Document:

Exhibit 10.1

Exhibit 10.1

SEPARATION AGREEMENT 

SEPARATION AGREEMENT dated as of the 28th day of February, 2014 between VALEANT PHARMACEUTICALS INTERNATIONAL, INC. (“Valeant”) and DANIEL WECHSLER (“Mr. Wechsler” and together with Valeant, the “Parties”). 

WHEREAS, Mr. Wechsler is serving as Executive Vice President - Company Group Chairman, Eye Health, pursuant to a letter agreement between Mr. Wechsler and Valeant dated July 12, 2013 (the “Letter Agreement”); and

WHEREAS, Mr. Wechsler is resigning from any and all positions with Valeant and with all subsidiaries of Valeant, effective immediately; and

WHEREAS, Valeant and Mr. Wechsler desire to enter into this Separation Agreement (this “Agreement”) to set forth the Parties’ agreement as to Mr. Wechsler’s entitlements and continuing obligations in connection with his resignation of employment with Valeant. 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the Parties hereto agree as follows: 
		
	1.
	Termination Date. 

		
	(a)
	The Parties agree that February 28, 2014 shall be Mr. Wechsler’s last day of employment with Valeant (the “Termination Date”) and his service as Executive Vice President - Company Group Chairman, Eye Health shall terminate as of the Termination Date.  Effective as of the Termination Date, Mr. Wechsler hereby resigns from all positions he holds as an employee, officer, director, benefit plan trustee or otherwise with respect to Valeant and its subsidiaries.

		
	(b)
	Upon the Termination Date, each of Mr. Wechsler’s equity compensation awards shall immediately terminate, without further compensation due, in accordance with their terms. 

		
	2.
	Payments. The Parties acknowledge that in connection with Mr. Wechsler’s termination of employment with Valeant, he shall be entitled to (or eligible for, as the case may be) the following:

		
	(a)
	any accrued but unpaid salary or vacation pay, which shall be paid to him in accordance with Valeant's policies with respect to such remuneration; and

		
	(b)
	subject to Mr. Wechsler executing the general release of claims attached hereto as Annex A  within 21 days following the Termination Date, and the applicable seven (7) calendar day revocation period expiring without revocation (the date upon which such revocation period expires being referred to hereinafter as the 

1

        
        

“Effective Date”), a separation payment in the amount of US$435,782, subject to applicable withholdings, payable on or about August 28, 2014; provided however that, if, at any time, Mr. Wechsler is in breach of any of his obligations under this Agreement, then from the date of such breach onward and with no further notice or action required, no payment shall be payable or paid, nor benefit provided, pursuant to this Section 2(b).
		
	3.
	Non-Compete and Non-Solicit.

		
	(a)
	Mr. Wechsler acknowledges that Valeant does business throughout the world. For a period of one year following the Termination Date, Mr. Wechsler shall not, directly or indirectly, serve as an employee, consultant, officer, director, lender, investor, shareholder, partner, manager or member of any person or entity, or own or act as a sole proprietor of a business that engages in the development, production and/or marketing of prescription and non-prescription pharmaceutical products or medical devices in the areas of eye health, dermatology, facial aesthetics and/or neurology or in any other line(s) of business in which Valeant is engaged on the Termination Date (each, a “Competitor”), in any of the states of the United States of America, Canada, and any country in Europe, Latin America, Australia and South East Asia, other than Valeant, or as approved in advance in writing by the Chief Executive Officer of Valeant; provided, however, that Mr. Wechsler’s passive ownership of securities shall not be a violation of this paragraph if such securities represent: (i) less than one percent (1%) of the publicly traded securities of any Large Publicly Traded Entity (determined at the time of investment); or (ii) less than $500,000 and less than five percent (5%) of the securities of any entity that is not a Large Publicly Traded Entity.  A “Large Publicly Traded Entity” means a publicly traded entity with a market capitalization greater than $500,000,000 at the time of investment.

		
	(b) 
	Subject to the last sentence of this Section 3(b), to protect the confidential information and other trade secrets of Valeant and its affiliates, Mr. Wechsler agrees, from the Termination Date through February 28, 2015, not to solicit, attempt to solicit, or participate in or assist in any way in the solicitation or attempted solicitation of any employees or independent contractors of Valeant or any of its affiliates. For purposes of this covenant, “solicit” or “solicitation” means directly or indirectly (including through the Permitted Person (as defined below)) influencing or attempting to influence employees or independent contractors of Valeant or any of its affiliates to become employed with or become an independent contractor for any other person, partnership, firm, corporation or other entity. Mr. Wechsler agrees that the covenants contained in this paragraph are reasonable and necessary to protect the confidential information and other trade secrets of Valeant and its affiliates, provided, that solicitation through general advertising or the provision of references shall not constitute a breach of such obligations. Notwithstanding the terms of this Section 3(b), Mr. Wechsler shall be entitled to solicit or attempt to solicit the individual who currently holds 

    
        

the title at Valeant (or Valeant’s affiliate) set out in Annex B hereto (the “Permitted Person”) to become employed with any new employer of Mr. Wechsler.
Mr. Wechsler expressly acknowledges that the restrictions set forth in this Section 3 shall not prevent or unduly restrict him from practicing his profession, or cause him economic hardship.  It is the intent and desire of Mr. Wechsler and Valeant (and its affiliates) that the restrictive provisions in this Section 3 be enforced to the fullest extent permissible under the laws and public policies as applied in each jurisdiction in which enforcement is sought. If any particular provision in this Section 3 shall be determined to be invalid or unenforceable, such covenant shall be amended, without any action on the part of either party hereto, to delete therefrom the portion so determined to be invalid or unenforceable, such deletion to apply only with respect to the operation of such covenant in the particular jurisdiction in which such adjudication is made.  Mr. Wechsler acknowledges that Valeant or its affiliates will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if he breaches his obligations under this Section 3.  Accordingly, Mr. Wechsler agrees that Valeant and its affiliates will be entitled, in addition to any other available remedies, to obtain injunctive relief against any breach or prospective breach by Mr. Wechsler of his obligations under this Section 3 in any Federal or state court sitting in the State of New Jersey, or, at Valeant's (or its affiliate's) election, in any other state or jurisdiction in which Mr. Wechsler maintains his principal residence or his principal place of business. Mr. Wechsler agrees that Valeant or its affiliates may seek the remedies described in the preceding sentence notwithstanding any arbitration or mediation agreement that may have been entered into with Valeant or any of its affiliates.  Mr. Wechsler hereby submits to the non-exclusive jurisdiction of all those courts for the purposes of any actions or proceedings instituted by Valeant or its affiliates to obtain that injunctive relief, and Mr. Wechsler agrees that process in any or all of those actions or proceedings may be served by registered mail, addressed to the last address provided by Mr. Wechsler to Valeant or its affiliates, or in any other manner authorized by law.
		
	4.
	Confidentiality. Mr. Wechsler will not disclose to, or use for the benefit of, any third party any Confidential Information. "Confidential Information" means any information about Valeant or any of its affiliates, their clients or personnel which is not known or available publicly or generally within the pharmaceutical industry, including, but not limited to, information relating to business operations, including customer and supply lists, customer files, marketing data, business plans, strategies, employee lists, contracts, financial records and accounts, products in development, product plans, projections and budgets, and similar information.  Anything herein to the contrary notwithstanding, the provisions of Section 4 shall not apply (a) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Mr. Wechsler to disclose or make accessible any information, or (b) as to information that is or becomes available to Mr. Wechsler on a non-confidential basis from a source outside of Valeant and such source does not breach any confidentiality or other obligation in making such disclosure to Mr. Wechsler.

