**Exhibit 10.21**

 

**EMPLOYMENT AGREEMENT**

 

This Employment Agreement (this “Agreement”) by and between WesternSierra Bancorp (“Bancorp”) and Patrick J. Rusnak (“Executive”), is dated May 3,2005. (the “Effective Date”)

 

**1.****                                      PURPOSE OFAGREEMENT.**  This Agreement sets forththe terms of Executive’s employment with Bancorp and provides Executive with acontingent signing bonus and severance benefits in certain circumstances as setforth in the Agreement.

 

**2.****                                      TERM OFAGREEMENT.**  This Agreement starts onthe Effective Date and expires on the third anniversary of the Effective Date.

 

**3.****                                      NO TERM OFEMPLOYMENT.**  Notwithstanding the termof this Agreement, Bancorp may terminate Executive’s employment at any time forany lawful reason or for no reason at all, subject to the provisions of thisAgreement.  Executive’s employment withBancorp is “at will.”

 

**4.****                                      DUTIES ANDEXECUTIVE POSITION.**  As of theEffective Date, Executive shall be employed as Executive Vice President/ChiefOperating Officer, and will perform such duties as may be designated by Bancorp’sboard of directors (the “Board”) or the Chief Executive Officer of Bancorp, towhom Executive will directly report (the “Supervisor”).

 

Executive agrees that to the best of Executive’sability and experience, Executive will at all times loyally and conscientiouslyperform all of the duties and obligations required of Executive pursuant to theexpress and implicit terms of this Agreement and as directed by the Board orthe Supervisor.  Executive shall devoteExecutive’s entire working time, attention and efforts to Bancorp’s businessand affairs, shall faithfully and diligently serve Bancorp’s interests andshall not engage in any business or employment activity that is not on Bancorp’sbehalf (whether or not pursued for gain or profit) except for (i) activitiesapproved in writing in advance by the Board and (ii) passive investments thatdo not involve Executive providing any advice or services to the businesses inwhich the investments are made.

 

**5.****                                      COMPENSATION.** For all services performed under thisAgreement, Bancorp agrees to pay the following compensation and benefits:

 

**BaseSalary.**  Executive’sbase salary is $16,666.67 per month ($200,000 on an annualized basis) (the “BaseSalary”) and shall increase to $18,333.34 per month ($220,000 on an annualizedbasis) beginning November 1, 2005, provided that Executive is still activelyemployed by the Bancorp at such time. Executive’s base salary shall further increase to $20,000 per month($240,000 on an annualized basis) beginning May 1, 2006, provide Executive isstill actively employed by the Bancorp at such time and has met the goals (“Goals”)outlined in Appendix A to this Agreement. The Board shall in good faith determine whether Executive has satisfiedsuch Goals, and its decision shall be final and definitive.

 

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**ContingentSigning Bonus and Participation in the Senior Management Incentive CompensationPlan.**  Executiveupon successfully completing 90 days of active employment with Bancorp shall bepaid a $21,000 signing bonus as additional incentive compensation.  Executiveshall be entitled participate in the Senior Management Incentive CompensationPlan and earn additional incentive compensation as set forth in such plan.

 

**PaidTime Off and Special Sick Time Off.**  Executive shall be entitled to 26 days paidtime off per year for vacation, personal time off and short-term illnesses tobe used in accordance with the Bancorp’s Employee Handbook.  Executive shall receive five days per year ofemployment with Bancorp, which will accumulate each year up to a maximum of 45days, to cover time off due to illnesses of four or more consecutive days underdoctor’s care.

 

**StockOptions.**  Subjectto the successful completion of 90 days of active employment with Bancorp,Bancorp shall grant to Executive an option to purchase upon exercise 30,000shares of Bancorp common stock at a per share option price equal to the marketprice of the Bancorp common stock at the date of grant by the Board and withsuch vesting conditions as determined by the Board.

 

**AutomobileAllowance.** Executive shall be paid an additional $400 per month compensation forExecutive’s automobile allowance.

