Exhibit 10.1


 


WESTERN
SIERRA BANCORP


CODE SECTION 409A
COMPLIANT


DEFERRED
COMPENSATION AGREEMENT


 


This Deferred Compensation Agreement (Agreement) is made and entered
into this 22nd day of July 2005 by and between Western Sierra Bancorp
(Bank) and Patrick J. Rusnak (Executive).


 


RECITALS


 


WHEREAS, as encouragement for the Executive to remain in the employ of
the Bank, the Bank is providing the Executive a deferred compensation
arrangement.


 


WHEREAS, the Agreement is designed to comply, in goodfaith, with Internal
Revenue Code section 409A and the guidance issued thereunder. The parties
further agree to amend the Agreement, to the extent necessary, to comply with
any guidance issued subsequent to the date of the Agreement and any provisions
of the Agreement which do not comply with Code section 409A are deemed
void.


 


NOW, THEREFORE, BE IT RESOLVED, in consideration of the
mutual promises and covenants contained herein, the Executive and the Bank
agree as follows:


 


ARTICLE 1.     DEFINITIONS


 


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


 


1.01.                        Change Of Control.


 


“Change of Control” means the earliest occurrence of
one of the following events:


 


A.                                   A Change In Ownership Of The Bank.


 


A change in ownership of the Bank occurs on the date
that any person (or group of persons) acquires ownership of stock of the Bank
that, together with stock 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 the Bank.


 


B.                                     A Change In Effective Control Of The Bank.


 


A change in effective control of the Bank occurs on
the date that:


 


1.                                       Any person (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 person or persons) ownership of stock of the Bank
possessing thirty-five percent (35%) or more of the total voting power of the
stock of the Bank; or


 


2.                                       A majority of members of the Bank’s Board of Directors
(Board) is replaced during any twelve (12) month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board prior to the date of the appointment or election.


 


C.                                     A Change In Ownership Of A Substantial
Portion Of The Bank’s Assets.


 


A change in the ownership of a substantial portion of
the Bank’s assets occurs on the date that any person (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 person or persons) assets from the
Bank that have a total gross fair market value equal to, or more than, forty
percent (40%) of the total gross fair market value of all of the assets of the
Bank immediately prior to such acquisition or acquisitions.


 


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1.02.                        Code.


 


“Code” means the Internal Revenue Code of 1986, as
amended.  References to a Code section shall
be deemed to be to that section as it now exists and to any successor
provision.


 


1.03.                        Compensation.


 


“Compensation” means the wages, salaries and cash
bonuses payable to the Executive.


 


1.04.                        409A Account.


 


“409A Account” means the book reserve account
maintained by the Bank with respect to the Executive’s participation hereunder
that is (i) subject to Code section 409A, and (ii) governed by
the terms of this Agreement.


 


1.05.                        Distribution Date.


 


“Distribution Date” means the earlier of the Fixed
Distribution Date or the date of termination of Executive’s employment with the
Bank.


 


1.06.                        Deferral Election Agreement.


 


“Deferral Election Agreement” means the Form attached
as Exhibit I and incorporated by reference herein.


 


1.07.                        Fixed Distribution Date.


 


“Fixed Distribution Date” means the distribution date,
specified on the Deferral Election Agreement, if any.


 


ARTICLE 2.
     DEFERRAL ELECTION


 


2.01.                        Initial Election.


 


The Executive shall make an initial
deferral election under this Agreement by filing a signed Deferral Election
Agreement with the Bank stating (i) the amount of Compensation to be
deferred, and (ii) the Fixed Distribution Date in accordance with Article 1.07
herein.  The Deferral Election Agreement
shall be effective to defer Compensation in the calendar year following receipt
by the Bank.  For the initial year of
eligibility, however, the Bank shall accept a Deferral Election Agreement made
within thirty (30) days of the date the Executive first became eligible to
defer under the Agreement.  In addition,
the Bank may accept a Deferral Election Agreement to defer compensation from
the Executive’s annual performance incentive up to six (6) months prior to
the end of the performance period.  For
example, if the annual performance incentive is measured from January 1,
2006 through December 31, 2006, the Bank may accept a deferral election
regarding the performance incentive no later than June 30, 2006.


