Document:

Western
Reserve Bancorp, Inc. and

    Western
Reserve Bank

    Senior
Executive Incentive Compensation Plan

    

    The Board
of Directors of Western Reserve Bancorp, Inc. and Western Reserve Bank desires
to provide an Incentive Compensation Plan for the Senior Executives of the Bank
that will achieve the following objectives:

    

    
      	
              ·  

            	
              Allow
      the Company to attract and retain talented senior
    executives;

            

    

    
      	
              ·  

            	
              Align
      the interests of the Company’s senior executives with those of the
      Company’s shareholders;

            

    

    
      	
              ·  

            	
              Recognize
      that there are several components to the Company’s financial success,
      including profitability, growth and asset quality;
  and

            

    

    
      	
              ·  

            	
              Provide
      a quantitative way to measure each of the components of the Company’s
      financial success and to allocate rewards equitably among each of the
      Company’s senior executives.

            

    

    

    To this
end, the Board of Directors has adopted the Revised and Amended Senior Executive
Incentive Compensation Plan (“the Plan”), which is attached as Exhibit
1.

    

    The Plan
seeks to provide a range of potential rewards based on the Company’s results in
each of eight Performance Factors, discussed below.  The Plan involves
seven Performance Levels, ranging from acceptable (Level 1) to spectacular
(Level 7).

    

    This plan
covers the following senior executives:

    

    
      	
              ·  

            	
              President
      and Chief Executive Officer; and

            

    

    
      	
              ·  

            	
              Executive
      Vice Presidents.

            

    

    

    However,
the most highly compensated employee of the Company is prohibited from
participating in this or any other bonus or incentive plan (as provided in the
rules of the TARP Standards for Compensation and Corporate
Governance).

    

    The Plan
provides for varying Bonus Percentages in relation to Base
Compensation.  Base Compensation is defined as the senior executive’s
actual earnings for the year, exclusive of any bonuses or fringe
benefits.

    

    The Board
believes that a properly-designed incentive plan does not over-emphasize one
type of behavior to the detriment of another.  For instance, if Loan
Growth were the only Performance Factor, Asset Quality could potentially
suffer.  Or, if Profitability were the only measure, Growth might be
hampered.  Therefore, the Plan provides for seven Performance Factors
in three broad categories:

    
      
         

         

        Page 1 of
6

      

       

      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009

    

    
      
         

      

      
        
           

        

        
          

        

      

      
         

      

    

    Western
Reserve Bancorp, Inc. and

    Western
Reserve Bank

    Senior
Executive Incentive Compensation Plan

    
 

    Overall
Profitability:

    --Return
on Average Consolidated Equity

    --Net
Interest Margin

    --Earnings
Per Share Growth

    Growth
Rates:

    --Loan
Growth

    --Local
Deposit Growth

    Asset
Quality:

    --Nonperforming
Assets as a Percentage of Total Assets

    --Net
Charge-offs as a Percentage of Average Net Loans

    

    There is
also a provision for a Discretionary component of the Incentive Compensation
payment.  This component is based on the Company’s overall Performance
Level, as determined by the Board of Directors.

    

    Likewise,
the Plan is designed to assign an appropriate Weighting to each of the
Performance Factors.  For example, each senior executive’s potential
bonus is based 45% on Overall Profitability, 30% on Growth, 16% on Asset
Quality, and 9% on the Board’s Discretion.

    

    The Plan
provides for a Minimum Threshold to be met before any payments may be made under
the Plan.  This Threshold is based on the Board-approved budget for
the Plan year.  The Threshold is computed as follows:

    

    
      	
              ·  

            	
              The
      Company must have Net Income after accrual for any Profit Sharing, Special
      Awards and Senior Executive Incentive Compensation ) of at least 85% of
      budget in order for any payments to be made under the
      Plan.  (Obviously, at this level of performance, the
      Profitability targets would not have been
met.)