 

**OtherBenefits.** Executive is entitled to participate, under the terms of the respectiveplans, in other benefit plans and perquisites generally available to Bancorp’sexecutives and employees.  Executiveshall be entitled to medical, dental, vision, chiropractic, employee assistanceplan, life, accidental disability, disability and long term disability coverageon such terms as such is provided by Bancorp to its executive officers.  Bancorp shall pay 100% of Executive’s monthlypremiums for Executive and Executive’s dependents upon Executive becomingeligible for such coverage beginning on the first of the month, following thecompletion of 90 days of employment with Bancorp.

 

**6.****                                      TERMINATION.**  Executive’s employment may be terminatedbefore the expiration of this Agreement as described in this Section, in whichevent Executive’s compensation and benefits shall terminate except as otherwiseprovided in this Agreement.

 

**ForCause.**  UponBancorp’s termination of Executive for Cause. For Cause shall mean

 

(a)                                  Dishonest orfraudulent conduct by Executive with respect to the performance of Executive’sduties with Bancorp;

 

(b)                                 Conductby Executive that materially discredits Bancorp or any of its subsidiaries oris materially detrimental to the reputation of Bancorp or any of itssubsidiaries, including but not limited to conviction or a plea of nolocontendere of Executive of a felony or crime involving moral turpitude;

 

(c)                                  Executive’swillful misconduct or gross negligence in performance of Executive’s dutiesunder this Agreement, including but not limited to Executive’s refusal tocomply in any material respect with the legal directives of the Board or theSupervisor, if such misconduct or negligence has not been remedied or is not

 

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being remedied to the Board’s reasonable satisfactionwithin thirty (30) days after written notice, including a detailed descriptionof the misconduct or negligence, has been delivered by the Board to Executive;

 

(d)                                 An order ordirective from a state or federal banking regulatory agency requesting orrequiring removal of Executive or a finding by any such agency that Executive’sperformance threatens the safety or soundness of Bancorp or any of itssubsidiaries; or

 

(e)                                  Materialbreach of Executive’s fiduciary duties to Bancorp if such breach has not beenremedied or is not being remedied to the Board’s reasonable satisfaction withinthirty (30) days after written notice, including a detailed description of thebreach, has been delivered by the Board to Executive.

 

**WithoutCause.**  UponBancorp’s termination of Executive without Cause, with or without notice, atany time in Bancorp’s sole discretion, for any reason other than forCause.  A Change in Control does not initself constitute Termination Without Cause.

 

**Death orDisability.**  Forpurposes of this Agreement, disability (“Disability”) shall mean either that the Executive is (i) unable toengage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment which can be expected to result indeath or can be expected to last for a continuous period of not less thantwelve (12) months, or (ii) is, by reason of any medically determinablephysical or mental impairment which can be expected to result in death or canbe expected to last for a continuous period of not less than twelve (12)months, receiving income replacement benefits for a period of not less thanthree (3) months under an accident and health plan sponsored by the Bank.

 

**Resignation.**  Upon Executive’s voluntary resignation,written notice of which Executive must give Bancorp at least 60 days in advanceof his resignation.

 

**Changein Control.**  Forpurposes of this Agreement, a “Change in Control” shall be deemed to haveoccurred when any of the following events take place:

 

**(a)****                                  A Change InOwnership Of The Bancorp.**  Achange in ownership of the Bancorp occurs on the date that any person (or groupof persons) acquires ownership of stock of the Bancorp that, together withstock held by such person or group, constitutes more than fifty percent (50%)of the total fair market value or total voting power of the stock of theBancorp.

 

**(b)****                                  A Change inEffective Control of the Bancorp**. A change in effective control of the Bancorp occurs on the date that:

 

1.                                       Anyperson (or group of persons) acquires (or has acquired during the twelve (12)month period ending on the date of the most recent acquisition by such personor persons) ownership of stock of the Bancorp possessing thirty-five percent(35%) or more of the total voting power of the stock of the Bancorp; or

 

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2.                                       Amajority of members of the Bancorp’s Board is replaced during any twelve (12)month period by directors whose appointment or election is not endorsed by amajority of the members of the Bancorp’s Board prior to the date of theappointment or election.

