Document:

ex10-4.htm

Exhibit 10.4

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

PLUMAS bank

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

This supplemental executive retirement AGREEMENT (“Agreement”) is made and entered into this 1st day of April, 2016, between Plumas Bank (“Bank”), a bank located in Quincy, CA, and BJ North (“Executive”). 

 

Article 1

Benefits Tables

 

The following tables describe the benefits available to the Executive, or the Executive’s Beneficiary, upon the occurrence of certain events. Capitalized terms have the meanings given them in Article 3. Except for death, each benefit described is in lieu of any other benefit herein.

 

Table A: Retirement Benefit

Normal Retirement Date (“NRD”) = April 1, 2026

 

	
Distribution Event
	
Amount of Benefit
	
Form of Benefit
	
Timing of Benefit Distribution

	
Executive’s Separation from Service following the Normal Retirement Date.
	
Annual benefit equal to $48,000 per year (“Annual Benefit”).
	
Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit.
	
Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.

 

Table B: Benefit Available Prior to Retirement

 

	
Distribution Event
	
Amount of Benefit
	
Form of Benefit
	
Timing of Benefit Distribution

	
Separation from Service prior to the Normal Retirement Date for reasons other than Separation from Service within twenty-four (24) months following a Change in Control or Separation from Service for Cause.
	
Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s Separation from Service. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed.
	
Accrued Liability Balance shall be distributed in equal monthly installments.
	
Payments shall commence on the first day of the month immediately following the Executive’s attainment of their Normal Retirement Date and shall continue for ten (10) years.

	
Change in Control followed within twenty-four (24) months by Executive’s Separation from Service.
	
Annual Benefit as provided in Table A, hereinabove.
	
Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit.
	
Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.

 

 

 

 

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Table C: Death Benefit

 

	
Distribution Event
	
Amount of Benefit
	
Form of Benefit
	
Timing of Benefit Distribution

	
Executive’s death while actively employed with the Bank.
	
Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s death. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed.
	
Accrued Liability Balance shall be distributed in equal monthly installments. 
	
Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.

	
Death prior to commencement of payments under Table A or Table B.
	
The same benefit to which the Executive was entitled to prior to the Executive’s death. 
	
Benefit shall be distributed in equally monthly installments.
	
Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.

	
Death during installment payout of benefit under Tables A or B.
	
Remaining installment payments, if any, under Table A or B.
	
In the same form of benefit distribution had the Executive lived.
	
Payment(s) to the Beneficiary (ies) continue on same schedule as if Executive had lived.

 

Article 2

Purpose

 

The purpose of this Agreement is to further the growth and development of the Bank by providing Executive with supplemental retirement income, and thereby encourage Executive’s productive efforts on behalf of the Bank and the Bank’s depositors, and to align the interests of the Executive and those depositors. The Bank promises to make certain payments to the Executive, or the Executive’s Beneficiary, at retirement, death, or upon some other qualifying event pursuant to the terms of this Agreement.

 

Article 3

Definitions and Construction

 

It is intended that this Agreement comply and be construed in accordance with Section 409A of the Internal Revenue Code (the “Code”). It is also intended that the Agreement be “unfunded” and maintained for a select group of management or highly compensated employees of the Bank, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and not be construed to provide income to the Executive or Beneficiary under the Code prior to actual receipt of benefits.

 

Where the following words and phrases appear in the Agreement, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary:

 

	
3.1
	
“Accrued Liability Balance” shall mean the amount accrued by the Bank to fund the future benefit expense associated with this Agreement. The Bank shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance, including APB 12 and FAS 106. Accordingly, the Bank shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which may be adjusted from time to time. 

 

 

 

1

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
3.2
	
“Beneficiary” shall mean the person(s) designated by the Executive, including the estate of the Executive, entitled to a benefit under this Agreement.

 

	
3.3
	
“Board” shall mean the Board of Directors of the Bank.

 

	
3.4
	
“Change in Control” shall mean a change in ownership or control of the Bank as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable published authority or guidance. 

 

	
3.5
	
“Code” shall mean the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder.

 

	
3.6
	
“Discount Rate” shall mean the rate used by the Bank for determining the Accrued Liability Balance.

 

	
3.7
	
“Effective Date” shall mean April 1, 2016. 

 

	
3.8
	
”Plan Year” shall mean each a twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of the Agreement and end on the following December 31.

 

	
3.9
	
“Separation from Service” shall mean that the Executive has retired or otherwise has a termination of employment with the Bank. For purposes of this Agreement, whether a termination of employment or service has occurred is determined based on whether the facts and circumstances indicate that the Bank and Executive reasonably anticipated that no further services would be performed after a certain date, or that the level of bona fide services the Executive would perform after such date (whether as an Executive or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an Executive or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Executive has been providing services to the Bank less than 36 months). Facts and circumstances to be considered in making this determination include, but are not limited to, whether the Executive continues to be treated as an Executive for other purposes (such as continuation of salary and participation in Executive benefit programs), whether similarly situated service providers have been treated consistently, and whether the Executive is permitted, and realistically available, to perform services for other service recipients in the same line of business. An Executive will be presumed not to have had a Separation from Service where the level of bona fide services performed continues at a level that is fifty percent (50%) or more of the average level of service performed by the Executive during the immediately preceding thirty-six (36) month period. A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence, provided Executive has the right to reemployment under an applicable statute or by contract.

 

 

 

2

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
3.10
	
“Termination for Cause” shall mean a termination of employment for:

 

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

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

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

 

	
3.11
	
”Unforeseeable Emergency” shall mean a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Executive’s dependent, or the Executive’s Beneficiary, loss of the Executive’s property due to casualty, other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. The imminent foreclosure of or eviction from the service provider’s primary residence may constitute an Unforeseeable Emergency. In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication, may constitute an Unforeseeable Emergency. Finally, the need to pay for the funeral expenses of a spouse, a beneficiary, or a dependent may also constitute an Unforeseeable Emergency. At all times this definition shall be construed in accordance with the definition under Section 409A. If the Executive seeks to terminate any current deferral elections or re-start the deferral election, it must be done in accordance with Section 409A.

 

Article 4

Distributions During Lifetime

 

	
4.1
	
Hardship Distribution. The Bank will permit early withdrawals for an Unforeseeable Emergency under certain circumstances arising as a result of events beyond the control of the Executive. The Executive may submit an application for an in-service early withdrawal due to an Unforeseeable Emergency to the Board of Directors. If, in the discretion of the Board, the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency, the Board shall make a distribution to such Executive from the Deferral Account. Such distribution shall be paid in one (1) lump sum within thirty (30) days, after the Board determines that the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency. The amount of such lump sum payment shall be limited to the amount reasonably necessary to meet the Executive’s requirements to the extent such emergency is not relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Executive’s assets, (to the extent the liquidation of such assets will not cause severe financial hardship) or by cessation of deferrals.