    
        

		
	5.
	Non-Disparagement.  From and after the Termination Date, Mr. Wechsler agrees to not disparage or in any other way communicate to any person or entity any negative information or opinion concerning Valeant, or its parents, subsidiaries and affiliates, or any of their partners, members, shareholders, officers, directors, employees or agents, of any of them.  This provision shall not prohibit Mr. Wechsler from making any statements or taking any actions required by law nor shall this provision be interpreted to require or encourage Mr. Wechsler to make any misrepresentations.

		
	6.
	Other Company Policies. Mr. Wechsler agrees that he shall continue to be bound by and comply with the terms of his confidentiality obligations to Valeant, and any provisions of the Standards of Business Conduct, Insider Trading Policy, Blackout Policy, Anti-Bribery Policy, Corporate Integrity Agreement and any other policies of Valeant and its affiliates that survive termination of employment.

		
	7.
	Cooperation 

		
	(a)
	During the eighteen (18) month period following the Termination Date, Mr. Wechsler agrees to make himself reasonably available (after taking into account his personal and professional schedule) to cooperate with Valeant and its affiliates in matters that materially concern:  (i) requests for information about the services Mr. Wechsler provided to Valeant, its affiliates and their predecessors during his employment with Valeant, its affiliates and their predecessors, (ii) the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of Valeant, its affiliates and their predecessors which relate to events or occurrences that transpired while Mr. Wechsler was employed by Valeant, its affiliates or their predecessors or (iii) any investigation or review by any federal, state or local regulatory, quasi-regulatory or self-governing authority (including, without limitation, the US Department of Justice, the US Federal Trade Commission or the US Securities and Exchange Commission) as any such investigation or review relates to events or occurrences that transpired while Mr. Wechsler was employed by Valeant, its affiliates and their predecessors.  Mr. Wechsler’s cooperation shall include:  (A) making himself reasonably available to meet and speak with officers or employees of Valeant, Valeant's counsel or any third-parties at the request of Valeant at times and locations to be determined by Valeant reasonably and in good faith, taking into account Mr. Wechsler’s business and personal needs and (B) giving accurate and truthful information at any interviews and accurate and truthful testimony in any legal proceedings or actions.  Unless required by law or legal process or in the course of, or related to, his subsequent employment, Mr. Wechsler will not knowingly or intentionally furnish information to or cooperate with any non-governmental entity (other than Valeant) in connection with any potential or pending proceeding or legal action involving matters arising during Mr. Wechsler’s employment with Valeant, its affiliates and their predecessors.

    
        

		
	(b)
	If Valeant requests services pursuant this Section 7, Mr. Wechsler shall not be entitled to any payments above those set forth in this Agreement; provided, however, that Valeant will reimburse Mr. Wechsler for any reasonable, out-of-pocket travel, hotel and meal expenses incurred in connection with Mr. Wechsler’s performance of obligations pursuant to this Section 7 for which Mr. Wechsler has obtained prior approval from Valeant.  

		
	(c)
	If Mr. Wechsler reasonably determines that he should be represented by counsel in connection with any matter described in this Section 7, he shall be represented by counsel selected by Valeant, which may be (at Valeant’s election) the same counsel representing Valeant or its affiliates in such matter unless Mr. Wechsler reasonably determines that he should be separately represented due to Valeant’s counsel having an actual conflict of interest, in which case Valeant shall agree to, and shall, pay the reasonable costs and expenses of separate counsel selected by Valeant in consultation with Mr. Wechsler for matters with respect to which Mr. Wechsler is cooperating with Valeant pursuant to this Section 7.

		
	(d)
	Nothing in this Agreement or any other agreement by and between the parties is intended to or shall preclude or in any way limit or restrict Mr. Wechsler from providing accurate and truthful testimony in response to a valid subpoena, court order, regulatory or governmental request or other judicial, administrative or legal process or otherwise as required by law (in the case of formal legal process in which event Mr. Wechsler shall notify Valeant in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least ten (10) days prior to providing such testimony (or, if such notice is not possible under the circumstances, with as much prior notice as is possible)).

		
	8.
	Representations.  Mr. Wechsler represents and agrees that he is not aware of any violations of any laws, rules or regulations with respect to any accounting, financial, reporting, regulatory or any other others at Valeant or its affiliates by any of their respective officers, directors, employees, agents or any other person providing services to them.  Mr. Wechsler represents that he has complied with the policies of Valeant, its affiliates and their predecessors applicable to Mr. Wechsler at any time concerning the treatment of confidential information. 

		
	9.
	Indemnification. From and after the date hereof, Mr. Wechsler shall be indemnified by Valeant as provided in its by-laws. In addition, Mr. Wechsler will be covered under Valeant’s Directors and Officers Liability Insurance Policy.

		
	10.
	Section 409A; Other Tax Matters. The Parties intend for the payments and benefits under this Agreement to be exempt from Section 409A or, if not so exempt, to be paid or provided in a manner which complies with the requirements of such section, and intend that this Agreement shall be construed and administered in accordance with such intention. Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each 

    
        

payment of compensation under this Agreement shall be treated as a separate payment of compensation.  Notwithstanding any other provision of this Agreement, Valeant may withhold from amounts payable under this Agreement all amounts that are required or authorized to be withheld, including, but not limited to, federal, state, local and foreign taxes required to be withheld by applicable laws or regulations.
		
	11.
	Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without regard to the application of any choice-of-law rules that would result in the application of another state’s laws.

		
	12.
	Entire Agreement.  This Agreement sets forth the entire agreement between Mr. Wechsler and Valeant concerning the termination of Mr. Wechsler’s employment, and supersedes any other written or oral promises concerning the subject matter of this Agreement, including, without limitation, those set forth in the Letter Agreement.  No waiver or amendment of this Agreement will be effective unless it is in writing, refers to this Agreement, and is signed by Mr. Wechsler and the Chief Executive Officer of Valeant.  Mr. Wechsler represents and agrees that other than the payments and benefits set forth in Section 2 of this Agreement (and subject to the terms and conditions of Section 2 of this Agreement), he is not entitled to any payments or benefits from Valeant, its affiliates or their predecessors.

            IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above. 

    
        

VALEANT PHARMACEUTICALS
INTERNATIONAL, INC.

By:     /s/ Brian Stolz                
Title: Brian Stolz
Name: Executive Vice President, Administration 
and Chief Human Capital Officer

EMPLOYEE

  /s/ Daniel Wechsler                
DANIEL WECHSLER

    
        

    
        

ANNEX A 
General Waiver & Release 

    
This Legal Release (“Release”) dated as of the last date executed below (the “Release Date”) is between Valeant Pharmaceuticals International, Inc. (the “Company”) and Daniel Wechsler (“Employee”). 

Employee Release.  Employee, on behalf of himself, and Employee’s heirs, executors, administrators, and/or assigns, does hereby RELEASE AND FOREVER DISCHARGE the Company, together with its parents, subsidiaries, affiliates, predecessors, and successor corporations and business entities, past, present and future, and its and their agents, directors, officers, employees, shareholders, insurers and reinsurers, and employee benefit plans (and the trustees, administrators, fiduciaries, agents, insurers, and reinsurers of such plans) past, present and future, and their heirs, executors, administrators, predecessors, successors, and assigns (collectively, the “RELEASEES”), of and from any and all legally waivable claims, causes of actions, suits, lawsuits, debts, promises, agreements and demands whatsoever in law or in equity, known or unknown, suspected or unsuspected, which Employee or which Employee’s heirs, executors administrators, or assigns hereafter ever had, now have, or may have, from the beginning of time to the date Employee executes this Release except as expressly set forth herein. This general waiver and release does not include any claims, causes of actions, suits, lawsuits, debts, and demands whatsoever in law or in equity, known or unknown, suspected or unsuspected which may come into existence post the date of this Release. 

