DIRECTOR SUPPLEMENTAL RETIREMENT PLAN
DIRECTOR AGREEMENT
THIS AGREEMENT is made and entered into this day of ,
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2002, by and between The East Carolina Bank, a bank organized and existing under
the laws of the State of North Carolina (hereinafter referred to as the "Bank"),
and ., a Director of the Bank (hereinafter referred to as the
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"Director").
WHEREAS, the Director is now in the service of the Bank and has for many
years faithfully served the Bank. It is the consensus of the Board of Directors
(hereinafter referred to as the "Board") that the Director's services have been
of exceptional merit, in excess of the compensation paid and an invaluable
contribution to the profits and position of the Bank in its field of activity.
The Board further believes that the Director's experience, knowledge of
corporate affairs, reputation and industry contacts are of such value, and the
Director's continued services so essential to the Bank's future growth and
profits, that it would suffer severe financial loss should the Director
terminate their services;
ACCORDINGLY, the Board has adopted The East Carolina Bank Director
Supplemental Retirement Plan Director Agreement (hereinafter referred to as the
"Director Plan") and it is the desire of the Bank and the Director to enter into
this Agreement under which the Bank will agree to make certain payments to the
Director upon the Director's retirement or to the Director's beneficiary(ies) in
the event of the Director's death pursuant to the Director Plan;
FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Director, and be considered a
non-qualified benefit plan for purposes of the Employee Retirement Security Act
of 1974, as amended ("ERISA"). The Director is fully advised of the Bank's
financial status and has had substantial input in the design and operation of
this benefit plan; and
NOW THEREFORE, in consideration of services the Director has performed in
the past and those to be performed in the future, and based upon the mutual
promises and covenants herein contained, the Bank and the Director agree as
follows:
I. DEFINITIONS
A. Effective Date:
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The Effective Date of the Director Plan shall be November 5, 2001.
B. Plan Year:
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Any reference to the "Plan Year" shall mean a calendar year from
January 1st to December 31st. In the year of implementation, the term
"Plan Year" shall mean the period from the Effective Date to December
31st of the year of the Effective Date.
C. Retirement Date:
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Retirement Date shall mean the first day of the calendar month
following the latter of (i) the date in which the Director reaches age
seventy (70) or (ii) the date upon which the Director actually retires
from service with the Bank after reaching age seventy (70).
D. Termination of Service:
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Termination of Service shall mean the Director's voluntary resignation
of service by the Director or the Bank's discharge of the Director
without cause, prior to the Normal Retirement Age (Subparagraph I
[I]).
E. Index Retirement Benefit:
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In the event the Director receives the retirement benefit set forth in
Subparagraph II (A) herein, the Index Retirement Benefit for each
Director in the Director Plan for each Plan Year shall be equal to the
excess (if any) of the Index (Subparagraph I [F]) for that Plan Year
over the Opportunity Cost (Subparagraph I [G]) for that Plan Year,
divided by a factor equal to 1.18 minus the marginal tax rate.
In the event the Director elects to receive the benefit set forth in
Subparagraph II (G) herein, the Index Retirement Benefit for each
Director in the Director Plan for each Plan Year shall be equal to the
excess (if any) of the Index (Subparagraph I [F]) for that Plan Year
over the Opportunity Cost (Subparagraph I [G]) for that Plan Year.
F. Index:
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The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contract(s) described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be applied
as if such insurance contract(s) were purchased on the Effective Date
of the Director Plan.
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Insurance Company: Jefferson Pilot Life Insurance Company
Policy Form: Flexible Premium Adjustable Life
Policy Name: ESP VI
Insured's Age and Sex: 56, Male
Riders: None
Ratings: None
Option: Level
Face Amount: $105,000
Premiums Paid: $50,000
Number of Premium Payments: Single
Assumed Purchase Date: November 5, 2001
Insurance Company: Mass Mutual Life Insurance Company
Policy Form: Flexible Premium Adjustable Life
Policy Name: Strategic Life Exec
Insured's Age and Sex: 56, Male
Riders: None
Ratings: None
Option: Level
Face Amount: $111,500
Premiums Paid: $50,000
Number of Premium Payments: Single
Assumed Purchase Date: November 5, 2001
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates they were actually
purchased shall be used in calculations under this Director Plan. If
such contracts of life insurance are not purchased or are subsequently
surrendered or lapsed, then the Bank shall receive annual policy
illustrations that assume the above-described policies were purchased
or had not subsequently surrendered or lapsed. Said illustration shall
be received from the respective insurance companies and will indicate
the increase in policy values for purposes of calculating the amount
of the Index.