 

	
4.2
	
Restriction on Timing of Distributions.  Solely to the extent necessary to avoid penalties under Section 409A, distributions under this Agreement may not commence earlier than six (6) months after a Separation from Service (as described under the “Separation from Service” provision herein) if, pursuant to Internal Revenue Code Section 409A, the Executive hereto is considered a “Specified Employee” of a publicly-traded company. In the event a distribution is delayed pursuant to this Section, the originally scheduled distribution shall be delayed for six (6) months, and shall commence instead on the first day of the seventh month following Separation from Service. If payments are scheduled to be made in installments, the first six (6) months of installment payments shall be delayed, aggregated, and paid instead on the first day of the seventh month, after which all installment payments shall be made on their regular schedule. If payment is scheduled to be made in a lump sum, the lump sum payment shall be delayed for six (6) months and instead be made on the first day of the seventh month.

 

 

 

3

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
4.3
	
Distributions Upon Income Inclusion Under Section 409A of the Code. If any amount is required to be included in income by the Executive prior to receipt due to a failure of this Agreement to meet the requirements of Code Section 409A, the Executive may petition the Plan Administrator for a distribution of that portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder that is required to be included in the Executive’s income. Upon the grant of such petition, which grant shall not be unreasonably withheld, the Bank shall distribute to the Executive immediately available funds in an amount equal to the portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder required to be included in income as a result of the failure of this Agreement to meet the requirements of Code Section 409A, within ninety (90) days of the date when the Executive’s petition is granted. Such a distribution shall effect and reduce the Executive’s benefits to be paid under this Agreement.

 

	
4.4
	
Change in Form or Timing of Distributions. Any change to the form or timing of distributions hereunder shall be considered made only when it becomes irrevocable under the terms of the Agreement. Any change will be considered irrevocable not later than thirty (30) days following acceptance of the change by the Plan Administrator and must comply with the following rules:

 

	 	
(1)
	
The change may not accelerate the time or schedule of any distribution, except as provided in Code Section 1.409A-3(j)(4);

	 	
(2)
	
The subsequent deferral election may not take effect until at least twelve (12) months after the date on which the election is made;

	 	
(3)
	
The payment (except in the case of death, Disability, or Unforeseeable Emergency) upon which the subsequent deferral election is made is deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid; and

	 	
(4)
	
In the case of a payment made at a specified time, the election must be made not less than twelve (12) months before the date the payment is scheduled to be paid.

 

 

 

4

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Article 5

Beneficiary

 

	
5.1
	
Beneficiary. Executive shall have the right to name a Beneficiary of the death benefit, if any, described in Article 1 herein. Executive shall have the right to name such Beneficiary at any time prior to Executive’s death and submit it to the Plan Administrator (or Plan Administrator’s representative) on the form provided. Once received and acknowledged by the Plan Administrator, the form shall be effective. The Executive may change a Beneficiary designation at any time by submitting a new form to the Plan Administrator. Any such change shall follow the same rules as for the original Beneficiary designation and shall automatically supersede the existing Beneficiary form on file with the Plan Administrator. 

 

	
5.2
	
Failure to Designate a Beneficiary. If Executive dies without a valid Beneficiary designation on file with the Plan Administrator, the Executive’s surviving spouse, if any, shall become the designated Beneficiary. If Executive has no surviving spouse, death benefits shall be paid to the personal representative of Executive’s estate. 

 

	
5.3
	
Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

 

Article 6

General Limitations

 

	
6.1
	
Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment is terminated for Cause.

 

	
6.2
	
Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

 

	
6.3
	
Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide within three (3) years after the date of this Agreement. In addition, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on an employment application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.

 

 

 

5

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Article 7

Administration of Agreement

 

	
7.1
	
Plan Administrator Duties. The Bank shall be the Plan Administrator, unless the Bank appoints a committee to be the Plan Administrator. The Bank may appoint a Committee (“Committee”) of one or more individuals in the employment of Bank for the purpose of discharging the administrative responsibilities of the Bank under the Plan. The Bank may remove a Committee member for any reason by giving such member ten (10) days’ written notice and may thereafter fill any vacancy thus created. The Committee shall represent the Bank in all matters concerning the administration of this Plan; provided however, the final authority for all administrative and operational decisions relating to the Plan remains with the Bank.

 

	
7.2
	
Authority of Plan Administrator. The Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of this Plan, and Section 409A of the Code, to interpret, alter, amend or revoke any rules and regulations so adopted, to enter into contracts on behalf of the Bank with respect to this Agreement, to make discretionary decisions under this Plan, to demand satisfactory proof of the occurrence of any event that is a condition precedent to the commencement of any payment or discharge of any obligation under the Plan, and to perform any and all administrative duties under this Plan.

 

	
7.3
	
Recusal. An individual serving as Plan Administrator may be eligible to participate in the Plan, but such person shall not be entitled to participate in discretionary decisions under Article 8 relating to such person’s own interests in the Plan.

 

	
7.4
	
Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

 

	
7.5
	
Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. 

 

	
7.6
	
Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by such contracted party.

 

	
7.7
	
Bank Information. To enable any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement to perform its functions, the Bank shall supply full and timely information to such contracted party on all matters relating to the date and circumstances of any event triggering a benefit hereunder. 

 

 

 

6

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
7.8
	
Annual Statement. Any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement shall provide to the Bank, on the schedule set forth in the Administrative Services Contract, a statement setting forth the benefits to be distributed under this Agreement. 

 

Article 8

Claims and Review Procedures

 

	
8.1
	
Claims Procedure. If Executive, beneficiary or his or her representative is denied all or a portion of an expected Agreement benefit for any reason and the Executive, beneficiary or his or her representative desires to dispute the decision of the Administrator, he or she must file a written notification of his or her claim with the Plan Administrator ("Claimant"). 

 

	 	
8.1.1
	
Initiation – Written Claim. Upon receipt of any written claim for benefits, the Plan Administrator shall be notified and shall give due consideration to the claim presented. If any Claimant claims to be entitled to benefits under the Agreement and the Plan Administrator determines that the claim should be denied in whole or in part, the Plan Administrator shall, in writing, notify such Claimant within ninety (90) days of receipt of the claim that the claim has been denied. The Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up to ninety (90) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial ninety (90) day period, of the circumstances requiring the extension of time and the date by which the Agreement expects to render a decision. If the claim is denied to any extent by the Plan Administrator, the Plan Administrator shall furnish the Claimant with a written notice setting forth:

 

	
 
	
(a)
	
the specific reason or reasons for denial of the claim;

	 	
(b)
	
a specific reference to the Agreement provisions on which the denial is based;

	
 
	
(c)
	
a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and

	
 
	
(d)
	
an explanation of the provisions of this Article.