 

**(c)****                                  A Change inOwnership of a Substantial Portion of the Bancorp’s Assets.**  A change in the ownership of a substantialportion of the Bancorp’s assets occurs on the date that any person (or group ofpersons) acquires (or has acquired during the twelve (12) month period endingon the date of the most recent acquisition by such person or persons) assetsfrom the Bancorp that have a total gross fair market value equal to, or morethan, forty percent (40%) of the total gross fair market value of all of theassets of the Bancorp immediately prior to such acquisition or acquisitions.

 

**7.****                                      PAYMENT UPONTERMINATION.**  Upon termination ofExecutive’s employment for any of the reasons set forth in Section 6 above,Executive will receive payment for all Base Salary and paid time off and otherbenefits accrued as of the date of Executive’s termination (“EarnedCompensation”), which shall be paid no later than the end of the business dayof such termination unless an earlier time is required by applicable law, inwhich case it shall be paid at such earlier time.  In the event of termination for death orDisability, Executive’s estate or Executive, respectively shall receive inaddition to Earned Compensation, accrued paid time off and medical, dental,vision, chiropractic insurance coverage for Executive and/or Executive’sdependents, as applicable for three months following the date of death or Disabilityat Bancorp’s expense.  In the event ofExecutive’s termination of employment for Cause or resignation without propernotice, Executive shall receive Earned Compensation and any accrued paid timeoff to the date of resignation.

 

**8.****                                      SEVERANCEBENEFIT.**  In the event of Executive’stermination Without Cause prior to the second anniversary of this Agreement, inaddition to receiving Earned Compensation, Executive will receive a severancebenefit equal to one month of Base Salary, based on Executive’s Base Salaryjust prior to termination (the “Severance Benefit”) for each month Executive isactively employed by the Bancorp up to a maximum Severance Benefit of sixmonths Base Salary.  In the event ofExecutive’s termination without Cause after the second anniversary of thisAgreement, in addition to receiving Earned Compensation, Executive will receivea severance benefit equal to one month of Base Salary, based on Executive’sBase Salary just prior to termination (the “Severance Benefit”) for each monthExecutive is actively employed by the Bancorp up to a maximum Severance Benefitof 12 months Base Salary.  The SeveranceBenefit shall be paid in installments over the number of months of continuedbase salary, starting on the next regular payday following termination. Receiptof the Severance Benefit is conditioned on Executive having executed theSeparation Agreement in substantially the form attached hereto as Exhibit B andthe revocation period having expired without Executive having revoked theSeparation Agreement.  Receipt andcontinued receipt of the Severance Benefit is further conditioned on Executivenot being in material violation of any material term of this Agreement or inmaterial violation of any material term of the Separation Agreement.  Executive shall not be required to mitigatethe amount of any payments under this Section (whether by seeking new employmentor otherwise), and the amount of Severance Benefits shall not be reduced by anyincome or funds that Executive may receive from another party.  In addition to any Severance Benefit paid bythe

 

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Bancorp, the Executive shall receive medical, dental,vision, and chiropractic insurance coverage for Executive and Executive’sdependents for three months following the date of termination without Cause atBancorp’s expense.

 

**9.****                                      CHANGE IN CONTROLBENEFIT.**  After a Change in Control,if either (i) the Executive is not retained by the resulting corporation for aperiod of 18 months in a position comparable to that of the highest levelexecutive vice president of the resulting corporation or a position with theresulting corporation that is acceptable to Executive, or (ii) as a conditionof accepting or performing the functions of the position under (i) above, theExecutive is required to relocate his residence or increase his daily commutingdistance to greater than 40 miles,  or(iii) the resulting company reduces Executive’s Base Salary from Executive’sBase Salary immediately prior to the Change in Control at any time during the18 month period immediately following the consummation of the Change in Control(either event shall constitute a “Triggering Event”), then Executive shall bepaid the 18 months of Executive’s Base Salary, based on Executive’s Base Salaryjust prior to the Change in Control (“Change in Control Benefit”).  Executive shall also be entitled to anyEarned Compensation in addition to the Change in Control Benefit upon aTriggering Event.  The Change in ControlBenefit and Earned Compensation shall be paid to Executive in a lump sum within5 calendar days following the Triggering Event.