The claims being waived and released include, without limitation: 

(a)    any and all claims of violation of any foreign or United States federal, state, provincial and local law arising from or relating to Employee’s recruitment, hire, employment and termination of employment with the Company; 

(b)    any and all claims of wrongful discharge, emotional distress, defamation, misrepresentation, fraud, detrimental reliance, breach of contractual obligations, promissory estoppel, negligence, assault and battery, and violation of public policy; 

(c)    all claims to disputed wages, compensation, and benefits, including any claims for violation of applicable state laws relating to wages and hours of work; 

(d)    any and all claims for violation of any state or federal statute or regulation relating to termination of employment, unlawful discrimination, harassment or retaliation under applicable federal, state and local constitutions, statutes, laws, and regulations (which includes, but is not limited to, the Age Discrimination in Employment Act, as amended (“ADEA”), Title VII of the Civil Rights Act of 1964, 42 U.S.C. 1981, the Employee Retirement Income Security Act (“ERISA”), the Family and Medical Leave Act of 1993, the Americans with Disabilities Act, the Rehabilitation Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the New 

        

Jersey Law Against Discrimination and Conscientious Employee Protection Act, the California Fair Employment and Housing Act and the California Family Rights Act), the Ontario Employment Standards Act, 2000, Human Rights Code, and Workplace Safety and Insurance Act; and 

(e)    any and all claims for monetary damages and any other form of personal relief. 

In waiving and releasing any and all claims against the Releasees, whether or not now known to Employee, Employee understands that this means that, if Employee later discovers facts different from or in addition to those facts currently known by Employee, or believed by Employee to be true, the waivers and releases of this Release will remain effective in all respects — despite such different or additional facts and Employee’s later discovery of such facts, even if Employee would not have agreed to this Release if Employee had prior knowledge of such facts. 

In order to waive and release any and all claims against the Releasees, whether or not now known, Employee expressly waives and releases all rights under California Civil Code section 1542 (or any comparable provision under any similar statute in any other jurisdiction) which states:

A general release does not extend to claims which the creditor [i.e. Employee] 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 settlement with the debtor [i.e. the Company].
The only claims that are not being waived and released by Employee hereunder are claims Employee may have for: 

(a)    unemployment, state disability and/or paid family leave insurance benefits pursuant to the terms of applicable state law; 

(b)    continuation of existing participation in Company-sponsored group health benefit plans, at Employee’s full expense, under the United States federal law known as “COBRA” and/or under any applicable state counterpart law; 

(c)    any benefit entitlements that are vested as of the Separation Date pursuant to the terms of a Company-sponsored benefit plan governed by the United States federal law known as “ERISA;” 

(e)    violation of any foreign or United States federal, state or local statutory and/or public policy right or entitlement that, by applicable law, is not waivable; 

(f)    any claims, causes of actions, suits, lawsuits, debts, or demands whatsoever arising out of or relating to the Employee’s right to enforce the terms of this Release and the Separation Agreement dated as of February 28, 2014 between the Employee and the Company (the “Separation Agreement”); and 

        

(g)    any wrongful act or omission occurring after the date Employee signs this Release. 

Nothing in this Release prevents or prohibits Employee from filing a claim with a government agency, such as the U.S. Equal Employment Opportunity Commission, that is responsible for enforcing a law. However, Employee understands that, because Employee is waiving and releasing all claims “for monetary damages and any other forms of personal relief” through the date upon which Employee signs this Release, Employee may not recover any monetary relief from such a claim and may only seek and receive non-personal forms of relief through any such claim. 

Confidentiality of this Release.  Employee agrees, covenants and promises that Employee has not communicated or disclosed, and will not hereafter communicate or disclose, the terms of this Release, to any persons with the exception of: (1) members of Employee’s immediate family, Employee’s attorneys, accountants, tax, or financial advisors, each of whom shall be informed of this confidentiality obligation and shall agree to be bound by its terms; (2) to the Internal Revenue Service or state or local taxing authority; (3) as is expressly required or protected by law; or (4) in any action to challenge or enforce the terms of this Release provided that such disclosure is protected from public disclosure by an appropriate confidentiality order to the maximum extent permitted by applicable authority. Employee agrees to be liable for any breach of this Paragraph by the individuals identified in clause (1) above. 

No Admission.  Nothing about the fact or content of this Release shall considered to be or treated by Employee or the Company as an admission of any wrongdoing, liability or violation of law by Employee or by any Releasee.
 
Consideration & Revocation Periods; Effective Date.  Employee acknowledges that (a) the Company has advised him of his right to consult with an attorney prior to signing this Release; (b) he has carefully read and fully understands all of the provisions of this Release, and (c) he is entering into this Release, including the releases set forth herein, knowingly, freely and voluntarily in exchange for good and valuable consideration (including, but not limited to, the payments to be made under Section 2(b) of the Separation Agreement) to which he would not be entitled in the absence of signing this Release. Employee has twenty-one (21) calendar days to consider this Release, although he may sign it sooner, but not before February 28, 2014. 

In addition, for the period of seven (7) calendar days after the date Employee signs this Release (“7-day Revocation Period”), Employee may revoke it by delivering written notice of revocation to the Company by hand-delivery or by facsimile or e-mail transmission using the street, facsimile or e-mail address for the Company stated below. 

Because of this 7-day Revocation Period, this Release will not become effective and enforceable until the eighth calendar day after the date Employee signed it (the “Effective Date” referred to in the Separation Agreement), provided that Employee has delivered Employee’s signed Release to the Company, and Employee did not revoke the Release. 

        

Delivery to the Company.  Employee should return this Release, signed by Employee (and any notice of revocation, if applicable) to: 

Valeant Pharmaceuticals International, Inc. 
700 U.S. Highway 202/206
Bridgewater, NJ 08807
Attn: Vice President, Human Resources 

Judicial Interpretation/Modification; Severability. In the event that this Release shall be held to be void, voidable, unlawful or, for any reason, unenforceable, the Release shall be voidable at the sole discretion of the Company. 

Governing Law and Venue.  This Release shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without regard to the application of any choice-of-law rules that would result in the application of another state’s laws.

Changes to Release. No changes to this Release can be effective except by another written agreement signed by Employee and by the Chief Executive Officer. 

Complete Agreement. Except for the Separation Agreement, this Release, assuming it is executed and not revoked during the 7-day Revocation Period, cancels, supersedes and replaces any and all prior agreements (written, oral or implied-in-fact or in-law) between Employee and the Company regarding all of the subjects covered by this Release. This Release and the Separation Agreement (and the documents referenced therein) are the full, complete and exclusive agreement between Employee and the Company regarding all of the subjects covered by this Release and the Separation Agreement, and neither the Employee nor the Company is relying on any representation or promise that is not expressly stated in this Release or the Separation Agreement. 

I HAVE READ THIS RELEASE. I UNDERSTAND THAT I AM GIVING UP IMPORTANT RIGHTS. I AM AWARE OF MY RIGHT TO CONSULT WITH AN ATTORNEY OF MY OWN CHOOSING DURING THE CONSIDERATION PERIOD, AND THAT THE COMPANY HAS ADVISED ME TO UNDERTAKE SUCH CONSULTATION BEFORE SIGNING THIS RELEASE. I SIGN THIS RELEASE FREELY AND VOLUNTARILY, WITHOUT DURESS OR COERCION. 

Date:                            
Daniel WechslerCOLB 03.31.2014 EX 10.1 SERP - DL

EXHIBIT 10.1
COLUMBIA STATE BANK 
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

ARTICLE I

PURPOSE AND EFFECTIVE DATE

The purpose of this Supplemental Executive Retirement Plan (hereinafter the “Plan”) is to provide supplemental retirement benefits for certain key employees of COLUMBIA STATE BANK (hereinafter “Bank” or “Employer”), a bank organized and existing under the laws of the state of Washington. It is intended that the Plan will aid in retaining and attracting individuals of exceptional ability by providing them with these benefits. This Columbia State Bank Supplemental Executive Retirement Plan Agreement (hereinafter “Agreement”) is made and entered into effective as of July 1, 2013, by and between Columbia State Bank (hereinafter “Bank” or “Employer”) and David Lawson (hereinafter “Executive” or “Participant”). 