 


2.02.                        Election Changes.


 


The Executive may modify the amount of Compensation to
be deferred by filing a new Deferral Election Agreement with the Bank.  The new Deferral Election Agreement shall not
be effective until the next calendar year following the year in which the new
Deferral Election Agreement is received by the Bank.  In addition, the Bank may accept a new
Deferral Election Agreement to defer compensation from the Executive’s annual
performance incentive up to six (6) months prior to the end of the
performance period.  The Executive may
not change the form of benefit payment provided in this Agreement.


 


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2.03.                        Election To Change The Fixed Distribution Date.


 


The Executive may make a subsequent
election to further defer his Fixed Distribution Date, if (i) the election
to further defer payment does not take effect for at least twelve (12) months, (ii) the
Fixed Distribution Date is rescheduled at least five (5) years from the
date the distribution would have otherwise been made, and (iii) the
election to change the Fixed Distribution Date is made no less than twelve (12)
months prior to the scheduled Fixed Distribution Date.  Subsequent elections that accelerate the
Fixed Distribution Date or change the form of distribution are prohibited.  Any election to change the Fixed Distribution
Date that violates Code section 409A is deemed void and the prior payment
election shall remain in force.


 


ARTICLE 3.
     409A ACCOUNT


 


3.01.                        Establishing And Crediting.


 


The Bank shall credit to the 409A Account the
following amounts:


 


A.                                   Deferrals.


 


The Compensation deferred by the Executive, as of the
time such amounts would have otherwise been paid to the Executive.


 


B.                                     Interest.


 


Interest on the account balance of the 409A Account
shall accrue at an annual rate, compounded quarterly, that is equal to the Wall
Street Journal Prime Rate as of the first business day of the calendar quarter for
each quarter the account balance of the 409A Account has a credit balance.  Interest shall be calculated quarterly and
posted to the 409A Account on a quarterly basis at the end of each quarter.  Interest for any partial period should be
calculated based on the actual number of days in the quarter.  Interest shall accrue on the account balance
of the 409A Account until such time the 409A Account has been completely
distributed.


 


3.02.                        Statement of Accounts.


 


The Bank shall provide to the Executive, within one
hundred twenty (120) days after each anniversary of this Agreement, a statement
setting forth the 409A Account balance.


 


3.03.                        Accounting Device Only.


 


The 409A Account is solely a device for measuring
amounts to be paid under this Agreement. 
The 409A Account is not a trust fund of any kind.


 


3.04.                        Unfunded Arrangement.


 


The Executive is a general unsecured creditor of the
Bank for the payment of benefits under this Agreement.  The benefits represent the Bank’s mere
promise to pay 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.


 


ARTICLE 4.
     LIFETIME BENEFITS


 


4.01                           Distribution Date.


 


The Bank
shall pay the Executive a benefit equal to the 409A Account balance on the
Distribution Date, and interest accruing thereon after the Distribution Date,
in sixty (60) substantially equal monthly installments.  Payment of benefits shall commence on the
first day of the month following the Fixed Distribution Date.  If the Executive terminates service with the
Bank prior to that time or fails to specify the Fixed Distribution Date in
accordance with Article 1.07, payment shall commence on the first day of
the seventh month following the Distribution Date due to the Executive’s
termination of employment.


 


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4.02.                        Change of Control Benefit.


 


The Bank
shall pay the Executive a benefit equal to the 409A Account balance on the date
of a Change of Control, and interest accruing thereon, after the Distribution
Date in sixty (60) substantially equal monthly installments.  Payment of benefits shall commence on the
first day of the month following the date of a Change of Control.


 


4.03                           Hardship Distributions.


 


If the Executive suffers a Financial
Hardship, as hereinafter defined, the Executive may apply to the Bank for the
payment of all or any part of his 409A Account. 
The Bank shall consider the circumstances of the Financial Hardship and
the best interests of the Executive and his family, and shall have the right,
in its sole discretion, to allow a distribution of part or all
of the amount requested, or to refuse to allow any distribution.  Upon a finding of Financial Hardship, the Bank
shall make the appropriate payment to the Executive in respect of the Executive’s
409A Account.  In no event shall the
aggregate amount of the distribution exceed the amount determined by the Bank
to be necessary to alleviate the Executive’s Financial Hardship or the full
value of the Executive’s Account, if less (a Financial Hardship may be
considered to include any taxes resulting from the hardship distribution), and
which is not reasonably available from other resources of the Executive.  For purposes of this Article, the value of
the Executive’s 409A Account shall be determined as of the date of the Hardship
Distribution.  “Financial Hardship” means
(i) a severe Financial Hardship to the Executive resulting from an illness
or accident of the Executive or a dependent of the Executive (as defined in
Code section 152(a)), (ii) loss of the Executive’s property due to
casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Executive,
as determined to exist by the Bank.


