Document:

Salary Continuation Agreement for Kevin McPhaill

 Exhibit 10.2 
 BANK OF THE SIERRA 
 SALARY CONTINUATION AGREEMENT 
 THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 1st day of January, 2007, by and between BANK OF THE SIERRA, a
state-chartered commercial bank located in Porterville, California (the “Company”) and KEVIN McPHAILL (the “Executive”). 
 The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business
success of the Company. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time. 
 Article 1 
 Definitions

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

	1.1	“Accrual Balance” means the liability that should be accrued by the Company, under Generally Accepted Accounting Principles (“GAAP”), for the
Company’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the
Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported annually by the Company to the Executive.

  

	1.2	“Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined
pursuant to Article 4. 

  

	1.3	“Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan
Administrator to designate one or more Beneficiaries. 

  

	1.4	“Board” means the Board of Directors of the Company as from time to time constituted. 

  

	1.5	“Change in Control” means the transfer of shares of the Company’s voting common stock such that one entity or one person acquires (or is deemed to acquire when
applying Section 318 of the Code) more than 50% of the Company’s outstanding voting common stock. 

	1.6	“Code” means the Internal Revenue Code of 1986, as amended. 

  

	1.7	“Disability” means Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment
which 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 (ii) is, by reason of any medically determinable physical or mental impairment which 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 or directors of the Company. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees or directors of the Company provided that the
definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social
Security Administration’s or the provider’s determination. 

  

	1.8	“Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six percent (6%). However, the Plan
Administrator, in its discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP and/or applicable bank regulatory guidance. 

  

	1.9	“Early Involuntary Termination” means that the Executive, prior to Normal Retirement Age, has been notified in writing that employment with the Company is
terminated for reasons other than an approved leave of absence, Termination for Cause, Disability, Early Voluntary Termination, or within twelve (12) months following a Change in Control. 

  

	1.10	“Early Voluntary Termination” means that the Executive, prior to Normal Retirement Age, has terminated employment with the Company for reasons other than
Termination for Cause, Disability, Early Involuntary Termination, or within twelve (12) months following a Change in Control. 

  

	1.11	“Effective Date” means January 1, 2007. 

  

	1.12	“Normal Retirement Age” means the Executive attaining age sixty-five (65). 

  

	1.13	“Plan Administrator” means the plan administrator described in Article 6. 

  

	1.14	“Plan Year” means each twelve-month period commencing on January 1st and ending on December 31st of each year. The initial Plan
Year shall commence on the Effective Date of this Agreement and end on the following January 1st.

  

	1.15	“Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Company if any stock of the
Company is 

 publicly traded on an established securities market or otherwise, as determined by the Plan Administrator
based on the twelve (12) month period ending each December 31 (the “identification period”) If the Executive is determined to be a Specified Employee for an identification period, the Executive shall be treated as a Specified
Employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of the fourth month following the close of the identification period. 
  

	1.16	“Termination for Cause” means Termination of Employment for: 

  

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

  

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

  

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

  

	1.17	“Termination of Employment” means the voluntary or involuntary termination of the Executive’s employment with the Company for reasons other than death. Whether
a Termination of Employment takes place is determined in accordance with the requirements of Code Section 409A based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Company and the
Executive intended for the Executive to provide significant services for the Company following such termination. A Termination of Employment will not have occurred if: 

  

	 	(a)	the Executive continues to provide services as an employee of the Company at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during
the immediately preceding three (3) full calendar years of employment (or, if employed less than three (3) years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual
remuneration earned during the final three (3) full calendar years of employment (or, if less, such lesser period), or 

  

	 	(b)	the Executive continues to provide services to the Company in a capacity other than as an employee of the Company at an annual rate that is fifty percent (50%) or more of the
services rendered, on average, during the immediately preceding three (3) full calendar years of employment (or if employed less than three (3) years, such lesser period) and the annual remuneration for such services is fifty percent
(50%) or more of the average annual remuneration earned during the final three (3) full calendar years of employment (or if less, such lesser period). 