 

**10.****                               CONFIDENTIALINFORMATION.**  The parties acknowledgethat in the course of Executive’s duties, Executive will have access to andbecome knowledgeable with certain proprietary and confidential information ofBancorp and its subsidiaries not known by its existing or potentialcompetitors.  Executive acknowledges thatsuch information constitutes valuable, special, and unique assets of thebusiness of Bancorp.  Executive agrees tohold in a fiduciary capacity, not use for Executive’s benefit, and notdisclose, communicate, or divulge in any manner during the period of Executive’semployment with Bancorp or at any time thereafter, any such data andconfidential information of any kind, nature, or description concerning anymatters affecting or relating to Bancorp’s business, its customers, or itsservices.  Executive agrees that allmemoranda, notes, records, papers, customer files, other documents, and allcopies thereof relating to Bancorp’s operations or business or matters relatedto any of Bancorp’s customers, some of which may be prepared by Executive.  Executive further agrees that all media,electronic or otherwise associated therewith containing such confidentialinformation held by or in the control of Executive, shall be Bancorp’s property(“Bancorp Property”).  Upon terminationof employment, Executive shall promptly return all the Bancorp Property toBancorp.

 

**11.****                               DISPUTE RESOLUTION.**  Except where such matters are deemed governedby ERISA, the parties agree to submit any dispute arising under this Agreementto final, binding, private arbitration in accordance with the CommercialArbitration Rules of the American Arbitration Association, and judgment on theaward rendered by the arbitrators may be entered in any court havingjurisdiction in Sacramento, California. This includes not only disputes about the meaning or performance of theAgreement, but disputes about its negotiation, drafting, or execution.  Judgment on the award rendered by thearbitrators may be entered in any court having jurisdiction.  There shall be three arbitrators, one to bechosen directly by each party, and the third arbitrator to be selected by thetwo arbitrators so chosen.  If anyarbitration proceeding is brought for the enforcement of this Agreement orbecause of an alleged dispute, breach or default in connection with thisAgreement, (i) the nonprevailing party shall pay the fees of the arbitratorsand all other

 

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costs of thearbitration, including the cost of any record or transcripts of thearbitrations and administrative fees; and (ii) the prevailing party shall beentitled to recover reasonable attorney’s fees and any other costs and expensesincurred in that action or proceeding, in addition to any other relief to whichit or he may be entitled.

 

**12.****                               NOTICES.**  All notices, requests, demands, and othercommunications provided for by this Agreement will be in writing and shall bedeemed sufficient upon receipt, when delivered personally or by anationally-recognized delivery service (such as Federal Express), or three (3)business days after being deposited in the U.S. mail as certified mail, returnreceipt requested, with postage prepaid, if such notice is addressed to theparty to be notified at such party’s address as set forth below or assubsequently modified by written notice.

 
| To Bancorp:   | Western Sierra Bancorp                           |
|---------------|--------------------------------------------------|
|          | 4080 Plaza Goldroado Circle                      |
|          | Cameron Park, California 95682                   |
|          | Attention: Gary D. Gall, Chief Executive Officer |
|          |                                             |
| To Executive: | Patrick J. Rusnak                                |
|          | 111 Heaton Court                                 |
|          | Granite Bay, California 95746                    |

 

**13.****                               GENERAL PROVISIONS.**

 

**GoverningLaw.**  The validity,interpretation, construction and performance of this Agreement shall begoverned by federal ERISA, as applicable, and otherwise by the laws of theState of California.

 

**SavingProvision.**  If anypart of this Agreement is held to be unenforceable, it shall not affect anyother part. If any part of this Agreement is held to be unenforceable aswritten, it shall be enforced to the maximum extent allowed by applicable law.