WHEREFORE, the Bank and Executive hereby agree to the following;  

ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise:

2.1    Actuarial Equivalent. The term “Actuarial Equivalent” means equivalence in value between two or more forms and/or times of payment based on a determination by an actuary chosen by the Committee, using sound actuarial assumptions at the time of such determination.

2.2    Administrator.  The Bank shall be the "Administrator" and, solely for the purposes of ERISA (as defined below), the "fiduciary" of this Agreement where a fiduciary is required by ERISA.

2.3    Applicable Percentage.  The term “Applicable Percentage” is the percentage of the Executive Benefit to which Executive shall be entitled based on (a) the date on which the Executive Separates From Service or Terminates Employment with the Bank or (b) one hundred percent (100%), as stipulated herein for certain described events (such as Involuntary Termination or Termination for Good Reason within two years following a Change in Control, or the Executive's Disability). Subject to the forgoing, the Applicable Percentage shall be as follows:

		
	DATE OF SEPARATION FROM SERVICE
	APPLICABLE PERCENTAGE

	
		
	July 1, 2013 through June 30, 2014
	0%

	July 1, 2014 through June 30, 2015
	15%

	July 1, 2015 through June 30, 2016
	20%

	July 1, 2016 through June 30, 2017
	25%

	July 1, 2017 through June 30, 2018
	30%

1 

	
		
	July 1, 2018 through June 30, 2019
	35%

	July 1, 2019 through June 30, 2020
	40%

	July 1, 2020 through June 30, 2021
	45%

	July 1, 2021 through June 30, 2022
	50%

	July 1, 2022 through June 30, 2023
	55%

	July 1, 2023 through June 30, 2024
	60%

	July 1, 2024 through June 30, 2025
	65%

	July 1, 2025 through June 30, 2026
	70%

	July 1, 2026 through June 30, 2027
	75%

	July 1, 2027 through June 30, 2028
	80%

	July 1, 2028 through June 30, 2029
	85%

	July 1, 2029 through June 30, 2030
	90%

	July 1, 2030 through June 30, 2031
	95%

	July 1, 2031 and thereafter
	100%

2.4    Base Salary. "Base Salary" shall mean the regular cash compensation actually paid      to  Executive  for  services  rendered  or  labor  performed  by Executive during a given calendar year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards. This amount shall include amounts Executive could have received in cash in lieu of (i)  contributions made on  Executive's  behalf  to  a  qualified  Plan  maintained  by the Bank  or  to   any  cafeteria   plan  under  Section  125  of  the  Code maintained by  the Employer and  (ii) deferrals of  compensation  made at the Executive's election  pursuant to a plan or arrangement of the Employer.

2.5    Board.  “Board” means the Board of Directors of Columbia State Bank.

2.6    Change in Control.  For the purpose of this Agreement, a Change in Control shall include any of the following (and for the purposes of this provision, the term “corporation” shall mean “the Bank” as defined above):

		
	A.   
	Change in the Ownership of a Corporation. A change in the ownership of a corporation occurs on the date that any one person or persons acting as a group (as defined in IRC 409A), acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of such corporation. The acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the corporation.

		
	B. 
	Change in the Effective Control of a Corporation. A change in the effective control of the corporation shall be deemed to occur on either of the following dates: 

(i) The date any one person, or persons acting as a group  acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the corporation possessing thirty  percent (30%) or more of the total voting power of the stock of such corporation; or

2 

(ii) The date a majority of members of the corporation’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors before the date of the appointment or election. 

		
	C. 
	Change in the Ownership of a Substantial Portion of a Corporation’s Assets. A change in the ownership of a substantial portion of a corporation’s assets shall be deemed to occur on the date that any one person or group acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately before such acquisition or acquisitions. No Change in Control shall result if the assets are transferred to certain entities controlled directly or indirectly by the shareholders of the transferring corporation. 

In addition, to constitute a change in control event with respect to the Executive, the change in control event must relate to (i) the corporation for whom Executive is performing services at the time of the Change in Control; (ii) The corporation that is liable for the payment of the amounts described herein (or all corporations liable for the payment if more than one corporation is liable) but only if either the deferred compensation is attributable to the performance of service by the Executive for such corporation(s) or there is a bona fide business purpose for such corporation(s) to be liable for such payment and, in either case, no significant purpose of making such corporation(s) liable for such payment is the avoidance of Federal income tax; or  (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii) above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (i) or (ii) above. 

2.7    The Code.  The "Code" shall mean the Internal Revenue Code of 1986, as amended (the “Code").

2.8    Committee.  “Committee” means the Compensation Committee of the Board of Directors of Columbia State Bank.

2.9    Disability/Disabled.  For the purposes of this Agreement, Executive will be considered Disabled if:

		
	A.  
	The Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or  

		
	B.  
	The Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employee’s employer.

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2.10    Early Commencement Reduction Factor. The term “Early Commencement Reduction Factor” is the amount by which Executive’s benefit shall be reduced based on the benefit being paid prior to Executive’s attaining the Normal Retirement Age. The amount of the Early Commencement Reduction Factor shall be determined as follows: for each year (or partial year) that an Executive’s benefit hereunder is paid prior to his attainment of the Normal Retirement Age, then the benefit amount shall be reduced by a factor of Five Percent (5%). Thus, if an executive with a Normal Retirement Age of Sixty-Two (62) begins receiving payments at age Fifty-Nine (59), the amount of the annual benefit shall be reduced by 15% (62- 59 = 3; 3 x 5%= 15%).  

2.11    Early Retirement Age. The “Early Retirement Age” shall be age fifty-five (55). 
    
2.12    ERISA.  The term "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
    
2.13    Effective Date.  The term “Effective Date” shall mean the date first written above.
2.14    Employer. The term “Employer” shall mean Columbia State Bank, any subsidiaries or affiliates thereof, or any successors thereto.

2.15    Executive Benefit. For the purposes of this Agreement, then term “Executive Benefit” shall refer to the annual amount to which Executive is entitled to receive pursuant to this Agreement. In addition, as the Executive Benefit is defined in terms of a lifetime annuity, Executive shall have the rights under 409A to elect an alternate annuity payment method, as specified herein. Amounts actually received by the Executive, however, shall be determined pursuant to Paragraphs 1 through 5 (including sub-paragraphs, as applicable), forfeited, reduced or adjusted to the extent:  (a) required under the other provisions of this Agreement; (b) required by reason of the lawful order of any regulatory agency or body having jurisdiction over the Employer; or (c) required in order for the Employer to comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).

2.16    Involuntary Termination/ Involuntary Separation From Service. In accordance with IRC 409A, the terms “Involuntary Termination” or “Involuntary Separation from Service” shall mean a Separation from Service due to the independent exercise of the unilateral authority of the Bank to terminate the Executive’s services, other than due to the Executive’s implicit or explicit request, where the Executive was willing and able to continue performing services (and not as the result of a Disability of a Termination For Cause).

2.17    IRC 409A. The term “IRC 409A” shall refer to the final regulations issued by the IRS and the Treasury Department under Section 409A of the Code. 

2.18    Normal Retirement / Normal Retirement Age.  The term "Normal Retirement" shall mean the Executive’s Separation From Service on or after attaining the Normal Retirement Age of Sixty-Five (65) and for reasons other than a Termination for Cause, because of a Disability, or pursuant to the provisions of paragraph 5.4.

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2.19    Participant. For the purpose of this Agreement, the terms “Executive” and “Participant” shall be interchangeable. 

2.20    Remain Employed. For the purpose of this Agreement, the term “Remain(s) Employed” shall mean that Executive has not experienced a Separation From Service. 