 The Executive’s employment relationship will be treated as continuing intact while the Executive is on military leave, sick leave or other bona fide
leave of absence if the period of such leave of absence does not exceed six (6) months, or if longer, so long as the 

 Executive’s right to reemployment with the Company is provided either by statute or by contract. If
the period of leave exceeds six (6) months and there is no right to reemployment, a Termination of Employment will be deemed to have occurred as of the first date immediately following such six (6) month period. 
 Article 2 
 Distributions During
Lifetime 
  

	2.1	Normal Retirement Benefit. Upon the Executive reaching Normal Retirement Age while in the active service of the Company, the Company shall distribute to the Executive the
benefit described in this Section 2.1 in lieu of any other benefit under this Article. 

  

	 	2.1.1	Amount of Benefit. The annual benefit under this Section 2.1 is One Hundred Thousand Dollars ($100,000). 

  

	 	2.1.2	Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the within thirty
(30) days following Normal Retirement Age. The annual benefit shall be distributed to the Executive for fifteen (15) years. 

  

	2.2	Early Involuntary Termination Benefit. Upon Early Involuntary Termination, the Company shall distribute to the Executive the benefit described in this Section 2.2 in
lieu of any other benefit under this Article. 

  

	 	2.2.1	Amount of Benefit. The benefit under this Section 2.2 is one hundred percent (100%) of the Accrual Balance determined as of the end of the month preceding
Termination of Employment. 

  

	 	2.2.2	Distribution of Benefit. The Company shall distribute the benefit to the Executive in a lump sum within thirty (30) days following Termination of Employment.

  

	2.3	Early Voluntary Termination Benefit. Upon the Executive’s Early Voluntary Termination, the Executive will not be eligible for a benefit under this Agreement.

  

	2.4	Disability Benefit. If Executive experiences a Disability which results in a Termination of Employment prior to Normal Retirement Age, the Company shall distribute to
the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article. 

  

	 	2.4.1	Amount of Benefit. The benefit under this Section 2.4 is one hundred percent (100%) of the Accrual Balance determined as of the end of the month preceding
Termination of Employment. 

  

	 	2.4.2	Distribution of Benefit. The Company shall distribute the benefit to the Executive in a lump sum within thirty (30) days following Termination of Employment.

	2.5	Change in Control Benefit. Upon a Change in Control, followed within twelve (12) months by a Termination of Employment, the Company shall distribute to the Executive the
benefit described in this Section 2.5 in lieu of any other benefit under this Article. 

  

	 	2.5.1	Amount of Benefit. The benefit under this Section 2.5 is one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

  

	 	2.5.2	Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty
(30) days following Termination of Employment. The annual benefit shall be distributed to the Executive for fifteen (15) years. 

  

	 	2.5.3	Excess Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, and to the extent allowed by Code Section 409A, if any distribution(s) made
under this Section 2.5.3 would be treated as an “excess parachute payment” under Code Section 280G, the Company shall reduce such distribution(s) to the extent necessary to avoid treating the distribution(s) as an excess
parachute payment. 

  

	2.6	Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at
Termination of Employment, the provisions of this Section 2.6 shall govern all distributions hereunder. Benefit distributions that are made due to a Termination of Employment occurring while the Executive is a Specified Employee shall not be
made during the first six (6) months following Termination of Employment. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day
of the seventh month following the Termination of Employment. All subsequent distributions shall be paid in the manner specified. 

  

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

	2.8	Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Company may, subject to the terms of
Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment: 

  

	 	(a)	may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder; 

  

	 	(b)	must, for benefits distributable under Section 2.1, be made at least twelve (12) months prior to the first scheduled distribution; 

  

	 	(c)	must, for benefits distributable under Sections 2.1, 2.2, 2.4 and 2.5, delay the commencement of distributions for a minimum of five (5) years from the date the first
distribution was originally scheduled to be made; and 

  

	 	(d)	must take effect not less than twelve (12) months after the amendment is made. 

 Article 3 
 Distribution at Death 
  

	3.1	Death During Active Service. If the Executive dies while in the active service of the Company, the Company shall distribute to the Beneficiary the benefit described in this
Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2. 

  

	 	3.1.1	Amount of Benefit. The benefit under this Section 3.1 is Nine Hundred Ninety-Two Thousand Four Hundred Sixty-Seven Dollars ($992,467). 

  

	 	3.1.2	Distribution of Benefit. The Company shall distribute the benefit to the Beneficiary in a lump sum within thirty (30) days following receipt by the Company of the
Executive’s death certificate. 