 

Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.1.1 be considered to constitute an allowance of the Claimant’s claim.

 

	
8.2
	
Review Procedure. A Claimant who has a claim denied wholly or partially under Section 8.1.1 may appeal to the Plan Administrator for reconsideration of that claim. A request for reconsideration under this Section 8.2 must be filed by written notice within sixty (60) days after receipt by the Claimant of the notice of denial under Section 8.1.1.

 
	 	8.2.1	Upon receipt of an appeal the Plan Administrator shall promptly take action to give due consideration to the appeal. Such consideration may include a hearing of the parties involved, if the Plan Administrator feels such a hearing is necessary. In preparing for this appeal the Claimant shall be given the right to review pertinent documents and the right to submit in writing a statement of issues and comments. After consideration of the merits of the appeal the Plan Administrator shall issue a written decision which shall be binding on all parties. The decision shall specifically state its reasons and pertinent Agreement provisions on which it relies. The Plan Administrator’s decision shall be issued within sixty (60) days after the appeal is filed, except that the Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up one-hundred and twenty (120) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial sixty (60) day period, of the circumstances requiring the extension of time and the date by which the Plan Administrator expects to render a decision. Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.2.1 be considered to constitute an allowance of the Claimant’s claim. For issues involving medical judgment, the employee must consult with an independent health care professional who may not be the health care professional who rendered the initial claim. 

      

 

 

7

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
8.3
	
Designation. The Plan Administrator may designate any other person of its choosing to make any determination otherwise required under this Article. Any person so designated shall have the same authority and discretion granted to the Plan Administrator hereunder.

 

Article 9

Amendments and Termination

 

	
9.1
	
Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform to written directives to the Bank from its auditors or bank regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.

 

	
9.2
	
Plan Termination – Generally. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Except as provided in Section 9.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after such termination, benefit distributions will be made at the earliest distribution event permitted under Table A.

 

	
9.3
	
Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 9.2, if this Agreement terminates in the following circumstances:

 

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

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

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

 

the Bank may distribute the appropriate benefit as provided for within this Agreement and determined as of the date of the termination of the Agreement, to the Trustee in a lump sum subject to the above terms.

 

 

 

8

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Article 10

Miscellaneous

 

	
10.1
	
Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.

 

	
10.2
	
No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

 

	
10.3
	
Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

	
10.4
	
Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority (ies). 

 

	
10.5
	
Applicable Law. This Agreement shall be governed by, construed and administered in accordance with the applicable provisions of ERISA, Code Section 409(A), Treasury Regulation § 1.409A and any other applicable federal law, provided, however, that to the extent not preempted by federal law this Agreement shall be governed by the laws of the state where the Bank’s primary corporate headquarters is located, except to the extent preempted by the laws of the United States of America.

	 	 

	
10.6
	
Unfunded Arrangement. The Executive is a general unsecured creditor of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive has no preferred or secured claim.

 

 

 

9

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
10.7
	
Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.

 

	
10.8
	
Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

 

	
10.9
	
Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

 

	
10.10
	
Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

 

	
10.11
	
Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

 

	
10.12
	
Validity. If any provision of this Agreement is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Agreement and this Agreement shall be construed and enforced as if such provision had not been included therein. 

 

	
10.13
	
Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: 

 

	
Plumas Bank

	
35 S. Lindan Ave.

	
Quincy, CA 95971 

Attn: Richard Belstock

	  

 

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

 

 

 

10

 

 

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

	
10.14
	
Right to Setoff. The Bank may, to the extent permitted by applicable law, deduct from and setoff against any amounts payable to an Executive from this Agreement such amounts as may be owed by a Executive to the Bank, although the Executive shall remain liable for any part of the Executive’s payment obligation not satisfied through such deduction and setoff. By participating in the Agreement, the Executive agrees to any deduction or setoff under this Section 10.14, which is allowed by law.

 

	
10.15
	
Limitation on Actions. Executive or Beneficiary who disagrees with a denial of his appealed claim under Article 9 of this Agreement must file any complaint in a federal District Court to dispute such determination (a) within three (3) years of the earlier of the date on which such claim for benefits first accrued or arose under the terms of the Agreement, or (b) within one (1) year after the such claim was denied upon appeal, or deemed denied under Article 9 hereof.

 

	
10.16
	
No Guarantee of Tax Consequences. While the Agreement is intended to provide tax deferral for Executive, the Agreement is not a guarantee that the intended tax deferral will be achieved. Executive is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with this Agreement. Neither the Bank nor any of its directors, officers or employees shall have any obligation to indemnify or otherwise hold Executive harmless from any such taxes. 

 

	
10.17
	
Deduction Limitation on Benefit Payments. If the Bank reasonably anticipates that the Bank’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the entire amount of any distribution from this Agreement is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or Beneficiary in the event of the Executive’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

 

	
10.18
	
Opportunity to Consult with Independent Advisors. The Executive acknowledges that he or she has been afforded the opportunity to consult with independent advisors of his or her choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him or her under the terms of this Agreement and the (i) terms and conditions which may affect the Executive's right to these benefits, and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this Section 10.19. The Executive further acknowledges that he or she has read, understands and consents to all of the terms and conditions of this Agreement, and that he or she enters into this Agreement with a full understanding of its terms and conditions.

 

 

 

11

 

  

PLUMAS BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

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

 

 

	
 EXECUTIVE:
	
 BANK:

	
 
	
 

	
 
	
 Plumas Bank

	
 /s/ BJ North
	
 

	
 
	
 By          /s/ Andrew J. Ryback

	
 [Executive]
	
 

	
 
	
 Title     President and CEO

 

 

12ex10-1.htm

EXHIBIT 10.1

 

 

SEPARATION AGREEMENT

AND RELEASE OF CLAIMS

 

This Separation Agreement and Release of Claims (this “Agreement”) is made and entered into as of March 31, 2016 (the “Separation Date”) by and between Brent D. Bailey (“Bailey”) and Cyanotech Corporation, a Nevada corporation, and its affiliated entities (collectively “Cyanotech” or the “Company”), with Bailey and the Company together referred to herein as the “parties.”

 

In consideration of the covenants and promises contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

1.     Resignation and Separation of Employment.

 

(a)     Bailey hereby resigns, effective on the Separation Date, from any officer, director, employee or other legal position associated with Cyanotech including, but not limited to, his position as President and Chief Executive Officer of Cyanotech and his position as a Director of Cyanotech. Bailey further agrees to promptly deliver any additional resignation letters that may be reasonably requested by the Company to evidence his resignation from any and all of such Cyanotech offices or positions.