2.21    Separation From Service/ Termination of Employment.  The terms Separation From Service (Separates From Service) and Termination of Employment shall be used interchangeably for the purposes of this Agreement and shall be interpreted in accordance with the provisions of IRC 409A. Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the employee will perform after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than twenty (20%) percent of the average level of bona fide services performed (as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the employer  if the employee has been providing services to the employer less than 36 months). There shall be no Separation From Service while the Executive is on military leave, sick leave or other bona fide leave of absence, as long as such leave does not exceed six (6) months, or if longer, so long as the individual retains a right to re-employment with the service recipient under an applicable statute or by contract.

2.22    Specified Employee. The term “Specified Employee” means an employee who, as of the date of the employee’s Separation from Service, is a key employee of an employer of which any stock is publicly traded on an established securities market or otherwise. An employee is a key employee if the employee meets the requirements of section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on a specified employee identification date. If Executive is a key employee as of a specified employee identification date, then Executive shall be treated as a key employee for the entire twelve (12) month period beginning on the specified employee effective date. 

2.23    Target Benefit Amount. For the purposes of this Agreement, the “Target Benefit Amount” shall be an amount equal to the lesser of the following: sixty percent (60%) of the average of Executive’s three highest years of Base Salary or Eighty Eight Thousand, Ninety-Eight Dollars ($88,098).
    
2.24    Termination For Cause. For the purpose of this Plan, a Termination For Cause shall be defined as a Termination  because of any of the following:
  
		
	A.
	Willful misfeasance or gross negligence; 

		
	B.
	Conduct demonstrably and significantly harmful to Employer or a financial institution subsidiary; or

		
	C.
	Conviction of a felony. 

2.25    Termination For Good Reason. A termination shall be deemed to be for Good Reason if after a Change of Control, Executive Separates From Service on or after the occurrence of any of the below events, and such events occur without the Executive’s consent: 

5 

		
	A.
	A material diminution in the Executive’s base compensation; 

		
	B.
	A material diminution in the Executive’s authority, duties, or responsibilities;

		
	C. 
	A material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report, including a requirement that an Executive report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation (or similar governing body with respect to an entity other than a corporation);

		
	D.
	A material diminution in the budget over which the Executive retains authority;

		
	E.
	A material change in the geographic location at which the Executive must perform the services;

		
	F.
	Any other action or inaction that constitutes a material breach by the Employer of the agreement under which the Executive provides services.  

2.26    Voluntary Termination. The term “Voluntary Termination” shall mean a Separation From Service elected by the Executive and not as a result of a Disability or For Good Reason.  

2.27    Years of Service. The term “Years of Service” shall  mean the twelve (12) consecutive month period beginning on a Participant’s date of hire and any twelve (12) month anniversary thereof, during the entirety of which time the Participant is an employee of the Company and has not experienced a Separation From Service. Service with a subsidiary or other entity controlled by the Company before the time such entity became a subsidiary or under such control shall not be considered credited “Service” unless the Plan Administrator specifically agrees to credit such service.

ARTICLE III
SCOPE, PURPOSE AND EFFECT

3.1    Not a Contract of Employment.  Although this Agreement is intended to provide the Executive with an additional incentive to remain in the employ of the Employer, this Agreement shall not be deemed to constitute a contract of employment between the Executive and the Employer nor shall any provision of this Agreement restrict or expand the right of the Employer to terminate the Executive's employment. This Agreement shall have no impact or effect upon any separate written Employment Agreement which the Executive may have with the Employer, it being the parties' intention and agreement that unless this Agreement is specifically referenced in said Employment Agreement (or any modification thereto), this Agreement (and the Employer's obligations hereunder) shall stand separate and apart and shall have no effect on or be affected by, the terms and provisions of said Employment Agreement.

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3.2    Fringe Benefit. The benefits provided by this Agreement are granted by the Bank as a fringe benefit to the Executive and are not a part of any salary reduction plan or any arrangement deferring a bonus or a salary increase.  The Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

3.3    Prohibited Payments. Notwithstanding anything in this Agreement to the contrary, if any payment made under this Agreement is a “golden parachute payment” as defined in Section 28(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the Rules and Regulations of the Federal Deposit Insurance Corporation (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a Bank Regulator, no payment shall be made hereunder without complying with said FDIC Rules.

ARTICLE IV

PAYMENT RESTRICTIONS AND LIMITATIONS

4.1    Delay in Payments for Specified Employee in the Event of a Separation From Service and Compliance With IRC 409A.  In the case of any Employee who is a Specified Employee as of the date of a Separation from Service, then a payment conditioned upon a Separation from Service may not be made before the date that is six (6) months after the date of Separation from Service (or, if earlier than the end of the six-month period, the date of death of the Specified Employee).  

In the event payments to which the Executive would otherwise be entitled during the first six (6) months are subject to this six (6) month delay in payment, then such payments shall be accumulated and paid on the first day of the seventh month following the date of Separation from Service. Payments will then continue thereafter as called for pursuant to the terms of this Agreement. 

Notwithstanding any provision existing in this Agreement or any amendment thereto, it is the intent of the Bank and the Executive that any payment or benefit provided pursuant to this Agreement shall be made and paid in a manner, at a time and in a form which complies with the applicable requirements of IRC Section 409A, in order to avoid any unfavorable tax consequences resulting from any such failure to comply. 

4.2      Modifying Form of Benefit Payment. Pursuant to the terms of the Agreement, and consistent Code Section 409A, when permitted herein, instead of having the Executive Benefit paid as a single life annuity, Executive may elect to have the benefit paid as follows: (i) A joint and survivor annuity with an actuarial equivalent of the benefit owing pursuant to the Agreement, with payment continued to the surviving spouse in the same amount as the amount paid to Executive, or (ii) A joint and survivor annuity in equal value to the actuarial equivalent of the benefit owing pursuant to the Agreement, with payment continued to the surviving spouse (registered domestic partner) in one-half of the amount paid to Executive. (For the purpose of this Agreement, the term “spouse” shall include a registered domestic partner).

4.3    Withholding of Payroll Taxes. The Employer shall withhold from payments made hereunder any taxes required to be withheld from a Participant’s wage under federal, state or local law. 

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ARTICLE V

PAYMENT OF EXECUTIVE BENEFITS

Executive Benefit payments due hereunder shall be payable under this Agreement pursuant to only (1) provision herein below. The date and circumstances of Executive’s Separation From Service shall determine which paragraph shall be used to calculate the Executive Benefit payment due. 

5.1       Executive Benefit Payments in the Event of Normal Retirement. Subject to the non-compete provisions of Paragraph 5.8 below, the Executive Benefit under this provision shall be determined as follows:
 
		
	A.
	Amount of Benefit. In the event Executive Separates From Service on a date which constitutes Normal Retirement as defined herein, then the Executive shall receive an amount calculated as follows:  the Applicable Percentage (as of the Separation From Service date) of the Target Benefit Amount. In addition to the forgoing, the annual Executive Benefit amount shall be increased at the rate of two percent (2%) each year, beginning on the first anniversary of the first Executive Benefit payment and annually thereafter for so long as Executive is entitled to receive an Executive Benefit. 

 
		
	B.
	Payment Method. This Annual Executive Benefit shall be paid in twelve (12) substantially equal monthly installments, with payments commencing on the first day of the first month following Executive’s Separation From Service and continuing until the death of the Executive.  