 

**SurvivalProvision.** The confidential information and disputeresolution provisions of this Agreement shall survive after termination of thisAgreement, and shall be enforceable regardless of any claim Employee may haveagainst Bancorp.  Also, if any benefitsprovided in Section 8 of this Agreement are still owed, or obligations orclaims pursuant to Section 10 or 11 are still pending, at the time oftermination of this Agreement, this Agreement shall continue in force, withrespect to those obligations or claims, until such benefits are paid in full orclaims are resolved in full.  Theobligation in Section 10 shall survive this Agreement for an indefinite period.

 

**Counterparts.**  This Agreement may be executed incounterparts, each of which shall be deemed an original, but all of whichtogether will constitute one and the same instrument.

 

**EntireAgreement.**  ThisAgreement constitutes the sole agreement of the parties regarding Executive’sbenefits in the event of termination or Change in Control and together withBancorp’s employee handbook governs the terms of Executive’s employment.  Where there is a conflict between theemployee handbook and this Agreement, the terms of this Agreement shall govern.

 

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**PreviousAgreements.**  ThisAgreement replaces and supersedes all prior oral and written agreements betweenthe Executive and Bancorp, or any affiliates or representatives of Bancorpregarding the subject matters set forth herein.

 

**Waiver.**  No waiver of any provision of this Agreementshall be valid unless in writing, signed by the party against whom the waiveris sought to be enforced.  The waiver ofany breach of this Agreement or failure to enforce any provision of this Agreementshall not waive any later breach.

 

**Assignment.**  Executive shall not assign or transfer any ofExecutive’s rights pursuant to this Agreement, wholly or partially, to anyother person or to delegate the performance of its duties under the terms ofthis Agreement.  The rights and obligationsof Bancorp under this Agreement shall inure to the benefit of and be binding ineach and every respect upon the direct and indirect successors and assigns ofBancorp, regardless of the manner in which the successors or assigns succeed tothe interests or assets of Bancorp.  ThisAgreement shall not be terminated by the voluntary or involuntary dissolutionof Bancorp, by any merger, consolidation or acquisition where Bancorp is notthe surviving corporation, by any transfer of all or substantially all of Bancorp’sassets, or by any other change in Bancorp’s structure or the manner in whichBancorp’s business or assets are held. Executive’s employment shall not be deemed terminated upon theoccurrence of one of the foregoing events. In the event of any merger, consolidation or transfer of assets, thisAgreement shall be binding upon and shall inure to the benefit of the survivingcorporation or the corporation to which the assets are transferred.

 

**Attorneys’Fees.**  If eitherparty institutes a proceeding to enforce its rights under, or to recoverdamages for breach of, this Agreement, the prevailing party shall be awardedall costs and expenses of the proceeding, including, but not limited to,attorneys’ fees, filing and service fees, witness fees, and arbitrator’s fees.If arbitration is commenced, the arbitrator will have full authority andcomplete discretion to determine the “prevailing party” and the amount of costsand expenses to be awarded under this paragraph.

 

**14.****                               ADVICE OF COUNSEL.**  TERMS AND PROVISIONS OF THIS AGREEMENT. THISAGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING ORPREPARATION HEREOF.

 
| **WESTERN SIERRA  BANCORP** | **EXECUTIVE**                         |
|-----------------------------|---------------------------------------|
| ** **                  | ** **                            |
| ** **                  | ** **                            |
| By:                         | /s/ Gary D. Gall                      |   | /s/ Patrick J. Rusnak |   |
|                        | Gary D. Gall, Chief Executive Officer |   | Patrick J. Rusnak |

 

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**EXHIBIT B**

 

**EMPLOYMENT SEPARATION AGREEMENTAND RELEASE OF CLAIMS**

 

This is a confidentialagreement between you, Patrick J. Rusnak, and us, Western Sierra Bancorp.  This agreement is dated for referencepurposes                           ,20      , which is the date we delivered thisagreement to you for your consideration. For purposes of this Agreement Western Sierra Bancorp together with eachof its subsidiaries or affiliates is referred to as “Bancorp.”

