balance” amount for
the period ending May 15 immediately prior to the date of retirement times the
corresponding Vesting Percentage as set forth in Schedule A attached
hereto.  Beginning on May 16, 2007,
Executive shall be entitled to receive such product of the Benefit Liability Balance
times the Vesting Percentage payable in 180 monthly installments.


 


(c)           Retirement Prior
to May 15, 2004.  If Executive
retires on or before May 15, 2004, he shall be entitled to no retirement
benefits under this Agreement.


 


(d)           Death After
Retirement.  Provided that Executive
retires on or after May 15, 2004, the Bank agrees that if the Executive dies
before receiving the full amount of monthly payments to which he is entitled
under this Agreement, the Executive’s designated Beneficiary shall be entitled
to receive the “Split Dollar Death Benefit” in the amount set forth in Schedule
A for the period ending May 15 in which death occurred.  If a valid Beneficiary Designation is not in
effect, the payment shall be made to the Executive’s surviving spouse or, if
none, said payments shall be made to the duly qualified personal
representative, executor or administrator of Executive’s estate.  Upon payment of such Split Dollar Death
Benefit, the Bank shall not be obligate to make any further payments hereunder.  No death benefit shall be payable hereunder
if it is determined that the Executive’s death was caused by suicide.


 

















 


ARTICLE 4


 


4.1.          Death Prior to
Retirement.  In the event the
Executive should die while employed by the Bank at any time after the date of
this Agreement but prior to his Retirement Date, the Bank shall pay the
Executive’s designated Beneficiary the “Split Dollar Death Benefit” in the
amount set for in Schedule A for the period ending May 15 in which death
occurred.  Upon payment of such Split
Dollar Death Benefit, the Bank shall not be obligate to make any further
payment hereunder.  If a valid
Beneficiary Designation is not in effect, the payment shall be made to the
Executive’s surviving spouse or, if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of
Executive’s estate.  No death benefit
shall be payable hereunder if it is determined that the Executive’s death was
caused by suicide.


 


4.2.          Disability Prior
to Retirement.  In the event the
Executive should become disabled while actively employed by the Bank but prior
to his Retirement Date, the Executive shall entitled to receive  the “Benefit Liability Balance” amount for
the period ending May 15 in which Executive is deemed Disabled  as set forth in Schedule A attached
hereto.  Upon reaching age 65,  Executive shall be entitled to receive such  Benefit Liability Balance  payable in 180 monthly installments.


 


4.3           Death After
Disability.  In the event Executive
should die after being deemed Disabled, the Executive’s designated Beneficiary
shall be entitled to the benefits as if he died after retirement as set forth
in Section 3.1(d).


 


ARTICLE 5


 


5.1.          Termination of
Employment.  The Bank reserves the
right to terminate the employment of the Executive at any time prior to
retirement.  In the event that
Executive’s employment shall terminate prior to his Retirement Date, then
Executive shall be entitled to the benefits described below.


 


(a)           If Executive continues to be employed by the Bank until
his Retirement Date, upon retirement, Executive will receive the payments in
accordance with Article 3.1.(a);


 


(b)           If the Company terminates Executive pursuant to Section
1.5(a) Termination for Cause, or if Executive terminates his employment for
reasons other than Section 1.5(b) Termination for Good Reason, on or prior to
May 15, 2004, Executive shall not be entitled to any benefits under this
Agreement;


 


(c)           If Executive is terminated without
cause, or Executive terminates this Agreement for Good Reason pursuant to
Section 1.5(b), on or prior to May 15, 2004, Executive will be entitled to the
product of the Benefit Liability Balance times the Vesting Percentage as of May
15, 2004 and as set forth in Schedule A. 
Beginning on May 16, 2007, Executive shall be entitled to such product
of the Benefit Liability Balance time Vesting Percentage, payable in 180
monthly installments; and


 

















 


(d)           If either the Company terminates Executive or if Executive
terminates employment after May 15, 2004, but prior to May 15, 2007, Executive
shall be entitled to the product of the Benefit Liability Balance times the
Vesting Percentage for the period ending May 15 immediately prior to the date
of termination as set forth in Schedule A. 
Beginning on May 16, 2007, Executive shall be entitled to receive such
product of Benefit Liability Balance time the Vesting Percentage, payable in
180 monthly installments.