            

    

    
      	
              ·  

            	
              If
      the Company earns between 85% and 99% of budgeted net income, any payments
      otherwise earned under the Plan will be pro-rated to that
      percentage.

            

    

    
      	
              ·  

            	
              If
      the Company earns at least 100% of budgeted net income, the payments will
      be computed as per the Plan.

            

    

    

    No
payment of Incentive Compensation for the Plan year will be made until after the
Company’s year-end results are finalized and released.

     

    
       

      Page
2 of 6

    
      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009

    

    
      
         

      

      
        
           

        

        
          

        

      

      
         

      

    

     

    Western
Reserve Bancorp, Inc. and

    Western
Reserve Bank

    Senior
Executive Incentive Compensation Plan

    

    

    The
senior executive must be in the Company’s employ at the time any payment is made
under the Plan to receive the payment.

    

    If any
payment made under this Plan is later found to have been based on materially
inaccurate financial statements or materially inaccurate performance metric
criteria (regardless of whether there was any ill intent or fraudulent behavior
involved), any person(s) receiving such payment(s) must promptly repay them to
the Company (the so-called “Clawback” provision).

    

    The Board
of Directors reserves the right to modify or terminate this Plan at any
time.

     

     

     

     

    
      Page 3 of
6

       

      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Western
Reserve Bancorp, Inc. and Western Reserve Bank

    Senior
Executive Incentive Compensation Plan

    

    Exhibit
1

    

    

    A.
Potential Bonuses as Percent of Base Compensation

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	 	
                                  Groups

                                
	
                                  Performance

                                  Level

                                	 	
                                  CEO

                                	 	
                                  Executive

                                  VPs

                                
	
                                  1

                                	 	
                                  10%

                                	 	
                                  10%

                                
	
                                  2

                                	 	
                                  20%

                                	 	
                                  15%

                                
	
                                  3

                                	 	
                                  30%

                                	 	
                                  20%

                                
	
                                  4

                                	 	
                                  40%

                                	 	
                                  25%

                                
	
                                  5

                                	 	
                                  50%

                                	 	
                                  30%

                                
	
                                  6

                                	 	
                                  60%

                                	 	
                                  35%

                                
	
                                  7

                                	 	
                                  70%

                                	 	
                                  40%

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

    

    

    
      Page 4 of
6

      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009

       

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Western
Reserve Bancorp, Inc. and Western Reserve Bank

    Senior
Executive Incentive Compensation Plan

    

    Exhibit
1

    

    

    B.
Performance Factors and Weightings

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  	 
      	
                                                                          CEO

                                                                        	 	
                                                                          Executive VPs

                                                                        
	
                                                                          Overall
      Profitability

                                                                        	
                                                                          45%

                                                                        	 	
                                                                          45%

                                                                        
	
                                                                          Return
      on Avg. Equity

                                                                        	
                                                                          15%

                                                                        	 	
                                                                          15%

                                                                        
	
                                                                          Net
      Interest Margin

                                                                        	
                                                                          15%

                                                                        	 	
                                                                          15%

                                                                        
	
                                                                          Core
      EPS Growth

                                                                        	
                                                                          15%

                                                                        	 	
                                                                          15%

                                                                        
	 
      	 
      	 	 
      
	
                                                                          Growth
      Rates

                                                                        	
                                                                          30%

                                                                        	 	
                                                                          30%

                                                                        
	
                                                                          Loan
      Growth

                                                                        	
                                                                          15%

                                                                        	 	
                                                                          15%

                                                                        
	
                                                                          Local
      Deposit Growth

                                                                        	
                                                                          15%

                                                                        	 	
                                                                          15%

                                                                        
	 
      	 
      	 	 
      
	
                                                                          Asset
      Quality

                                                                        	
                                                                          16%

                                                                        	 	
                                                                          16%

                                                                        
	
                                                                          Non-Performing
      Assets/Total Assets

                                                                        	
                                                                          8%

                                                                        	 	
                                                                          8%

                                                                        
	