 

(b)     Bailey agrees that, as of the Separation Date, he will cease to be an officer, director or employee of, or have any connection with, or claims against Cyanotech, except for payment of final wages and accrued and unused vacation as set forth in Section 9, below, and the payments or benefits due hereunder.

 

2.     Termination of Existing Employment Agreement. The parties acknowledge that they are party to that certain Letter Agreement Re: Contract Terms of Employment, dated as of November 5, 2010 (the “Employment Agreement”), and mutually agree that, pursuant to clause (a)(iii) under the Employment Agreement section entitled “Termination,” without further action required by either of the parties, the Employment Agreement is hereby terminated as of the Separation Date. Bailey hereby waives the thirty day notice requirement under such section of the Employment Agreement (the “Notice Waiver”) and agrees that his employment and the Employment Term (as defined in the Employment Agreement) will terminate effective as of the Separation Date. The parties further agree that Bailey will continue to be bound by those provisions of the Employment Agreement specified in the section entitled “Survival” (collectively, the “Surviving Provisions”). Other than the Surviving Provisions, this Agreement will exclusively govern the relationship between Bailey and the Company from and after the Separation Date.

 

3.     Surrender of Stock Options. Bailey hereby agrees that all of the stock options, restricted stock, and all other equity rights or interests in the Company currently held by him, whether vested or unvested, whether issued pursuant to the Cyanotech Corporation 2005 Stock Option Plan or otherwise (collectively, “Options”), are hereby cancelled, terminated and surrendered in all respects and shall cease to be outstanding as of the Separation Date. Following the Separation Date, Bailey shall have no rights with respect to any Options.

 

 

1

 

 

4.     Severance Payments. In accordance with the “Termination” section of the Employment Agreement and in consideration of the Notice Waiver, Cyanotech agrees to pay to Bailey (“Severance Payments”) an amount equal to $25,000.00 per month, subject to all applicable federal and state taxes and withholding, to be paid out on the Company’s regular pay cycle beginning on the first payroll cycle following the Separation Date and continuing until such time as Bailey has received an aggregate of $325,000, provided that the Company shall have the right to discontinue such Severance Payments if Bailey breaches any of his obligations under the Surviving Provisions.

 

5.     2016 Grant of Cyanotech Stock. In consideration of Bailey’s surrender of Options pursuant to Section 3 of this Agreement, the Company agrees to grant to Bailey an aggregate of Seventy Seven Thousand Five Hundred (77,500) shares of the Company’s Common Stock, par value $0.02 per share (“Common Stock”), on or before April 30, 2016 (the “2016 Grant”); provided that Bailey has earlier delivered cash to the Company in an amount equal to the Company’s aggregate minimum statutory withholding for all applicable federal, state and local taxes (the “Requisite Withholding Amount”) with respect to such shares of Common Stock. Alternatively, Bailey may notify the Company in writing that he elects to have the Company retain a portion of the Common Stock constituting the 2016 Grant (rounded up to the next whole share) as consideration for the Company remitting the Requisite Withholding Amount to the applicable taxing authorities. The parties acknowledge and agree that the Requisite Withholding Amount cannot be determined until the date the 2016 Grant is to be made, but understand that it will constitute approximately 36% of such Common Stock. All Common Stock issued to Bailey pursuant to the 2016 Grant shall be fully paid, non-assessable and validly issued. The parties acknowledge and agree that the 2016 Grant represents full and adequate legal consideration for Bailey’s surrender of his Options pursuant to Section 3 of this Agreement and each agrees that it will not take a tax or reporting position that is inconsistent with such treatment of the 2016 Grant.

 

6.     Additional Separation Benefits. If Bailey signs this Agreement, abides by its terms, and does not revoke the General Release before the eighth day after the Separation Date (the “Acceptance Date”) pursuant to Section 12 below, he will receive the following separation benefits (the “Separation Benefits”), which are in addition to anything he is otherwise entitled to or has been paid by Cyanotech, including, but not limited to, the Severance Payments, the 2016 Grant, final wages and any accrued and unused vacation pay:

 

(a)     Medical Coverage Continuation. During the eighteen (18) month period following the Separation Date, the Company agrees to contribute to Bailey’s group health insurance premiums in the same percentage of the monthly cost that it paid immediately prior to the Separation Date, provided that Bailey timely and properly applies for medical coverage continuation under the Consolidated Budget Reconciliation Act of 1986 (“COBRA”), and Bailey is and remains eligible for such COBRA coverage during that time (the “Healthcare Benefit”). Bailey will be responsible for payment of the remainder of the cost of COBRA medical coverage, and for the full cost of any dental or vision coverage he or any member of his family elects. Any failure by Bailey to pay his portion of coverage will result in termination of COBRA medical coverage and loss of his right to receive the Healthcare Benefit. Nothing in this paragraph or elsewhere in this Agreement waives or otherwise releases Bailey’s rights under COBRA or any similar state laws or to receive a certificate of creditable coverage (or such other similarly entitled document) under the Health Insurance Portability and Accountability Act of 1996, from the plan that Bailey participates in at the time he elects to receive COBRA coverage. The parties acknowledge and agree that if, during the period Bailey is receiving the Healthcare Benefit, Bailey commits any act in contravention of the Surviving Provisions or this Agreement, the Company shall not thereafter have any further obligation to provide the Healthcare Benefit to Bailey.

 

 

2

 

 

(b)     2017 Grant of Cyanotech Stock. In consideration of the other covenants contained in this Agreement including, but not limited to, the General Release granted pursuant to Section 10 and the Non-Competition and Confidentiality provisions contained in Section 16, the Company agrees to grant to Bailey an aggregate of Seventy Seven Thousand Five Hundred (77,500) shares of the Company’s Common Stock, on a date that is no earlier than January 1, 2017 and no later than January 30, 2017 (the “2017 Grant” and, together with the 2016 Grant, the “Share Grants”); provided that the Company shall not be obligated to make the 2017 Grant if Bailey breaches any provision of this Agreement; provided further that Bailey has earlier delivered cash to the Company in an amount equal to the Company’s Requisite Withholding Amount with respect to such shares of Common Stock. Alternatively, Bailey may notify the Company in writing that he elects to have the Company retain a portion of the Common Stock constituting the 2017 Grant (rounded up to the next whole share) as consideration for the Company remitting the Requisite Withholding Amount to the applicable taxing authorities. The parties acknowledge and agree that the Requisite Withholding Amount cannot be determined until the date the 2017 Grant is to be made, but understand that it will constitute approximately 36% of such Common Stock. Any Common Stock issued to Bailey pursuant to the 2017 Grant shall be fully paid, non-assessable and validly issued.