  

	3.2	Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions,
the Company shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived. 

  

	3.3	Death After Termination of Employment But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but
dies prior to the commencement of said benefit distributions, the Company shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty
(30) days following receipt by the Company of the Executive’s death certificate. 

 Article 4 
 Beneficiaries 
  

	4.1	Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the
Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Company in which the Executive participates. 

  

	4.2	Beneficiary Designation: Change; Spousal Consent. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to
the Plan Administrator or its designated agent. If the Executive names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Plan Administrator, must be signed by the Executive’s spouse and
returned to the Plan Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently
dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to
time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form
filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death. 

  

	4.3	Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or
its designated agent. 

  

	4.4	No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the
Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate. 

  

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

 Article 5 
 General Limitations 
  

	5.1	Termination for Cause. Notwithstanding any provision of this Agreement to the 

  

	 	contrary, the Company shall not distribute any benefit under this Agreement if the Executive’s employment with the Company is terminated due to a Termination for Cause.

  

	5.2	Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance
company which issued a life insurance policy covering the Executive and owned by the Company denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other
reason. 

  

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

 Article 6 
 Administration of Agreement 
  

	6.1	Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall
appoint. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not
conflict with Section 409A of the Code and regulations thereunder. 

  

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

  

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

  

	6.4	Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or
liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 

	6.5	Company Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters
relating to the date and circumstances of the retirement, Disability, death, or Termination of Employment of the Executive, and such other pertinent information as the Plan Administrator may reasonably require. 

  

	6.6	Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth
the benefits to be distributed under this Agreement. 

 Article 7 
 Claims And Review Procedures 
  

	7.1	Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall
make a claim for such benefits as follows: 

  

	 	7.1.1	Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the
contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event
that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant. 

  

	 	7.1.2	Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 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 90 days by notifying the claimant in writing, prior to the end of the initial 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. 

  

	 	7.1.3	Notice of Decision. If the Plan Administrator denies part or all of the claim, 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: 

  

	 	(a)	The specific reasons for the denial; 

  

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

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

  

	 	(d)	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and 

  

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

  

	7.2	Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of
the denial, as follows: 

  

	 	7.2.1	Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the
Plan Administrator a written request for review. 

  

	 	7.2.2	Additional Submissions – Information Access. The claimant 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. 

  

	 	7.2.3	Considerations on Review. 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. 

  

	 	7.2.4	Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. 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 60 days by notifying the claimant in writing, prior to the end of the
initial 60-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. 

  

	 	7.2.5	Notice of Decision. 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: 

  

	 	(a)	The specific reasons for the denial; 

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

  

	 	(c)	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 

  

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

 Article 8 
 Amendments and Termination 
  

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

  

	8.2	Plan Termination Generally. This Agreement may be terminated only by a written agreement signed by the Company and the Executive, provided, however, this Agreement will
automatically terminate if no benefit is payable to the Executive due to the Executive’s Termination for Cause, suicide or misstatement as set forth in Article 5, or upon an Early Voluntary Termination. The benefit shall be the Accrual Balance
as of the date the Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made
at the earliest distribution event permitted under Article 2 or Article 3. 

  

	8.3	Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Company terminates this Agreement in the following
circumstances: 

  

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

  

	 	(b)	Upon the Company’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the 

 Executive’s gross income in the latest of (i) the calendar year in which the Agreement
terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or 
  

	 	(c)	Upon the Company’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all
distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Company does not adopt any new non-account balance plans for a minimum of five (5) years following
the date of such termination; 

 the Company may distribute the Accrual Balance, determined as of the date of the termination of
the Agreement, to the Executive in a lump sum subject to the above terms. 
 Article 9 
 Miscellaneous 
  

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

  

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

  

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

  

	9.4	Tax Withholding and Reporting. The Company shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the
Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Company’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further,
the Company shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder. 

  

	9.5	Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United
States of America. 

  

	9.6	Unfunded Arrangement. The Executive and the Beneficiary are general unsecured creditors of the Company for the distribution of benefits under this Agreement. The benefits
represent the mere promise by the Company to distribute such benefits. The 

 rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Company to which the Executive and Beneficiary have no preferred or secured claim.