 

**1.****                                      TERMINATION OFEMPLOYMENT.**  Your employmentterminates [or was terminated] on                               ,20       (the “Separation Date”).

 

**2.****                                      PAYMENTS.**  In exchange for your agreeing to the releaseof claims and other terms in this agreement, we will pay you the SeveranceBenefit specified in Section 8 of the Employment Agreement between you andWestern Sierra Bancorp dated                         , 2005 (the “Employment Agreement”).  Youacknowledge that we are not obligated to make these payments to you unless youagree to comply with the terms of this agreement.

 

**3.****                                      COBRACONTINUATION COVERAGE.**  Your normalemployee participation in Bancorp’s group health coverage will terminate threemonths following your termination (“Separation Date”).  Continuation of group health coveragethereafter will be made available to you and your dependents pursuant tofederal law (COBRA).  As long as youtimely elect COBRA continuation coverage, Bancorp will waive the requirementthat you pay for the cost of continuation coverage through the SeparationDate.  Continuation of group healthcoverage thereafter is entirely at your expense, as provided under COBRA.

 

**4.****                                      TERMINATION OFBENEFITS.**  Except as provided inparagraph 3 above, your participation in all employee benefit plans andprograms ended on the Separation Date. Your rights under any pension benefit or other plans in which you mayhave participated will be determined in accordance with the written plandocuments governing those plans.

 

**5.****                                      FULL PAYMENT.**  You acknowledge having received full paymentof all compensation of any kind (including wages, salary, vacation, sick leave,commissions, bonuses and incentive compensation) that you earned as a result ofyour employment by Bancorp.

 

**6.****                                      NO FURTHERCOMPENSATION.**  Any and all agreementsto pay you bonuses or other incentive compensation are terminated, except forany payments earned during active employment as determined in accordance withthe written plan documents governing those plans.  You understand and agree that you have noright to receive any further payments for bonuses or other incentivecompensation.  Bancorp owes no furthercompensation or benefits of any kind, except as described above.

 

**7.****                                      RELEASE OFCLAIMS.**

 

(a)                                  Youhereby release (i) Bancorp and its subsidiaries, affiliates, and benefit plans,(ii) each of Bancorp’s past and present shareholders, Executives, directors,agents, employees, representatives, administrators, fiduciaries and attorneys,and (iii) the

 

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predecessors, successors, transferees and assigns ofeach of the persons and entities described in this sentence, from any and allclaims of any kind, known or unknown, that arose on or before the date yousigned this agreement.

 

(b)                                 Theclaims you are releasing include, without limitation, claims of wrongfultermination, claims of constructive discharge, claims arising out of employmentagreements, representations or policies related to your employment, claims arisingunder federal, state or local laws or ordinances prohibiting discrimination orharassment or requiring accommodation on the basis of age, race, color,national origin, religion, sex, disability, marital status, sexual orientationor any other status, claims of failure to accommodate a disability or religiouspractice, claims for violation of public policy, claims of retaliation, claimsof failure to assist you in applying for future position openings, claims offailure to hire you for future position openings, claims for wages orcompensation of any kind (including overtime claims), claims of tortiousinterference with contract or expectancy, claims of fraud or negligentmisrepresentation, claims of breach of privacy, defamation claims, claims ofintentional or negligent infliction of emotional distress, claims of unfairlabor practices, claims arising out of any claimed right to stock or stockoptions, claims for attorneys’ fees or costs, and any other claims that arebased on any legal obligations that arise out of or are related to youremployment relationship with us.

 

(c)                                  Youspecifically waive any rights or claims that you may have under the CaliforniaLabor Code, the Civil Rights Act of 1964 (including Title VII of that Act), theEqual Pay Act of 1963, the Age Discrimination in Employment Act of 1967 (ADEA),the Americans with Disabilities Act of 1990 (ADA), the Fair Labor Standards Actof 1938 (FLSA), the Family and Medical Leave Act of 1993 (FMLA), the WorkerAdjustment and Retraining Notification Act (WARN), the Employee RetirementIncome Security Act of 1974 (ERISA), the National Labor Relations Act (NLRA),and all similar federal, state and local laws.