 

Bailey acknowledges that the 2017 Grant exceeds what a departing employee at his level is entitled to, and that said grants are made in consideration for the promises and obligations contained herein. Bailey acknowledges and agrees that the 2016 Grant constitutes adequate legal consideration for the surrender of his Options and that the 2017 Grant constitutes adequate legal consideration for the General Release and the other promises contained in this Agreement. Therefore, if, at any time prior to receiving the 2017 Grant, Bailey commits any act in contravention of Bailey’s covenants contained in this Agreement or the Surviving Provisions, the Company shall not thereafter be obligated to pay the 2017 Grant; provided that prior to any termination of 2017 Grant, the Company shall deliver a written notice to Bailey (the “Company Notice”) which identifies, in reasonable detail, the basis on which the Company believes it may terminate such 2017 Grant and Bailey shall have a period of thirty (30) days from the date of the Company Notice to cure any alleged breach or respond in writing to the Company describing, in reasonable detail, the basis on which Bailey believes the Company does not have grounds to terminate the 2017 Grant (the “Employee Response”); provided further that if after the end of such thirty (30) day period Bailey has not cured the alleged breach or the Company determines, in good faith after taking into account the Employee Response, that the basis for termination described in the Company Notice remains valid, the Company may, in its reasonable discretion, terminate and refuse to issue all or any portion of the 2017 Grant.

 

(c)     Reimbursement of Legal Expenses. The Company agrees that within ten (10) days of the Acceptance Date, it will reimburse up to Five Thousand Dollars ($5,000) in Bailey’s reasonable, documented legal fees and expenses incurred by him in connection with his termination of employment from the Company, as well as the negotiation and execution of this Agreement; provided, however, all invoices from Bailey’s legal counsel that demonstrate reasonable, documented legal fees and expenses may be redacted to preserve attorney-client privilege.

 

 

3

 

 

7.     Relationship to Other Plans. The benefits provided to Bailey by this Agreement are in lieu of and exceed any benefits to which he might be eligible under any other Cyanotech plan, scheme, or under U.S. law. On and after the Separation Date, Bailey will not receive any benefits pursuant to any other Cyanotech plan, or under U.S. law. Bailey acknowledges that the payments he will receive under this Agreement exceed what a resigning employee is entitled to, and that these payments are made in consideration for his promises and obligations herein.

 

8.     Taxes. All Severance Payments, Separation Benefits and Share Grants will be treated as wages and are subject to withholding of applicable taxes and employee social security contributions under United States and applicable state law.

 

9.     Payments on Separation from Employment. On the Separation Date, Cyanotech will pay Bailey all of his (a) earned wages, (b) accrued and unused vacation, and (c) ordinary, necessary and reasonable business expenses incurred by Bailey on behalf of the Company while performing his duties and responsibilities for the Company. The Company agrees that Bailey’s payment of $2,240 for his rental property in Kona, Hawaii for the remainder of the lease term which ends April 21, 2016 shall be deemed an ordinary, necessary and reasonable business expense for purposes of this Section 9. These payments (i.e., earned wages, accrued and unused vacation and reimbursable business expenses) will be paid to Bailey regardless of whether Bailey revokes the General Release pursuant to Section 12, below.

 

10.     General Release by Bailey. In consideration of the Separation Benefits provided in this Agreement, Bailey, on behalf of himself, his successors, heirs, administrators, executors, assigns, attorneys, agents and representatives, and each of them, irrevocably and unconditionally waives, releases, and promises never to assert against Cyanotech or its present and former parent companies, affiliates, subsidiaries, officers, directors, present and former employees, attorneys, insurers, agents, successors, and assigns, and each of them (collectively, the “Cyanotech Releasees”), any and all debts, claims, liabilities, demands, and causes of action of every kind, nature and description he may have against Cyanotech Releasees to the fullest extent permitted by law, including all those arising out of or related to Bailey’s employment with Cyanotech, or any affiliate, Bailey’s resignation from employment and all other positions with Cyanotech or any affiliate, or any other claim of any kind arising from any act that occurred during Bailey’s employment with Cyanotech including the cessation of employment contemplated by this Agreement (the “General Release”); provided, however, that Bailey is not waiving any claims or rights that he may have under this Agreement.

 

This General Release is intended to have the broadest possible application, and includes, but is not limited to, claims arising in any jurisdiction in the world, including any claims under U.S. federal, state, or local statutory or common law such as alleged violations of the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act of 1993, the Workers Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the California Civil Code, the California Labor Code, the California WARN Act (Cal. Labor Code §§1400 et seq.), claims arising under contract or any alleged breach of tort law, and claims arising out of any law or public policy of the United States of America, the State of California, the State of Hawaii, or any other governmental entity. Bailey expressly waives his right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by Bailey or on his behalf, related in any way to the matters released herein. However, this General Release is not intended to bar any claims that, by statute, may not be waived, such as Bailey’s right to file a charge with the National Labor Relations Board or Equal Employment Opportunity Commission and other similar government agencies, and claims for any challenge to the validity of Bailey’s release of claims under the Age Discrimination in Employment Act of 1967, as amended, as set forth in this Agreement. 

 

 

4

 

 

Bailey accepts the amounts to which he is entitled by virtue of this Agreement as final settlement of accounts between the parties and declares expressly that, subject to performance of this Agreement, neither Cyanotech nor any other Cyanotech Releasees, wherever located, will have any further obligations to Bailey. Bailey confirms that he has no further rights or claims – and to the extent relevant he knowingly and expressly waives any and all of such rights and claims – against Cyanotech and the Cyanotech Releasees, wherever located and under any applicable laws of any relevant jurisdiction, on the basis of the employment relationship and/or the termination of the Employment Agreement, including (without limitation) salary, bonuses, commissions, vacation pay, termination, discrimination, outplacement benefits, relocation benefits, protection indemnities of any nature, any other indemnities or on any other basis whatsoever.

 

Bailey, moreover, expressly waives the right to invoke any factual or legal error or any omission whatsoever pertaining to the existence and extent of his rights.

 

11.     Section 1542 Waiver. Bailey waives all rights under California Civil Code section 1542, if applicable, and any similar statute or rule of decision in Hawaii or any other jurisdiction. Section 1542 reads as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

By waiving all rights under section 1542, Bailey acknowledges that this General Release includes all claims, demands, or causes of action, attorneys’ fees and costs that Bailey may have against Cyanotech Releasees. It is understood and agreed by Bailey that the General Release contained in this Agreement waives all right, if any, under California Civil Code section 1542, and any similar statute or rule of decision in Hawaii or any other jurisdiction, and is a full and final release, and that it will extinguish claims, demands and causes of action that are known or unknown, foreseen, or unforeseen, anticipated or unanticipated, of every kind, nature and character Bailey may have against Cyanotech Releasees as of the date Bailey executes this Agreement.

 

 

5

 

 

12.     Notification of Rights Under the Older Workers Benefit Protection Act. The following notification is contemplated by the Older Workers Benefit Protection Act.