 


ARTICLE 5.      DEATH
BENEFITS


 


5.01.                        Death Prior To The Fixed Distribution Date.


 


If the Executive dies prior to the Fixed Distribution
Date, if any, the Bank shall pay the Executive’s beneficiary a benefit equal
to the 409A Account balance on the Distribution Date, and interest accruing
thereon after the Distribution Date, in sixty (60) substantially equal monthly
installments.  Payment of benefits shall
commence on the first day of the month following the Distribution Date.


 


5.02.                        Death During Benefit Period.


 


If the Executive dies after benefit payments have
commenced under this Agreement but before receiving all such payments, the Bank
shall pay the remaining benefits to the Executive’s beneficiary at the same time
and in the same amounts it would have paid to the Executive had the Executive
survived.


 


ARTICLE 6.      BENEFICIARIES


 


6.01.                        Beneficiary Designations.


 


The Executive shall designate a beneficiary by filing
the Designation of Beneficiary form incorporated herein as Exhibit II with
the Bank.  The Executive may revoke or
modify the designation at any time by filing a new designation.  However, a new designation will only be
effective if signed by the Executive and accepted by the Bank during the
Executive’s lifetime.  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.  If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive’s estate.


 


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6.02.                        Facility of Payment.


 


If a benefit is payable to a minor, to a person
declared incompetent, or a to a person incapable of handling the disposition of
his or her property, the Bank may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person.  The Bank may
require proof of incompetency, minority or guardianship as it may deem
appropriate prior to distribution of the benefit.  Such distribution shall completely discharge
the Bank from all liability with respect to such benefit.


 


ARTICLE 7.      CLAIMS AND
REVIEW PROCEDURES


 


7.01.                        Claims Procedure.


 


The Bank shall notify the Executive’s beneficiary in
writing, within thirty (30) days of his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Agreement.  If the Bank determines that
the beneficiary is not eligible for benefits or full benefits, the notice shall
set forth (i) the specific reasons for such denial, (ii) a specific
reference to the provisions of the Agreement on which the denial is based, (iii) a
description of any additional information or material necessary for the
claimant to perfect his or her claim, and a description of why it is needed,
and (iv) an explanation of the Agreement’s claims review procedure and
other appropriate information as to the steps to be taken if the beneficiary
wishes to have the claim reviewed.  If
the Bank determines that there are special circumstances requiring additional
time to make a decision, the Bank shall notify the beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional thirty (30) day period.


 


7.02.                        Review Procedure.


 


If the beneficiary is determined by the Bank not to be
eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Bank by filing a petition for
review with the Bank within thirty (30) days after receipt of the notice issued
by the Bank.  Said petition shall state
the specific reasons which the beneficiary believes entitle him or her to
benefits or to greater or different benefits. 
Within sixty (60) days after receipt by the Bank of the petition, the Bank
shall afford the beneficiary (and counsel, if any) an opportunity to present
his or her position to the Bank orally or in writing, and the beneficiary (or
counsel) shall have the right to review the pertinent documents.  The Bank shall notify the beneficiary of its
decision in writing no later than thirty (30) days after receipt of the
presentation of the position of the beneficiary or sixty (60) days after
receipt by the Bank of the petition of the beneficiary, stating specifically
the basis of its decision, written in a manner calculated to be understood by
the beneficiary and the specific provisions of the Agreement on which the
decision is based.


 


7.03.                        Benefits Required To Be Paid.


 


Section 7.01 and 7.02 of this Article 7
shall not be construed to relieve the Bank of its obligation to pay Executive
or Executive’s beneficiary the benefits provided by this Agreement.


 


ARTICLE 8.      AMENDMENTS
AND TERMINATION


 


This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Executive.  In
no event shall this Agreement be terminated without payment to the Executive of
the 409A Account balance attributable to Executive’s deferrals and interest
credited on such amounts.