 

(d)                                 Youagree not to seek any personal recovery (of money damages, injunctive relief orotherwise) for the claims you are releasing in this agreement, either throughany complaint to any governmental agency or otherwise.  You agree not to start any lawsuit orarbitration asserting any of the claims you are releasing in thisagreement.  You represent and warrantthat you have not initiated any complaint, charge, lawsuit or arbitrationinvolving any of the claims you are releasing in this agreement.  You agree not to apply for future employmentwith Bancorp and that Bancorp has no obligation to consider you for futureemployment.

 

(e)                                  Yourepresent and warrant that you have all necessary authority to enter into thisagreement (including, if you are married, on behalf of your marital community)and that you have not transferred any interest in any claims to your spouse orto any third party.

 

(f)                                    Thisagreement does not affect your rights, if any, to receive pension planbenefits, medical plan benefits, unemployment compensation benefits or workers’compensation benefits.  This agreementalso does not affect your rights, if any, under agreements, bylaw provisions,insurance or otherwise, to be indemnified,

 

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defended or held harmless in connection with claimsthat may be asserted against you by third parties.

 

(g)                                 Youunderstand that you are releasing potentially unknown claims, and that you havelimited knowledge with respect to some of the claims being released.  You acknowledge that there is a risk that,after signing this agreement, you may learn information that might haveaffected your decision to enter into this agreement.  You assume this risk and all other risks ofany mistake in entering into this agreement. You agree that this release is fairly and knowingly made.

 

(h)                                 Youare giving up all rights and claims of any kind, known or unknown, except forthe rights specifically given to you in this agreement.

 

**8.****                                      NO ADMISSION OFLIABILITY.**  Neither this agreementnor the payments made under this agreement are an admission of liability orwrongdoing by Bancorp.

 

**9.****                                      BANCORPMATERIALS.** You represent and warrant that you have, or no later than theSeparation Date will have, returned all keys, credit cards, documents and othermaterials that belong to us.

 

**10.****                               NONDISCLOSURE AGREEMENT.**  You will comply with the covenant regardingconfidential information in Section 10 of the Employment Agreement.

 

**11.****                               NO DISPARAGEMENT.**You may not disparage Bancorp or Bancorp’s business or products, and may notencourage any third parties to sue Bancorp.

 

**12.****                               COOPERATION REGARDINGOTHER CLAIMS.**  If any claim isasserted by or against Bancorp as to which you have relevant knowledge, youwill reasonably cooperate with us in the prosecution or defense of that claim,including by providing truthful information and testimony as reasonablyrequested by us.

 

**13.****                               NO INTERFERENCE.** Youwill not, apart from good faith competition, interfere with Bancorp’srelationships with customers, employees, vendors, or others.

 

**14.****                               INDEPENDENT LEGALCOUNSEL.**  You are advised andencouraged to consult with an attorney before signing this agreement.  You acknowledge that you have had an adequateopportunity to do so.

 

**15.****                               CONSIDERATION PERIOD.**  You have 21 days from the date this agreementis given to you to consider this agreement before signing it. You may use asmuch or as little of this 21-day period as you wish before signing. If you donot sign and return this agreement within this 21-day period, you will not beeligible to receive the benefits described in this agreement.

 

**16.****                               REVOCATION PERIOD ANDEFFECTIVE DATE.**  You have 7 calendardays after signing this agreement to revoke it. To revoke this agreement aftersigning it, you must deliver a written notice of revocation to Bancorp’sPresident before the 7-day period expires. This agreement shall not becomeeffective until the 8th calendar day after you sign it.  If you revoke this agreement it will notbecome effective or enforceable and you will not be entitled to the benefitsdescribed in this agreement.

 

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**17.****                               GOVERNING LAW.**  This agreement is governed by the laws of theState of California that apply to contracts executed and to be performedentirely within the State of California.