 

Bailey will have 21 days starting from the date he received this Agreement in which to accept the terms of Section 10 (General Release by Bailey) of this Agreement, although he may accept such section of this Agreement at any time within those 21 days. Bailey is advised to and has consulted with an attorney about this Agreement generally and Section 10 hereof specifically. By signing this Agreement, Bailey understands that, pursuant to Section 10, he is knowingly and voluntarily releasing his rights to pursue any claim under the Age Discrimination in Employment Act, as well as other types of claims. Bailey acknowledges that the General Release contained in this Agreement does not apply to any new claims that may arise after the date Bailey signs this Agreement.

 

To accept the Agreement, Bailey must sign and date the Agreement and return it to Cyanotech. Bailey will have seven (7) days after he signs this Agreement in which to revoke the General Release contained in Section 10 hereof. Bailey further understands that a revocation of the General Release contained in Section 10 will make him ineligible to receive the Separation Benefits described in Section 6 of this Agreement, but that the rest of this Agreement will remain in full force and effect. To revoke the General Release, Bailey must send Cyanotech a written statement of revocation by overnight mail. If Bailey does not revoke his acceptance within the seven (7) day revocation period, Section 10 (General Release by Bailey) shall become effective and enforceable on the Acceptance Date, and the Separation Benefits shall become payable as set forth above in Section 6. If Bailey revokes the General Release by delivering written notice to Cyanotech prior to the Acceptance Date, Section 10 (General Release by Bailey) shall not apply and Bailey will not be entitled to any of the Separation Benefits set forth in Section 6 of this Agreement. However, all other provisions of this Agreement including, but not limited to, Section 1 (Resignation and Separation of Employment), Section 2 (Termination of Existing Employment Agreement) and Section 3 (Surrender of Stock Options) will remain in full force and effect.

 

By agreeing to the General Release contained in this Agreement, Bailey agrees that he will not pursue any claim covered by it. If he breaks this promise, he agrees to pay Cyanotech’s costs and expenses (including reasonable attorneys’ fees) related to the defense of any claims, other than claims to challenge the validity of this Agreement under the Older Workers Benefit Protection Act (the “OWBPA”) and the Age Discrimination in Employment Act (the “ADEA”). In spite of this Agreement, Bailey retains the right to challenge the knowing and voluntary nature of this Agreement under the OWBPA and the ADEA before a court, the Equal Employment Opportunity Commission (the “EEOC”), or any state or local agency permitted to enforce those laws, and the General Release does not impose any penalty or condition for doing so. Bailey understands that nothing in the General Release prevents him from filing a charge or complaint with, or from participating in an investigation or proceeding conducted by the EEOC or any state or local agency which can act as a referral agency for the EEOC. Bailey understands, however, that if he successfully pursues a claim against Cyanotech under the OWBPA or the ADEA, Cyanotech may seek to set off the amounts that are payable to him for signing this Agreement against any award he obtains, including, but not limited to, the Separation Benefits, the 2017 Grant and the Health Benefits. If he unsuccessfully pursues a claim against Cyanotech under the OWBPA or the ADEA, then Cyanotech may be entitled to recover its costs and attorneys’ fees to the extent specifically authorized by federal law.

 

 

6

 

 

13.     Cooperation. In consideration of this Agreement, Bailey will fully cooperate with Cyanotech and its counsel as it relates, in any way, to any foreign or domestic dispute (including, but not limited to, litigation, arbitration, and federal, state or local administrative inquiry) arising out of or related to any services he performed for Cyanotech and which occurred during his employment with, or time providing other services to, Cyanotech. Full cooperation shall include, but not be limited to, review of documents, attendance at meetings, trial or administrative proceedings, depositions, interviews, or production of documents to Cyanotech without the need of the subpoena process. During the period Bailey is receiving Severance Payments or Separation Benefits, such cooperation will be provided by Bailey without further compensation, other than reimbursement for reasonable out of pocket business expenses such as transportation, lodging, parking and meals or as specifically agreed in advance and in writing. After such period, such cooperation will be provided by Bailey; provided, the Company pays him a per diem determined using his base salary as of his Separation Date, reimburses Bailey for reasonable out of pocket business expenses such as transportation, lodging, parking and meals, and schedules his cooperation, to the extent reasonably practicable, so as not to unreasonably interfere with Bailey’s business or personal affairs. In addition, as a condition to Cyanotech executing this Agreement and providing the Separation Benefits hereunder, Bailey agrees to cooperate in all matters relating to the transition of his employment (including with respect to internal and external communication plans) and other matters reasonably requested by Cyanotech after the Separation Date, without further compensation.

 

14.     No Existing Claims. Bailey warrants that he has no existing claims against Cyanotech or any of the other Cyanotech Releasees, and that he has not filed any complaints, charges, grievances, or lawsuits against any Cyanotech Releasees, or any other person or entity which is released by the General Release contained in this Agreement, with any federal, state, or other court or agency in any jurisdiction inside or outside the United States.

 

15.     No Admission of Liability. This Agreement is not an admission of liability on the part of Cyanotech Releasees, or any of their present or former directors, officers, employees, shareholders, or agents. This Agreement is not an admission, directly or by implication, that Cyanotech Releasees, or any of them, has violated any law, regulation, rule, or contractual right, or any other duty or obligation of any kind, including any duty or obligation owed to or allegedly owed to Bailey.

 

16.     Non-Competition; Confidentiality.

 

(a)     Non-Competition. In consideration of (a) Bailey’s access to and knowledge of trade secrets and confidential information of the Company, and (b) the Share Grants, Bailey covenants and agrees that, for a period of two (2) years after the Separation Date, Bailey shall not either individually or as a partner, joint venturer, consultant, shareholder, member or representative of another person or otherwise, directly or indirectly, participate in, engage in, or have a financial or management interest in, promote, or assist any other person (other than the Company) in any business operation or any enterprise if such business operation or enterprise engages or is preparing or planning to engage in a business that is substantially similar to, or competes for business with, any business that, as of the Separation Date, the Company was conducting or, to the knowledge of Bailey, actively pursuing. The Company’s rights pursuant to this Section 16 are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity. Bailey may, however, directly or indirectly own, solely as an investment, securities of any entity engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or over the counter market if Bailey (i) is not a controlling person of, or a member of a group which controls, such entity, and (ii) does not directly or indirectly own one percent (1%) or more of any class of securities of such entity.

 

 

7

 

 

(b)     Confidential Information; Trade Secrets.