 


Notwithstanding the foregoing, Executive shall be entitled to receive
the annual payments set forth in Section 3.1(a) as if he retired after May 15,
2007, with such benefits beginning on May 16, 2007, if the Employment is
terminated within twelve (12) months of a Change of Control.  Such annual payments will be paid in monthly
installments.


 


ARTICLE 6


 


6.1.          Nonassignable.  Neither the Executive, his spouse, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, hypothecate, mortgage, modify, or otherwise encumber in
advance any of the benefits payable hereunder. 
Further, no benefits hereunder shall be subject to seizure for the
payment of any debts, judgments, or alimony, owed by the Executive or his
beneficiary or any of them, or be transferable by operation of law in the event
of bankruptcy, insolvency or otherwise.


 


ARTICLE 7


 


7.1.          Claims Procedure.  The Bank shall make all determinations as to
rights to benefits under this Agreement. 
Any decision by the Bank denying a claim by the Executive or his
beneficiary for benefits under this Agreement shall be stated in writing and
delivered or mailed to the Executive or such beneficiary.  Such decision shall set forth the specific
reasons for the denial, written to the best of the Bank’s ability in a manner
calculated to be understood without legal or actuarial counsel.  In addition, the Bank shall provide a
reasonable opportunity to the Executive or such beneficiary for full and fair
review of the decision denying such claim.


 


ARTICLE 8


 


8.l.           Unsecured
General Creditor.  The Executive’s
rights are limited to the right to receive payments as provided in this
Agreement and the Executive’s position with respect thereto is that of a
general unsecured creditor of the Bank.


 


ARTICLE 9


 


9.1.          Not a Contract of
Employment.  This Agreement shall
not be deemed to constitute a contract of employment between the parties
hereto, nor shall any provision hereof restrict the right of the Bank to
discharge the Executive, or restrict the right of the Executive to terminate
his employment.


 

















 


ARTICLE 10


 


10.1.        Successors and
Assigns; Assignment.  The rights and
obligations of this Agreement shall be binding upon and inure to the benefit of
the successors, assigns, heirs and personal representatives of the parties
hereto.  Executive may not assign this
Agreement or any of Executive’s rights hereunder except with the prior written
consent of the Bank.


 


10.2.        Severability.  If any provision of this Agreement, as
applied to either party or to any circumstances, is judged by a court to be
void or unenforceable, in whole or in part, the same shall in no way affect any
other provision of this Agreement, the application of such provision in any
other circumstances, or the validity or enforceability of this Agreement.


 


10.3.        Arbitration.  Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
in accordance with the rules of the American Arbitration Association then in
effect.  Judgment may be entered on the
arbitrator’s award in any court having jurisdiction.  The parties agree to be subject to the jurisdiction of the County
of Sacramento.


 


10.4.        Governing
Law.  This Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State of
California, without giving effect to the choice of law principles thereof.


 


10.5.        Waiver.  A waiver by either party of any of the terms
or conditions of this Agreement in any one instance shall not be deemed or
construed to be a waiver of such terms or conditions for the future, or of any
subsequent breach thereof.  All
remedies, rights, undertakings, obligations and agreements contained in this
Agreement shall be cumulative, and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either party.


 


10.6.        Attorneys’ Fees.  If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys’ fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.


 


10.7.        Headings.  The headings in this Agreement are for
convenience only and shall not in any manner affect the interpretation or
construction of the Agreement or any of its provisions.


 


10.8.        Notice.  For the purposes of this Agreement, notices,
demands 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 (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:


 

















 


If to the Bank, to:


 


Feather River State Bank


1227 Bridge Street, Suite C


Yuba City, CA  
95991


Attn: Chairman of the Board of Directors of


Feather River State Bank


 


If to the Executive, to:


 


John I. Jelavich


1809 Lorraine Way


Yuba City, CA 
95993


 


or
to such other respective addresses as the parties hereto shall designate to the
other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.


 


10.9  Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.


 


IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Yuba City, California, the day and year first set forth below.


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  FEATHER
  RIVER STATE BANK

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:  

  	
  February
  21, 2003

  	
   

  	
  /s/
  Al Montna

  
	
   

  	
   

  	
   

  	
  Al
  Montna, Chairman of the Board

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:  

  	
  February
  21, 2003

  	
   

  	
  /s/
  John I. Jelavich

  
	
   

  	
   

  	
   

  	
  John I. Jelavich