As this Executive Benefit is a lifetime annuity, then in the alternative, and in compliance with Code Section 409A, Executive may elect one (1) of two (2) alternative annuity payout methods as presented in Exhibit A, the Distribution Election Form. These optional methods consist of joint and survivor annuities with an Actuarial Equivalent value equal to the single life Executive Benefit, with payments continued to the survivor in varying amounts. Exhibit B, attached hereto, provides a hypothetical example of how the benefit payments might differ between a single life annuity and a joint life annuity. The benefit payment commencement date and schedule shall otherwise remain unchanged. Any election to use an alternate annuity payment method must be made prior to the payment start date and, other than as addressed herein below, Executive shall not have the ability to modify the form of annuity elected once payments have begun. In the event , however,  that a joint and survivor annuity option is elected and the Executive’s Spouse pre-deceases Executive, then for all payments made to Executive after the Executive’s spouse’s death, the amounts payable under this Agreement shall increase and be equal to the payment amounts Executive would have received under a single life annuity option. Executive shall not be able then to designate a new spouse and reinstate joint life annuity payments. 
 

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5.2      Executive Benefit Payments on or After Attaining the Early Retirement Age but Before Attaining the Normal Retirement Age. 

Subject to the non-compete provisions of Paragraph 5.8 below, in the event Executive Separates From Service on or after attaining the Early Retirement Age, but before attaining the Normal Retirement Age, then the Executive Benefit to which Executive is entitled shall be determined as follows:
 
		
	A.
	Amount of Benefit. 

		
	(1)
	In the event Executive has completed Ten (10) Years of Service, then upon a Voluntary Separation From Service on or after attaining the Early Retirement Age (but before attaining the Normal Retirement Age), Executive shall be entitled to receive an amount calculated as follows: the Applicable Percentage (as of the Separation From Service date) of the Target Benefit Amount; however this amount shall be reduced by the Early Commencement Reduction Factor. In addition to the forgoing, the annual Executive Benefit amount shall be increased at the rate of two percent (2%) each year, beginning on the first anniversary of the first Executive Benefit payment and annually thereafter for so long as Executive is entitled to receive an Executive Benefit

		
	(2)
	In the event Executive has not completed Ten (10) Years of Service, then upon a Voluntary Separation From Service on or after attaining the Early Retirement Age (but before attaining the Normal Retirement Age), Executive shall forfeit all rights and benefits he may have had under the terms of this Agreement

		
	(3)
	In the event Executive is Involuntarily Terminated on or after attaining the Early Retirement Age (but before attaining the Normal Retirement Age), then Executive shall be entitled to receive an amount calculated as follows: the Applicable Percentage (as of the Separation From Service date) of the Target Benefit Amount; however this amount shall be reduced by the Early Commencement Reduction Factor. In addition to the forgoing, the annual Executive Benefit amount shall be increased at the rate of two percent (2%) each year, beginning on the first anniversary of the first Executive Benefit payment and annually thereafter for so long as Executive is entitled to receive an Executive Benefit. 

 
		
	B.   
	Payment Method. Any Executive Benefit due hereunder shall be paid in twelve (12) substantially equal monthly installments, with payments commencing on the first day of the first month following Executive’s Separation From Service and continuing until the death of the Executive.  

As this Executive Benefit is a lifetime annuity, then in the alternative, and in compliance with Code Section 409A, Executive may elect one (1) of two (2) alternative annuity payout methods as presented in Exhibit A, the Distribution Election Form. These optional methods consist of joint and

9 

survivor annuities with an Actuarial Equivalent value equal to the single life Executive Benefit, with payments continued to the survivor in varying amounts. Exhibit B, attached hereto, provides a hypothetical example of how the benefit payments might differ between a single life annuity and a joint life annuity. The benefit payment commencement date and schedule shall otherwise remain unchanged. Any election to use an alternate annuity payment method must be made prior to the payment start date and, other than as addressed herein below, Executive shall not have the ability to modify the form of annuity elected once payments have begun. In the event , however,  that a joint and survivor annuity option is elected and the Executive’s Spouse pre-deceases Executive, then for all payments made to Executive after the Executive’s spouse’s death, the amounts payable under this Agreement shall increase and be equal to the payment amounts Executive would have received under a single life annuity option. Executive shall not be able then to designate a new spouse and reinstate joint life annuity payments. 
 
            5.3       Executive Benefit Payments in the Event of Involuntary or Voluntary Termination Prior to Attaining the Early Retirement Age. 
 
Subject to the non-compete provisions of Paragraph 5.8 below, in the event Executive Separates From Service prior to attaining the Early Retirement Age, then the Executive Benefit to which Executive is entitled shall be determined as follows:

		
	A.
	Benefit Amount. 

		
	(1)
	In the event the Executive is Involuntarily Terminated prior to attaining the Early Retirement Age,  then Executive shall be entitled to receive an Executive Benefit in an amount equal to the following: the Actuarial Equivalent of the Applicable Percentage (as of the Separation From Service date) of the Target Benefit Amount. 

 
		
	(2)
	In the event the Executive Voluntarily Terminates employment with the Bank prior to attaining the Early Retirement Age, then the Executive Benefit shall be determined as follows: (i) In the event Executive has attained an AP of 100%, then he shall be entitled to receive an Executive Benefit in an amount equal to the Actuarial Equivalent of the Applicable Percentage of the of the Target Benefit Amount; (ii) In the event Executive has not attained an Applicable Percentage of 100%, he shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement.

		
	B.  
	Payment Method. This Executive Benefit shall be paid in one (1) lump sum one (1) year following Separation From Service. 

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5.4       Termination Following a Change in Control.  Benefits hereunder shall be determined as follows: 
 
		
	A.
	Benefit Amount. 

		
	(1)
	Involuntary Termination or Termination for Good Reason. In the event Executive is Involuntarily Terminated or Terminates for Good Reason following a Change in Control, then the Applicable Percentage shall be deemed to be that percentage Executive would have received had he Remained Employed until attaining the Normal Retirement Age of Sixty-Five (65). Executive shall then be entitled to receive an annual amount calculated as follows: the Applicable Percentage of the Target Benefit Amount. Executive shall NOT be subject to the non-compete provisions of Paragraph 5.8 below. 

 
		
	(2)
	Voluntary Termination. In the event Executive Voluntarily Separates From Service following a Change in Control, then Executive shall be entitled to receive one of the following amounts, depending on the circumstances specified below:

 
a.     If Executive has attained the Early Retirement Age and has completed ten (10) Years of Service, if he has attained an Applicable Percentage of One Hundred Percent (100%), or if he has attained the Normal Retirement Age at the time of such Separation From Service, then he shall receive an amount calculated as follows: the Applicable Percentage of the Target Benefit Amount. Executive shall be subject to the non-compete provisions of Paragraph 5.8 below.
 
b.     In the event Executive does not qualify for Normal Retirement and does not satisfy the requirements of Paragraph 5.4A(2)a above, then in the event Executive Voluntarily Separates From Service following a Change in Control, he shall forfeit all rights and benefits he may have had under the terms of this Agreement.
 
B.                Benefit Payments.  If Executive is entitled to receive a benefit pursuant to the terms of this Paragraph 5.4, then the benefit shall be payable as follows:
 
		
	(1)
	In the event Executive has qualified for Early or Normal Retirement, then Executive Benefit payments shall commence on the first day of the first month following the Executive’s Separation From Service and shall be paid in twelve (12) substantially equal monthly installments, with payments commencing on the first day of the first month following Executive’s Separation From Service and continuing until the death of Executive. In addition to the forgoing, the annual Executive Benefit amount shall be increased at the rate of two percent (2%) each year, beginning on the first anniversary of the first Executive Benefit payment and annually thereafter for so long as Executive is entitled to receive an Executive Benefit. 