 

(i)     “Confidential Information” means all information and material which is proprietary to the Company, whether or not marked as “confidential” or “proprietary,” and which was disclosed to or obtained from the Company by Bailey, which relates to the past, present or future research, development or business activities of the Company. Confidential Information is all information or materials prepared by or for the Company and includes, without limitation, all of the following: business records, intellectual property licensing programs, licensing terms and conditions, strategic planning, business acquisition planning, business development, joint venture planning, forward planning, strategic initiatives, prospective patent portfolio information, prospective investor information, prospective joint venture information, designs, drawings, specifications, techniques, models, data, documentation, diagrams, flow charts, research, development, processes, systems, methods, machinery, procedures, “know-how,” new product or new technology information, formulas, patents, patent applications, product prototypes, product copies, cost of production, manufacturing, developing or marketing techniques and materials, cost of production, development or marketing time tables, customer lists, strategies related to customers, suppliers or personnel, contract forms, pricing policies and financial information, volumes of sales, and other information of similar nature, whether or not reduced to writing or other tangible form, and any other non-public business information. Confidential Information does not include any information which (A) is or becomes generally available to the public by acts other than those of Bailey after receiving it, or (B) has been received lawfully and in good faith by Bailey from a third party who did not derive it from the Company in violation of a duty or obligation of confidentiality.

 

(ii)     “Trade Secrets” shall mean any scientific or technical data, information, design, process, procedure, formula or improvement that is commercially available to any of the Company and is not generally known in the industry.

 

(iii)     From and after the Separation Date, neither Bailey nor any of his agents or representatives shall, directly or indirectly, publish or otherwise disclose, or permit others to publish, divulge, disseminate, copy or otherwise disclose the Trade Secrets or Confidential Information of the Company.

 

(iv)     From and after the Separation Date, Bailey will not engage in competition with the Company while making use of the Trade Secrets of the Company.

 

 

8

 

 

(c)     Remedies. Bailey acknowledges that unfair competition, misappropriation of Trade Secrets or violation of any of the provisions contained in this Section 16, or violation of any of the Surviving Provisions, would cause irreparable injury to the Company, that the remedy at law for any violation or threatened violation thereof would be inadequate, and that the Company shall be entitled to temporary and permanent injunctive or other equitable relief without the necessity of proving actual damages.

 

17.     Section 409A.

 

(a)     Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Bailey, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation not exempt under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Bailey has a “separation from service” within the meaning of Section 409A. For purposes of this Agreement and for determining what amounts are Deferred Payments, Bailey shall be deemed to have incurred an “involuntary separation from service,” as such term is defined in Treasury Regulation Section 1.409A-1(n). Further, for purposes of this Agreement, any reference to “termination of employment,” “termination” or any similar term shall be construed to mean a “separation from service” within the meaning of Section 409A. No separation payable to Bailey, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Bailey has a “separation from service” within the meaning of Section 409A. For purposes of this Agreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and any guidance promulgated thereunder or any state law equivalent.

 

(b)     Notwithstanding anything to the contrary in this Agreement, if Bailey is a “specified employee” within the meaning of Section 409A at the time of Bailey’s termination of employment (other than due to death), then the Deferred Payments, if any, that are payable within the first six months following Bailey’s separation from service, will become payable on the first payroll date that occurs on or after the date six months and one day following the date of Bailey’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit without regard to such delay. Notwithstanding anything herein to the contrary, if Bailey dies following Bailey’s separation from service, but prior to the six month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Bailey’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit without regard to such delay. Each payment, installment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations to the extent permissible thereunder.

 

(c)     Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

 

9

 

 

(d)     The following rules shall govern all reimbursements of ordinary, necessary and reasonable business expenses incurred by Bailey on behalf of the Company, including the Company’s agreement to reimburse legal expenses, as described in Section 6(c):

 

(i)     only those fees and expenses that are objectively determinable pursuant to the nondiscretionary description in this Agreement are eligible for reimbursement;

 

(ii)     the Company shall only reimburse Bailey for fees and expenses incurred during his employment with the Company and for the two (2) year period that commences immediately following his termination of employment;

 

(iii)     the amount of fees and expenses eligible for reimbursement during Bailey’s taxable year shall not affect the amount of fees and expenses eligible for reimbursement in any other taxable year;

 

(iv)     the reimbursement of an eligible fee or expense shall be made on or before the last day of Bailey’s taxable year following the year in which the expense was incurred; and

 

(v)     the right to reimbursement may not be exchanged for another benefit or liquidated to cash.

 

(e)     The foregoing provisions are intended to be exempt from or comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. Bailey agrees to amend this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition to Bailey under Section 409A, so long as such amendment or action does not reduce Bailey’s benefits hereunder. Bailey has had an opportunity to review this Agreement with his own legal and tax advisors and understands that Cyanotech does not guarantee any particular tax effect for income provided to Bailey pursuant to this Agreement. In any event, except for Cyanotech’s responsibility to withhold any applicable income and employment taxes from compensation paid or provided to Bailey, Cyanotech shall not be responsible for the payment of any applicable taxes, penalties or interest on compensation paid or provided to Bailey pursuant to this Agreement. In no event will the Company reimburse Bailey for any penalties, taxes or interest that may be imposed on Bailey as a result of Section 409A.

 

18.     Future Employment. Bailey acknowledges that any employment relationship he has had with Cyanotech terminates irrevocably in accordance with this Agreement on the Separation Date, and that Bailey has no further relationship in the future with Cyanotech. Bailey agrees to waive any claim for reinstatement or rehire.

 

19.     Attorneys’ Fees and Costs. Subject to Section 6(c) of this Agreement, the parties will bear their own fees and costs incurred in connection with negotiating and drafting this Agreement.

 

 

10

 

 

20.     Non-Assignment of Claims. Bailey represents and warrants that he has not assigned or otherwise transferred any interest in any claim that is the subject of this Agreement.

 

21.     Advice of Counsel. In executing this Agreement, Bailey acknowledges that he has had the opportunity to consult with, and be advised by, an independent lawyer of his choice, and that he has executed this Agreement voluntarily after independent investigation, and without fraud, duress, or undue influence.

 

22.     Ambiguities. Bailey has reviewed this Agreement, and has had a full opportunity to negotiate its contents. Bailey expressly waives any common law or statutory rule of construction that ambiguities are to be construed against the drafter of the Agreement, and Bailey agrees that the language of this Agreement will be in all cases construed as a whole, according to its fair meaning.

 

23.     Integration. This Agreement, together with the Surviving Provisions, constitutes a single, integrated written contract expressing the entire agreement of the parties. This Agreement and the Surviving Provisions supersede all prior understandings and agreements, both oral and written. Other than this Agreement and the Surviving Provisions, there are no other agreements, written or oral, express or implied, between the parties with respect to the subject matter of this Agreement and the Surviving Provisions. The parties agree that this Agreement, together with the Surviving Provisions, may be modified only in a writing that is signed by both an authorized representative of Cyanotech and Bailey.