  

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

  

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

  

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

  

	9.10	Alternative Action. In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Agreement, the Company or Plan
Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Company, provided that such alternative acts do not violate Section 409A of
the Code. 

  

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

  

	9.12	Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but
this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein. 

  

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

  

	
	 Bank of the Sierra

	 90 North Main Street

	 Porterville, CA 93257

 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as
of the date shown on the postmark on the receipt for registration or certification. 

 Any notice or filing required or permitted to be given to the Executive under this Agreement shall be
sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive. 
  

	9.14	Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the
requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement. 

 IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Company have signed this Agreement. 
  

					
	EXECUTIVE:	    	COMPANY:
		
		    	BANK OF THE SIERRA
			
	  
	    	By	 	  

	Kevin McPhaill	    		 	
			
		    	TitleFirst Amendment to the Salary Continuation Agreement for Kenneth Taylor

 Exhibit 10.3 
 BANK OF THE SIERRA 
 Salary Continuation Agreement 
 FIRST AMENDMENT 
 TO THE 
 BANK OF THE SIERRA 
 SALARY CONTINUATION AGREEMENT 
 DATED OCTOBER 1, 2002 
 FOR

 KENNETH TAYLOR 
 THIS FIRST AMENDMENT is adopted this      day of                     , 2006, effective as of
January 1, 2007, by and between Bank of the Sierra, a state-chartered commercial bank located in Porterville, California (the “Company”), and Kenneth Taylor (the “Executive”). 
 The Company and the Executive executed the Salary Continuation Agreement effective as of October 1, 2002 (the “Agreement”). 
 The undersigned hereby amend the Agreement for the purpose of bringing the Agreement into compliance with Section 409A of the Internal Revenue Code.
Therefore, the following changes shall be made: 
 Section 1.9 of the Agreement shall be deleted in its entirety and replaced by the
following: 
  

	1.9	“Plan Year” means a twelve-month period commencing on January 1st and ending on December 31st of each year.

 The following Section 1.9a shall be added to the Agreement immediately following Section 1.9: 

 

	1.9a	“Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Company if any stock of the
Company is publicly traded on an established securities market or otherwise, as determined by the plan administrator based on the twelve (12) month period ending each December 31 (the “identification period”) If the Executive is
determined to be a Specified Employee for an identification period, the Executive shall be treated as a Specified Employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of the fourth month
following the close of the identification period. 

 Section 1.11 of the Agreement shall be deleted in its entirety and
replaced by the following: 
  

	1.11	 “Termination of Employment” means the voluntary or involuntary termination of the Executive’s employment with the Company for reasons other
than death. Whether a Termination of Employment takes place is determined in accordance with the requirements of Code Section 409A based on the facts and circumstances surrounding the 

 BANK OF THE SIERRA 
 Salary
Continuation Agreement 
  

	 	termination of the Executive’s employment and whether the Company and the Executive intended for the Executive to provide significant services for the Company following such
termination. A Termination of Employment will not have occurred if: 

  

	 	(a)	the Executive continues to provide services as an employee of the Company at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during
the immediately preceding three (3) full calendar years of employment (or, if employed less than three (3) years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual
remuneration earned during the final three (3) full calendar years of employment (or, if less, such lesser period), or 

  

	 	(b)	the Executive continues to provide services to the Company in a capacity other than as an employee of the Company at an annual rate that is fifty percent (50%) or more of the
services rendered, on average, during the immediately preceding three (3) full calendar years of employment (or if employed less than three (3) years, such lesser period) and the annual remuneration for such services is fifty percent
(50%) or more of the average annual remuneration earned during the final three (3) full calendar years of employment (or if less, such lesser period). 

 The Executive’s employment relationship will be treated as continuing intact while the Executive is on military leave, sick leave or other bona fide
leave of absence if the period of such leave of absence does not exceed six (6) months, or if longer, so long as the Executive’s right to reemployment with the Company is provided either by statute or by contract. If the period of leave
exceeds six (6) months and there is no right to reemployment, a Termination of Employment will be deemed to have occurred as of the first date immediately following such six (6) month period. 
 Section 2.1.1 of the Agreement shall be deleted in its entirety and replaced by the following: 
  

	2.1.1	Amount of Benefit. The annual benefit under this Section 2.1 is One Hundred Thousand Dollars ($100,000). 

 Sections 2.1.3 and 2.5.3 of the Agreement shall be deleted in their entirety. 
 Section 2.5.2 of the Agreement shall be deleted in its entirety and replaced by the following: 
  

	2.5.2	Payment of Benefit. The Company shall pay the annual benefit determined in Section 2.5.1 to the Executive in 12 equal monthly installments commencing with
the month following Termination of Employment, paying the annual benefit to the Executive for a period of 15 years. 