In either case, references to the life insurance contracts are merely
for purposes of calculating a benefit. The Bank has no obligation to
purchase such life insurance and, if purchased, the Director and the
Director's beneficiary(ies) shall have no ownership interest in such
policy and shall always have no greater interest in the benefits under
this Director Plan than that of an unsecured creditor of the Bank.
G. Opportunity Cost:
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The Opportunity Cost for any Plan Year shall be calculated by taking
the sum of the amount of premiums for the life insurance policies
described in the definition of "Index" plus the amount of any
after-tax benefits paid to
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the Director pursuant to the Director Plan (Paragraph II hereinafter)
plus the amount of all previous years' after-tax Opportunity Cost, and
multiplying that sum by the greater of either one of the following:
(i) the average after tax yield of a one-year Treasury xxxx, or (ii)
the Bank's average annualized after-tax Cost of Funds Expense as
determined by the Bank's third quarter call report as filed with the
appropriate regulatory agency.
H. Change of Control:
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Change of Control shall mean the direct or indirect acquisition by
another person, firm or corporation, by merger, share exchange,
consolidation, purchase or otherwise, of all or substantially all of
the assets or stock of the Bank or its parent company.
I. Normal Retirement Age:
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Normal Retirement Age shall mean the date on which the Director
attains age seventy (70).
J. Benefit Accounting:
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The Bank shall account for the benefit provided herein using the
regulatory accounting principles of the Bank's primary federal
regulator. The Bank shall establish an accrued liability retirement
account for the Director into which appropriate reserves shall be
accrued.
II. INDEX BENEFITS
A. Retirement Benefits:
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Subject to Subparagraphs II (D) and (G) hereinafter, a Director who
remains in the service of the Bank until the Normal Retirement Age
(Subparagraph I [I]) shall be entitled to receive an annual benefit
amount equal to the amount set forth in Exhibit A-1. Said payments
shall be made quarterly and shall commence at the beginning of the
Bank's first quarter following the Director's Retirement Date and
shall continue until the Director attains age seventy-seven (77). Upon
completion of the aforestated payments and commencing subsequent
thereto and subject to Subparagraph II (A) (i) hereinbelow, the Index
Retirement Benefit (Subparagraph I [E]) for each Plan Year subsequent
to the year in which the Director attains age seventy-seven (77), and
including the remaining portion of the Plan Year in which the Director
attains age seventy-seven (77), shall be paid to the Director until
the Director's death.
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(i) The Index Retirement Benefit Adjustment:
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The Index Retirement Benefit payment as set forth hereinabove for
the eight (8) Plan Years subsequent to the Director attaining age
seventy-seven (77) shall be adjusted according to a number equal
to the aggregate of the Index Retirement Benefit (Subparagraph I
[E]) for each Plan Year from the Effective Date of this agreement
until the Plan Year subsequent to the Director attaining age
seventy-seven (77) over the aggregate of the benefit payments the
Director actually received under the terms of this Director Plan
through that date. For example, if the Director retires at age
sixty-five (65) and the aggregate annual benefits received by the
Director until the Plan Year the Director attains age
seventy-seven (77) were $900,000.00, and the aggregate Index
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Retirement Benefits for each Plan Year from the Effective Date of
this agreement to the Plan Year the Director's attains age
seventy-seven (77) were $1,000,000.00 then the Director's Index
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Retirement Benefit in the first eight (8) Plan Years said payment
is payable to the Director would be increased by Twelve Thousand
Five Hundred and 00/100ths Dollars ($12,500.00) each year (i.e.
$100,000.00 / 8). If said number is a deficit, then the Index
Retirement Benefit for the first Plan Year said payment is
payable to the Director and each subsequent Plan Year's benefit
(if necessary) shall be reduced until the entire deficit has been
recovered by the Bank. For each year thereafter, the Index
Retirement Benefit payment shall be paid as set forth in
Subparagraph I (E). For example, if the Director retires at age
sixty-five (65) and the aggregate annual benefits to be received
by the Director until the Plan Year the Director attains age
seventy-seven (77) were $1,000,000.00, and the aggregate Index
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Retirement Benefits for each Plan Year from the Effective Date of
this agreement to the Plan Year the Director attains age
seventy-seven (77) were $900,000.00 and the Director's Index
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Retirement Benefit was $90,000.00 in the first year, then the
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Director would not receive any Index Retirement Benefit in the
first year, and the second years' Index Retirement benefit would
be reduced by $10,000.00.