11 

As this Executive Benefit is a lifetime annuity, then in the alternative, and in compliance with Code Section 409A, Executive may elect one (1) of two (2) alternative annuity payout methods as presented in Exhibit A, the Distribution Election Form. These optional methods consist of joint and survivor annuities with an Actuarial Equivalent value equal to the single life Executive Benefit, with payments continued to the survivor in varying amounts. Exhibit B, attached hereto, provides a hypothetical example of how the benefit payments might differ between a single life annuity and a joint life annuity. The benefit payment commencement date and schedule shall otherwise remain unchanged. Any election to use an alternate annuity payment method must be made prior to the payment start date and, other than as addressed herein below, Executive shall not have the ability to modify the form of annuity elected once payments have begun. In the event , however,  that a joint and survivor annuity option is elected and the Executive’s Spouse pre-deceases Executive, then for all payments made to Executive after the Executive’s spouse’s death, the amounts payable under this Agreement shall increase and be equal to the payment amounts Executive would have received under a single life annuity option. Executive shall not be able then to designate a new spouse and reinstate joint life annuity payments. 
 
		
	(2)
	In the event Executive has not yet qualified for Early or Normal Retirement, then the Actuarial Equivalent of the Executive Benefit shall be paid in one (1) lump sum one (1) year following Separation From Service. 

 
5.5       Disability.  In the event that Executive becomes Disabled prior to Separating From Service, then upon such Disability, the Applicable Percentage shall be deemed to be One Hundred Percent (100%) and the Participant shall be entitled to be paid a lump sum amount equal to the Actuarial Equivalent value of the following: the Applicable Percentage of the Target Benefit Amount. This lump sum payment shall be made in the first (1st) day of the first (1st) month following Disability. 

5.6        Termination For Cause.  In the event Executive is Terminated For Cause at any time after the effective date of this Agreement, then he shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement.

5.7       Death.
 
		
	A.
	Benefit Amount. 

		
	(1)
	Death Prior to Separation From Service.  In the event Executive dies prior to Separating From Service, then there is no death benefits payable under this Agreement. Any such benefits would be payable pursuant to a Split Dollar Life Insurance Agreement, if any exists. 

 

12 

		
	(2)
	Death After Separation From Service and After Becoming Entitled to Receive Payment, but Prior to Receiving Any or All Such Payments. In the event Executive dies after Separating From Service and after becoming entitled to the benefits specified under this Agreement, then payments shall only be made following Executive’s death if Executive has elected a joint and survivor payment option.

5.8     Forfeiture in the Event of Breach of Non-Competition Agreement. Notwithstanding any other provision of this Agreement, the Executive Benefit due pursuant to the provisions of Paragraphs, 5.1, 5.2, 5.3 5.4A(2) and 5.5 shall be forfeited and no Executive Benefit shall be due the Executive hereunder if the Executive enters into competitive activity in the Employer's market area within the three (3) year period beginning on the date of the Executive's termination of Employment. To the extent Executive is paid an Executive Benefit under this Agreement and breaches this provision, Employer shall not only be excused from paying any future benefit, but Employer shall have the right to seek reimbursement for all amounts previously paid out under this Agreement. For the purposes of this Agreement, “competitive activity” means acting directly or indirectly as an employee, agent, stockholder (other than passive holdings of less than one percent (1%) of the outstanding shares of a publicly-traded company), member, director, co-partner or in any other individual or representative capacity on behalf of any bank or financial institution (including without limitation trust company, finance company, leasing company or any entity that provides credit). The Employer's market area is defined as the following counties in the State of Washington and all counties bordering on any such county and any county in which the Employer maintains a branch or other office, now or at the time of the Executive's termination of Employment:  Cowlitz, King, Kitsap, Pierce and Thurston.

ARTICLE VI

ADMINISTRATION

6.1    Committee and Duties.  This Plan shall be administered by an Administrative Committee which shall consist of not less than three persons appointed by the Board of Directors. Any member of the Committee may be removed at any time by the Board.  Any member may resign by delivering his written resignation to the Board.  Upon the existence of any vacancy, the Board may appoint a successor.  The Committee shall have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan.  A majority of the members of the Committee shall constitute a quorum for the transaction of business. A majority vote of the Committee members constituting a quorum shall control any decision.

6.2    Agents.  In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer.

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

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6.4    Indemnity of Committee.  The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense, or liability arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct.

ARTICLE VII

CLAIMS PROCEDURE

7.1    Claim.    In the event a dispute arises over the benefits under this executive plan and benefits are not paid to the Executive (or to the Executive’s beneficiary[ies], if applicable) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above in accordance with the following procedures:
    
		
	A. 
	Written Claim.  The claimant may file a written request for such benefit to the Plan Administrator.

		
	B. 
	Claim Decision.  Upon receipt of such claim, the Plan Administrator shall respond to such claimant within ninety (90) days after receiving the claim.  If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional ninety (90) days for reasonable cause by notifying the claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

If the claim is denied in whole or in part, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

		
	(i)
	The specific reasons for the denial;

		
	(ii)
	The specific reference to pertinent provisions of the Agreement on which the denial is based;

		
	(iii)
	A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

		
	(iv)
	Appropriate information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits applicable to such procedures; and

		
	(v)
	A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

		
	C.  
	Request for Review.  Within sixty (60) days after receiving notice from the Plan Administrator that a claim has been denied (in part or all of the claim), then  claimant (or their duly authorized representative) may file 

14 

with the Plan Administrator, a written request for a review of the denial of the claim. 

The claimant (or his duly authorized representative) shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.  The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

		
	D.  
	Decision on Review.  The Plan Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review.  If the Plan Administrator determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The notice of extension must set forth the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render its decision.

In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

The Plan Administrator shall notify the claimant in writing of its decision on review.  The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

(i)    The specific reasons for the denial;
		
	(ii)
	A reference to the specific provisions of the Agreement on which the denial is based;

		
	(iii)
	A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(iv)    A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).  

		
	E.
	Special Timing Rules for Disability Claims. In the event a claim above is a claim for disability benefits, then the applicable time periods for notifying claimants regarding benefits determinations shall be reduced as required by 29 CFR 2560.503-1 (I.e., (a) the ninety (90) day response time with the possibility of a ninety (90) day extension in Section 8.2B shall be shortened to a forty-five (45) day response time with the possibility of a thirty (30) day extension, and (b) the sixty (60) day response time with the possibility of a sixty (60) day extension in shall be shortened to a forty-five (45) day response time with the possibility of a forty-five (45) day extension). In addition, in the event of a disability claim, the Bank shall identify any medical or vocational expert whose advice was obtained by the Plan in connection with 

15 

the initial benefit determination, without regard to whether the advice was relied upon.  If the review is from an adverse benefit determination that was based in whole or in part on a medical judgment, the Bank shall consult with a health care professional that has appropriate training and experience in the field of medicine involved in the medical judgment and who is neither the individual who was consulted in connection with the adverse benefit determination that is under review nor the subordinate of such individual.  Any review of the denial of a claim made on account of disability shall be conducted by a person or persons who neither had any part in the initial benefit determination nor are subordinates of the persons who did.

7.2    Arbitration of Disputes. All unresolved claims, disputes and other matters in question arising out of or relating to this Plan or the breach or interpretation thereof, other than those matters which are to be determined by the Employer in its sole and absolute discretion, shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of the parties, of JAMS in Tacoma, Washington. In the event JAMS is unable or unwilling to conduct the arbitration provided for under the terms of this Paragraph, or has discontinued its business, the parties agree that a representative member, selected by the mutual agreement of the parties, of the American Arbitration Association (“AAA”), located in Tacoma, Washington, shall conduct the binding arbitration referred to in this Paragraph.  Notice of the demand for arbitration shall be filed in writing with the other party to this Plan and with ASP (or AAA, if necessary).  In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations.  The arbitration shall be subject to such rules of procedure used or established by JAMS, or if there are none, the rules of procedure used or established by AAA.  Any award rendered by JAMS or AAA shall be final and binding upon the successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with the provisions of the Washington Rules of Civil Procedure.  Any arbitration hereunder shall be conducted in Tacoma, Washington, unless otherwise agreed to by the parties.
        