 BANK OF THE SIERRA 
 Salary
Continuation Agreement 
 The following Sections 2.6, 2.7 and 2.8 shall be added to the Agreement immediately following
Section 2.5.2: 
  

	2.6	Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at
Termination of Employment, the provisions of this Section 2.6 shall govern all distributions hereunder. Benefit distributions that are made due to a Termination of Employment occurring while the Executive is a Specified Employee shall not be
made during the first six (6) months following Termination of Employment. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day
of the seventh month following the Termination of Employment. All subsequent distributions shall be paid in the manner specified. 

  

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

  

	2.8	Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Company may, subject to the terms of Section 7.1,
amend the Agreement to delay the timing or change the form of distributions. Any such amendment: 

  

	 	(a)	may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A and the regulations thereunder; 

  

	 	(b)	must, for benefits distributable under Sections 2.1, 2.3, 2.4 and 2.5, delay the commencement of distributions for a minimum of five (5) years from the date the first
distribution was originally scheduled to be made; and 

  

	 	(c)	must take effect not less than twelve (12) months after the amendment is made. 

 BANK OF THE SIERRA 
 Salary
Continuation Agreement 
 Article 3 of the Agreement shall be deleted in its entirety and replaced by the following: 
 Article 3 
 Death Benefits 
  

	3.1	Death During Active Service. If the Executive dies prior to Termination of Employment, the Company shall distribute to the Beneficiary the benefit described in this
Section 3.1. This benefit shall be distributed in lieu of any benefit under Article 2. 

  

	 	3.1.1	Amount of Benefit. The benefit under this Section 3.1 is Three Hundred Thirty-Four Thousand One Hundred Dollars ($334,100). 

  

	 	3.1.2	Distribution of Benefit. The Company shall distribute the benefit to the Beneficiary in a lump sum within thirty (30) days following receipt by the Company of the
Executive’s death certificate. 

  

	3.2	Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions,
the Company shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived. 

  

	3.3	Death After Termination of Employment But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies
prior to the commencement of said benefit distributions, the Company shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty
(30) days following receipt by the Company of the Executive’s death certificate. 

 Article 7 of the Agreement
shall be deleted in its entirety and replaced by the following: 
 Article 7 
 Amendments and Termination 
  

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

  

	7.2	 Plan Termination Generally. The Company and the Executive may mutually terminate this Agreement at any time. The benefit hereunder shall be the amount the
Company has accrued with respect to the Company’s obligations hereunder as of the date the 

 BANK OF THE SIERRA 
 Salary
Continuation Agreement 
  

	 	Agreement is terminated. Except as provided in Section 7.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after
such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3. 

  

	7.3	Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if this Agreement terminates in the following circumstances:

  

	 	(a)	Within thirty (30) days before or twelve (12) months after a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of
the assets of the Company as described in Section 409A(2)(A)(v) of the Code, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the
Company’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated
arrangements within twelve (12) months of the termination of the arrangements; 

  

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

  

	 	(c)	Upon the Company’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all
distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Company does not adopt any new non-account balance plans for a minimum of five (5) years following
the date of such termination; 

 the Company may distribute the amount the Company should have accrued with respect to the
Company’s obligations hereunder, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms. 
 The following Section 8.11 shall be added to the Agreement immediately following Section 8.10: 
  

	8.11	Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the
requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement. 

 BANK OF THE SIERRA 
 Salary
Continuation Agreement 
 The Schedule A attached to this Amendment supersedes any previous Schedule A attached or otherwise used in
connection with the Agreement. 
 IN WITNESS OF THE ABOVE, the Company and the Executive hereby consent to this First Amendment.

  

					
	Executive:	    	Bank of the Sierra
			
	  
	    	By	 	  

	Kenneth Taylor	    	Title

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