                                                                          Net
      Charge-Offs/Avg Loans

                                                                        	
                                                                          8%

                                                                        	 	
                                                                          8%

                                                                        
	 
      	 
      	 	 
      
	
                                                                          Discretionary

                                                                        	
                                                                          9%

                                                                        	 	
                                                                          9%

                                                                        
	 
      	 
      	 	 
      
	
                                                                          Total
      Weighting

                                                                        	
                                                                          100%

                                                                        	 	
                                                                          100%

                                                                        

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

    

      Page 5
of 6

      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Western
Reserve Bancorp, Inc. and Western Reserve Bank

    Senior
Executive Incentive Compensation Plan

    

    Exhibit
1

    

    

    C.
Performance Targets

    

    
      
        
          
            	
                    Performance

                    Level

                  	
                    Return on

                    Avg. Equity

                  	
                    Net Interest

                    Margin

                  	
                    EPS

                    Growth

                  	
                    Loan

                    Growth

                  	
                    Local Deposit

                    Growth

                  	
                    Non-

                    Performing

                    Assets/

                    Total Assets

                  	
                    Net

                    Charge-

                    Offs/

                    Avg. Loans

                  
	
                    1

                  	
                    8.00%

                  	
                    3.75%

                  	
                    6.0%

                  	
                    8.0%

                  	
                    10.0%

                  	
                    0.75%

                  	
                    0.15%

                  
	
                    2

                  	
                    10.00%

                  	
                    3.85%

                  	
                    9.0%

                  	
                    10.0%

                  	
                    12.0%

                  	
                    0.65%

                  	
                    0.13%

                  
	
                    3

                  	
                    12.00%

                  	
                    3.95%

                  	
                    12.0%

                  	
                    12.0%

                  	
                    14.0%

                  	
                    0.55%

                  	
                    0.10%

                  
	
                    4

                  	
                    14.00%

                  	
                    4.05%

                  	
                    15.0%

                  	
                    14.00%

                  	
                    16.0%

                  	
                    0.45%

                  	
                    0.07%

                  
	
                    5

                  	
                    16.00%

                  	
                    4.15%

                  	
                    18.0%

                  	
                    16.00%

                  	
                    18.0%

                  	
                    0.35%

                  	
                    0.04%

                  
	
                    6

                  	
                    18.00%

                  	
                    4.25%

                  	
                    21.0%

                  	
                    18.00%

                  	
                    20.0%

                  	
                    0.25%

                  	
                    0.02%

                  
	
                    7

                  	
                    20.00%

                  	
                    4.35%

                  	
                    24.0%

                  	
                    20.00%

                  	
                    22.0%

                  	
                    0.15%

                  	
                    0.00%

                  

          

        

      

    

    

    
 

    

    
      Page 6
of 6

      Adopted:  January
19, 2006

      Revised:   January
18, 2007

      Revised:   May
1, 2008

      Revised:   October
15, 2009Amendment
to Employment Agreement

    

    

    As you
know, Western Reserve Bancorp elected to participate in the Capital Purchase
Program (CPP) of the Troubled Asset Relief Program (TARP).  As long as
we are a participant, we must comply with certain TARP compensation
provisions.

    

    One of
these provisions involves your Change in Control Agreement.  It is
necessary that you waive your rights to any “golden parachute” payment (or any
similar payment that could be considered a “golden parachute” under U.S.
Treasury Rules) during the time that we are a participant in TARP.

    

    Also, you
must agree to a “clawback” of any bonus or incentive compensation payment that
is later found to have been made based on materially inaccurate financial
statements or performance criteria.

     

    
 

    
      
        
          
            
              
                	 	WESTERN RESERVE BANCORP,
      INC.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	 
      	 
	 	 	 	 

              

            

          

        

      

     

    Acknowledged
and accepted:

    

    

    

    __________________________________________________

    Name                                                                        Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]