 

**18.****                               DISPUTE RESOLUTION.**  Except where such matters are deemed governedby ERISA, the parties agree to submit any dispute arising under this agreementto final, binding, private arbitration in accordance with the CommercialArbitration Rules of the American Arbitration Association, and judgment on theaward rendered by the arbitrators may be entered in any court havingjurisdiction in Sacramento, California. This includes not only disputes about the meaning or performance of theagreement, but disputes about its negotiation, drafting, or execution.  Judgment on the award rendered by thearbitrators may be entered in any court having jurisdiction.  There shall be three arbitrators, one to bechosen directly by each party, and the third arbitrator to be selected by thetwo arbitrators so chosen.  If anyarbitration proceeding is brought for the enforcement of this agreement orbecause of an alleged dispute, breach or default in connection with thisagreement, (i) the nonprevailing party shall pay the fees of the arbitratorsand all other costs of the arbitration, including the cost of any record ortranscripts of the arbitrations and administrative fees; and (ii) theprevailing party shall be entitled to recover reasonable attorney’s fees andany other costs and expenses incurred in that action or proceeding, in additionto any other relief to which it or he may be entitled.

 

**19.****                               ATTORNEYS’ FEES.**  If either party institutes a proceeding toenforce its rights under, or to recover damages for breach of, this agreement,the prevailing party shall be awarded all costs and expenses of the proceeding,including, but not limited to, attorneys’ fees, filing and service fees,witness fees, and arbitrator’s fees.  Ifarbitration is commenced, the arbitrator will have full authority and completediscretion to determine the “prevailing party” and the amount of costs andexpenses to be awarded under this paragraph.

 

**20.****                               FINAL AND COMPLETEAGREEMENT.**  This agreement is thefinal and complete expression of all agreements between us on all subjects andsupersedes and replaces all prior discussions, representations, agreements,policies and practices. You acknowledge you are not signing this agreementrelying on anything not set out herein.

 
| ** ** | **WESTERN SIERRA BANCORP** |
|------------|----------------------------|
| ** ** | ** **                 |
| ** ** | ** **                 |
|       | By:                        |   |   |
|       |                       | Gary D. Gall, Chief Executive Officer |

 

 

I, THE UNDERSIGNED, HAVING BEEN ADVISED TO CONSULT WITH AN ATTORNEY,HEREBY AGREE TO BE BOUND BY THIS AGREEMENT AND CONFIRM THAT I HAVE READ ANDUNDERSTOOD EACH PART OF IT.

 

 
|   |              |   |
|--------|-------------------|--------|
|   | Patrick J. Rusnak |
|   |              |   |
|   | Date              |

 

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**AppendixA**

 

Goals/Expectations:

 

The following is a list of goals and expectations for the position ofChief Operating Officer for Western Sierra Bancorp.  It is understood that to truly enhance theorganization, our COO must understand and embrace our current status whileproviding guidance and support to enhance the organization, both culturally andfinancially.

 

Defining Success:

 

1.     Getto know the financials forward and backwards as well as the mission andobjective of the WSBA so you can represent the Bank to Investors.

 

2.     Becomethe resident expert on the financials so that you can represent the Bank to theboard and related committees on all aspects of Bank performance.

 

3.     Gainan understanding of the charters, history and relationships of the holdingcompany with its banks and develop a working relationship with those CEO’s.

 

4.     Usingthe proper metrics, assist in managing the banks implementation of board statedgoals in a way that assures continued profitability and growth.

 

5.     Actas a confidant, buffer and intermediary between the office of CEO andmanagement.

 

6.     Gainthe respect and confidence of the Board and Management in a way that allows youto influence decisions made regarding goals, key hires, terminations, and Bankpolicies.

 

7.     Overseethe search, evaluation and implementation of all Merger and Acquisitionactivity.

 

8.     Create5an atmosphere of confidence and respect with management and the board in orderto step in as interim CEO, if needed

 

9.     Strategicallyorganize and manage the holding company as a true back office for thesubsidiaries including enhancing the management information systems in thespirit of “best practices”.

 

10.   Insurethat WSBA is taking care of its employees in a way that balances profitabilitywith proper management principles.

 

5-B

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