 


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ARTICLE 9.      MISCELLANEOUS


 


9.01.                        Binding Effect.


 


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


 


9.02.                        No Guaranty of Employment.


 


The Agreement is not an employment policy or
contract.  Neither this Agreement, nor
any modifications hereof, nor the payment of any benefits hereunder shall be
construed as an employment contract, nor as giving to the Executive any right
to be employed by the Bank, nor as modifying the terms of any employment
contract between the Executive and the Bank.


 


9.03.                        Amendment.


 


No waiver or modification of any part of this
Agreement shall be valid unless the amendment is in writing signed by the Bank
and the Executive.  Notwithstanding any
other provision of this Agreement to the contrary, the Bank may amend this
Agreement at any time, without the consent of the Executive, effective as of
any date, if the Bank determines in its sole and absolute discretion that the
amendment is necessary or appropriate in order to either (i) maintain the
status of the Agreement as set forth in the Income Tax Status paragraph or
ERISA Status paragraph above or (ii) if the Agreement would otherwise
result in significant financial penalties or be otherwise significantly
detrimental to the Bank (other than the financial impact of paying the benefits
under the Agreement), regardless of the effect of any such amendment on the
Executive or the benefits with respect to the Executive.


 


9.04.                        Termination.


 


If not terminated at an earlier date, this Agreement
shall terminate as of the earliest date on which the Bank’s obligations to the
Executive and his Beneficiary(ies) have been satisfied.  Upon termination of the Agreement, no
distributions of benefits shall be made that are not otherwise permitted by the
Agreement, unless such distributions are permitted under Code section 409A
or the lawful guidance published by the Treasury Department or the IRS pursuant
to Code section 409A.


 


9.05.                        Nontransferability.


 


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


 


9.06.                        Tax Withholding.


 


The Bank shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.


 


9.07.                        Applicable Law.


 


This Agreement shall be construed, administered and
governed in all respects by the laws of the United States of America to the
extent applicable, and otherwise by the laws of the state of California.


 


9.08.                        Headings.


 


The paragraph headings appearing in this Agreement
shall not be deemed to govern, limit, modify, or in any way affect the scope,
meaning or intent of this Agreement.


 


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9.09.                        Entire Agreement.


 


This Agreement constitutes the entire agreement
between the Bank and the Executive as it relates to the benefits
under this Agreement.  This Agreement
supersedes all prior and contemporaneous agreements, understandings and
representations between the parties, whether written or oral, with respect to
the subject matter hereof.


 


9.10.                        Severability.


 


If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective without being impaired
or invalidated in any way.


 


9.11.                        Attorneys Fees.


 


In the event that either party to this Agreement
brings an action or suit against the other party by reason of any breach of
this Agreement, the prevailing party in whose favor final judgment is entered
shall be entitled to have and recover from the losing party all reasonable
costs and expenses incurred or sustained by such prevailing party in connection
with such suit or action, including, without limitation, legal fees and court
costs.


 


9.12.                        ERISA Status.


 


This Agreement is intended to qualify as an unfunded
plan of deferred compensation that is maintained by an employer primarily for
the purpose of providing deferred compensation for a “select group of
management or highly compensated employees” as those terms are defined under
the provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA).  Only those employees
who are responsible for the management, growth and protection of the business
of the Bank are eligible to participate in the Plan.  The Executive is fully advised of the Bank’s
financial status and has had substantial input in the negotiation and design of
this benefit arrangement.  It is
understood that the amounts payable to the Executive under this Agreement are
strictly from the general assets of the Bank and that the Executive has no
greater rights to the general assets of the Bank than any other unsecured
general creditor.  For purposes of ERISA,
the Bank shall be the named fiduciary and administrator under this Agreement.


 


IN WITNESS WHEREOF, the Executive and a duly authorized officer of the
Bank have signed this Agreement on this 22nd day of July 2005.


 


 


	
   

  	
  WESTERN SIERRA BANCORP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Gary D. Gall

  	
   

  
	
   

  	
  Gary D. Gall

  	
   

  
	
   

  	
  President & Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Patrick J. Rusnak

  	
   

  
	
   

  	
  Patrick J. Rusnak

  	
   

  



 


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