7.3    Attorneys' Fees.  In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, (a) each party shall pay his own attorneys’ arbitration fees incurred (pursuant to the terms of this Agreement); (b) the prevailing party shall be entitled to recover from the other party reasonable expenses, attorneys' fees and costs incurred in the enforcement or collection of any judgment or award rendered.   The "prevailing party" means any party (one party or both parties, as the case may be) determined by the arbitrator(s) or court to be entitled to money payments from the other, not necessarily the party in whose favor a judgment is rendered.

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ARTICLE VIII

MISCELLANEOUS

8.1    Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301, and 401 of the Employee Retirement Income Security act of 1974, as amended (“ERISA”), and therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I ERISA.  Accordingly, the Plan shall terminate and no further benefits shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt.

8.2    Status as an Unsecured General Creditor and Rabbi Trust.  Notwithstanding anything contained herein to the contrary: (i) the Executive shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Employer as a result of this Agreement; (ii) none of the Bank’s assets shall be held in or under any trust for the benefit of the Executive or held in any way as security for the fulfillment of the obligations of the Bank under this Agreement; (iii) all of the Bank’s assets shall be and remain the general unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement shall be that of an unfunded and unsecured promise by the Bank to pay money in the future; and (v) the Executive shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement.

Notwithstanding subparagraphs (i) through (v) above, the Bank and the Executive acknowledge and agree that, in the event of a Change in Control, upon request of the Executive, or in the Bank’s discretion if the Executive does not so request and the Bank nonetheless deems it appropriate, the Bank shall establish, not later than the effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the "Trust" or "Trusts") upon such terms and conditions as the Bank, in its sole discretion, deems appropriate and in compliance with applicable provisions of the Code, in order to permit the Bank to make contributions and/or transfer assets to the Trust or Trusts to discharge its obligations pursuant to this Agreement.  The principal of the Trust or Trusts and any earnings thereon shall be held separate and apart from other funds of the Bank to be used exclusively for discharge of the Bank’s obligations pursuant to this Agreement and shall continue to be subject to the claims of the Bank’s general creditors until paid to the Executive in such manner and at such times as specified in this Agreement.

8.3    Non-assignability.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable.  No part of the amount payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

8.4    Not a Contract of Employment.  The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or his beneficiary, if applicable) shall have no rights against the Employer except

17 

as may otherwise be specifically provided herein.  Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time.

8.5    Protective Provisions. A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefit hereunder, and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer.

8.6    Terms.  Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply.

8.7    Captions.  The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

8.8    Governing Law.  The provisions of this Plan shall be construed, interpreted, and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Oregon.

8.9    Validity.  If any provision of this Plan shall be held illegal or invalid for any reason, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way.

8.10    Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of the Executive and the Bank.  Accordingly, the Bank shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement.  The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity.

8.11    Nonwaiver.  The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party's right thereafter to enforce each and every term and condition of this Agreement.

8.12    Partial Invalidity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity.

8.13    Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement 

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and contains all of the covenants and agreements between the parties with respect thereto.  Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

8.14    Modifications.  Any modification of this Agreement shall be effective only if it is in writing and signed by each party or such party's authorized representative, and only to the extent that it is compliant with all applicable codes and statutes, including but not limited to IRS Code Section 409A.

8.15    Notice.  Any notice required or permitted of either the Executive or the Bank under this Agreement shall be deemed to have been duly given, if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; and if by mail, on the third day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.

If to the Bank:        
            

If to the Executive:

8.16    IRS Section 280G Issues. If all or any portion of the amounts payable to the Participant under this Plan, either alone or together with other payments which the Participant has the right to receive from the Employer, constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Participant shall be responsible for the payment of such excise tax and Employer (and its successor) shall be responsible for any loss of deductibility related thereto; provided, however, that Employer and Participant shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code, but only to the extent that any agreement to minimize the impact of the Section 4999 excise tax shall comply in all respects with all applicable laws, including IRC Section 409A and regulations thereunder. If, at a later date, it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction, or otherwise) that the amount of excise taxes payable by the Participant is greater than the amount initially so determined, then the Participant shall pay an amount equal to the sum of such additional excise taxes and any interest, fines and penalties resulting from such underpayment.  The determination of the amount of any such excise taxes shall be made by the independent accounting firm employed by the Employer immediately prior to the change in control or such other independent accounting firm or advisor as may be mutually agreeable to Employer and Participant in the exercise of their reasonable good faith judgment.

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8.17    Opportunity To Consult With Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him 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, 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 paragraph. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.

___/s/   DAVID LAWSON____________        ____David Lawson_________________
Executive-    Signature and Date                     Print Name

COLUMBIA STATE BANK 

		
	By:__/s/ MELANIE J. DRESSEL________
	      Date:  __August 22, 2013_______________         Authorized Executive                    

Title:__CEO            __________

20 

EXHIBIT A TO THE
DISTRIBUTION ELECTION FORM FOR THE
COLUMBIA STATE BANK 
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

Pursuant to the terms of the Supplemental Executive Compensation Agreement, by and between me, David Lawson, and Columbia State Bank (hereinafter “Bank”), effective as of August 20, 2013 (“Agreement”), I have been granted a supplemental compensation benefit. 
Pursuant to Internal Revenue Code Section 409A, there are multiple restrictions and limitations regarding modifying the time and/or form of such payments; however an exception to these restrictions permits elections to change from a life annuity to another actuarially equivalent life annuity (prior to payments beginning). 

In the event no alternate method is selected above, then amounts due under this Agreement shall be paid out as a single life annuity based on the life of the Participant. Subject to the forgoing, and provided that payments have not yet begun, Executive may elect to have the Executive Benefit paid as follows:

Election of Actuarial Equivalent of Form of Benefit For Married Participant or Participant with Domestic Partner. Pursuant to the terms of the Agreement, and consistent Code Section 409A, instead of having my benefit paid as a single life annuity, with payments continuing until my death, I elect to have my benefit paid to me as designated below:
		
	_________
	A joint and survivor annuity with an actuarial equivalent of the benefit owing pursuant to the Agreement, with payment continued to the surviving spouse in the same amount as the amount paid to me.

		
	_________
	A joint and survivor annuity in equal value to the actuarial equivalent of the benefit owing pursuant to the Agreement, with payment continued to my surviving spouse (registered domestic partner) in one-half of the amount paid to me.

Acknowledgment of Limitations on Changes in Time and Form of Payment of Benefits.  All Actuarially Equivalent valuations must be in compliance with Code Section 409A and 1.409A-2(b)(2)(ii). In addition, when determining whether two life annuities are Actuarially Equivalent, the same actuarial assumptions and methods must be used in valuing each life annuity. This requirement applies over the entire term of Participant’s participation in the plan, such that the annuities must be actuarially equivalent at all times for the annuity options to be treated as one time and form of payment. However, provided the actuarial methods and assumptions are reasonable, there is no requirement that consistent actuarial assumptions and methods be used over the term of the Participant’s participation in the plan. Accordingly, the plan may change the actuarial assumptions and methods used to determine the life annuity payments, provided that all of the actuarial assumptions and methods are reasonable.   

In the event, however, that a joint and survivor annuity option is selected, and that Participant’s spouse predeceases Participant, then for all payments made to Participant after the Participant’s spouse’s death, the amounts payable under this Agreement shall increase and be equal to the payment amounts Participant would have received under a single life annuity option. In addition, Participant shall no longer have the ability to make a new joint and survivor annuity election. 

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In the event no alternate method is selected above, then amounts due under this Agreement shall be paid out as a single life annuity. 

To the extent that any paragraph, term, or provision of the Agreement is not specifically amended herein, or in any other amendment thereto, said paragraph, term, or provision shall remain in full force and effect as set forth in said Agreement.

WHEREFORE, the Insured and a duly authorized Bank officer have signed this Amendment as of the written date

Signed:    /s/  DAVID LAWSON        Print Name:    David Lawson         
 
Dated: August 20, 2013                                  

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