 

24.     Choice of Law. The parties agree that the formation, terms, and construction of this Agreement are governed by the laws of the State of Hawaii, and where applicable, of the United States.

 

25.     Disputes. The parties intend that any claims under this Agreement be subject to the same dispute resolution procedures as claims made under the Surviving Provisions. Therefore, the parties agree that any and all claims, controversies or disputes arising out of or relating to this Agreement, or the breach thereof, which remain unresolved after direct negotiations between the parties, shall first be submitted to confidential mediation in Honolulu in accordance with the Rules, Procedures and Protocols for Mediation of Disputes of Dispute Prevention & Resolution, Inc. (“DPRI”) then in effect. If any issues, claims or disputes remain unresolved after mediation concludes, the parties agree to submit any such issues to binding arbitration in Honolulu before one or three arbitrator(s) in accordance with the Rules, Procedures and Protocols for Arbitration of Disputes of DPRI then in effect. However, the parties agree that the foregoing shall not preclude either party from seeking any injunctive or equitable relief from a court of competent jurisdiction pursuant to any provision of this Agreement. The parties further agree that, subject to Chapter 658A, Hawaii Revised Statutes, as the same may hereafter be amended or recodified, the award of the arbitrator(s) shall be binding upon each party and that judgment upon the award rendered may be entered in any court of competent jurisdiction.

 

26.     Severability. If any provision of this Agreement is determined by any court of competent jurisdiction or arbitrator to be illegal, invalid, or unenforceable, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefits contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such court or arbitrator, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby

 

 

11

 

 

27.     Prevailing Party. If any dispute arises between the parties hereto concerning this Agreement or their respective rights, duties and obligations hereunder, the party prevailing in such proceeding, as determined by the arbitrator or court, shall be entitled to reasonable attorneys’ fees and costs in addition to any other relief that may be granted.

 

28.     Binding Effect. This Agreement will be binding upon, and will inure to the benefit of, Bailey’s heirs, executors, and administrators, if any, and will be binding upon and will inure to the benefit of the individual or collective successors and assigns of Cyanotech, and all of its present and former directors, officers, employees, shareholders, agents, and all persons acting by, through, or in concert with any of them.

 

29.     Notices. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when delivered by a nationally recognized overnight mail courier, postage pre-paid. In case of the Company, mailed notices shall be addressed to its corporate headquarters as set forth in its most recent filing with the United States Securities and Exchange Commission (the “SEC”), and all notices shall be directed to the attention of its Chairman of the Board. In case of Bailey, mailed notices shall be addressed to Bailey at the home address that Bailey most recently communicated to the Company in writing. Bailey understands that it may be recommended or required that Cyanotech file a copy of this Agreement and/or a summary thereof with the SEC and Bailey hereby consents to any such filings with the SEC.

 

30.     Property of the Company. Bailey acknowledges that all tangible items containing any Confidential Information or Trade Secrets, including, without limitation, records, reports, documents, software and other materials, including any copies thereof are the exclusive property of the Company, and Bailey shall deliver to the Company all such material in his possession or control upon the Company’s request and in all events no later than the Acceptance Date. Bailey shall also return keys, equipment, identification or credit cards, or other property belonging to the Company upon the Company’s request and in all events no later than the Acceptance Date. Notwithstanding the foregoing to the contrary, Bailey shall be permitted to retain his Company laptop, as well as the software, personal information and pictures, and other downloaded materials that do not relate to the Company’s business. In the presence of Bailey, the Company will review and remove any Confidential Information or Trade Secrets of the Company, as well as software that is used solely for the Company’s business.

 

31.     Securities Law Compliance.

 

(a)     In connection with the Share Grants, Bailey hereby represents and warrants to the Company as of each of the Separation Date, the date of the 2016 Grant and the date of the 2017 Share Grant, as follows: 

 

(i)     As a result of Bailey’s long-time status as an officer of the Company, Bailey has a pre-existing business relationship with the Company and its officers, directors and controlling persons and through such relationships can reasonably be assumed by the Company to have the capacity to evaluate the merits and risks of an investment in the Company and to protect Bailey’s own interests in connection with this transaction;

 

 

12

 

 

(ii)     Bailey has heretofore discussed the Company and its plans, operations and financial condition with the Company’s officers, knows that the Company continues to be a highly speculative business and has heretofore received all such information as Bailey has deemed necessary and appropriate to enable Bailey to evaluate the financial risk inherent in making an investment in the shares of Common Stock subject to the Share Grants (the “Shares”), and Bailey has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof;

 

(iii)     Bailey understands that an investment in the Shares is speculative and that any possible profits therefrom are uncertain;

 

(iv)     Bailey is able to bear the economic risks of the investment in Shares for an indefinite period of time; and

 

(v)     Bailey is acquiring the Shares for his own account and not with a view to their resale or distribution.

 

(b)     Bailey acknowledges that the Shares have not been registered under the Securities Act of 1933 (the “Securities Act”), and are being issued to him in reliance upon the exemption from such registration provided by Regulation D of the Securities Act and the corresponding state security law exemption applicable to stock issuances to investors whose preexisting business relationship with the issuing company provides the investor with enough knowledge and experience regarding the financial and business matters of the issuing company to reach an informed and knowledgeable decision regarding the merits and risks of the investment.

 

(c)     Bailey hereby confirms that he has been informed that the Shares constitute restricted securities under the Securities Act and may not be resold or transferred unless the Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Bailey acknowledges that he is prepared to hold the Shares for an indefinite period.

 

(d)     Bailey agrees that he will make no disposition of the Shares unless and until he has provided the Company with an opinion of counsel, in form and substance reasonably satisfactory to the Company, that (i) the proposed disposition does not require registration of the Shares under the Securities Act, or (ii) all appropriate action necessary for compliance with the registration requirements of the Securities Act or of any exemption from registration available under the Securities Act has been taken.

 

(e)     In order to reflect the restrictions on disposition of the Shares, the stock certificates for the Shares will be endorsed with a restrictive legend substantially in the form of the following:

 

 

13

 

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING THESE SECURITIES OR (B) THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES (CONCURRED IN BY LEGAL COUNSEL FOR THIS CORPORATION) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.”

 

[signature page follows]

 

 

14

 

 

IN WITNESS WHEREOF, the undersigned have read the foregoing Agreement, and accept and agree to the provisions contained therein and hereby execute it voluntarily, and with full understanding of its consequences as of the Separation Date.

 

BAILEY:

 

 

 

/s/ Brent D. Bailey     

Brent D. Bailey

 

 

 

COMPANY:

 

Cyanotech Corporation,

a Nevada corporation

 

 

By:     /s/ Michael A. Davis     
 Name:   Michael A. Davis
 Title:     Chairman

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00256-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00256-of-00352.parquet"}]]