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B. Termination of Service:
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Subject to Subparagraphs II (D) and (G), should a Director suffer a
Termination of Service the Director shall be entitled to receive the
following percentage of the annual benefit set forth in Exhibit A-1.
Said payments shall be made quarterly and shall commence at the
beginning of the Bank's first quarter following the Director's Normal
Retirement Age (Subparagraph I [I]) and shall continue until the
Director attains age seventy-seven (77). Upon completion of the
aforestated payments and commencing subsequent thereto and subject to
Subparagraph II (A) (i)
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hereinabove the following percentage of the Index Retirement Benefit
for each Plan Year subsequent to the year in which the Director
attains seventy-seven (77), and including the remaining portion of the
Plan Year in which the Director attains age seventy-seven (77), shall
be paid to the Director until the Director's death.
Subsequent to one (1) 20% for each full year of service
full year on the Board of from the date of first service
Directors of the Bank to a maximum of 100%
C. Death:
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If the Director dies while there is a balance in the Director's
accrued liability retirement account, then the unpaid balance shall be
paid in a lump sum to the individual or individuals designated in
writing by the Director and filed with the Bank. In the absence of or
a failure to designate a beneficiary, the unpaid balance shall be paid
in a lump sum to the personal representative of the Director's estate.
If, upon death, the Director shall have received the total balance of
the Director's accrued liability retirement account, then no further
benefit shall be due hereunder. In any event, upon the death of the
Director, the Director's beneficiary shall not be entitled to receive
any Index Retirement Benefit.
D. Discharge for Cause:
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All rights of the Director hereunder shall cease and terminate
immediately in the event of a termination of Director's service with
Bank "with cause." The term "with cause" shall be deemed to mean, but
is not limited to, personal dishonesty, incompetence, willful material
misconduct, breach of fiduciary duty, failure to perform the
obligations of the Director as stated herein, willful violation of any
law, rule, or regulation (other than minor traffic infractions), or,
any material breach of any provision of this agreement.
E. Disability Benefit:
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In the event the Director becomes disabled, as defined herein, prior
to any Termination of Service, and the Director's service with the
Bank is terminated because of such disability, the Director, upon
submission of written documentation and verification of disability
satisfactory to the Bank, shall receive one hundred percent (100%) of
the benefit amount provided in Subparagraph II (A) above. Payment of
such benefit shall begin when the Director reaches his or her Normal
Retirement Age. Subject to the Bank's obligations and Director's
rights under Title I of the Americans with Disabilities Act and the
Family and Medical Leave Act, if applicable, and any other applicable
federal or state laws, disability shall be defined as the Director not
being able to perform the duties of the
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Director's own job and shall be as further defined in the Bank's long
term disability policy in effect at the time of said disability. If no
such policy exists at the time of the disability, then disability
shall be defined as a physical or mental impairment of Director which
renders Director incapable of performing Director's normal and regular
essential service duties and which shall be medically determined to be
of permanent duration as the same is construed for purposes of
disability benefits under the federal Social Security laws and
regulations. If there is a dispute regarding whether the Director is
disabled, such dispute shall be resolved by a physician selected by
the Bank and such resolution shall be binding upon all parties to this
Agreement.
F. Death Benefit:
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Except as set forth above, there is no death benefit provided under
this Agreement.
G. Long Term Care Policy Option:
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The Director shall have the option, prior to receipt of any benefits
under the terms of this Agreement, to elect a long term care policy to
be provided by the Bank. Said option to receive said long term care
policy shall be exercised prior to receipt of any benefit set forth in
this Agreement and said election shall be a one time election only and
shall expire at the Director's age sixty (60).
The value of the long term care policy provided by the Bank shall be
equal to the Index Retirement Benefit (Subparagraph I [E]) for each
Plan Year from the date the policy is provided by the Bank until the
date the long term care policy terminates as set forth hereinbelow.
The long term care policy provided by the Bank shall continue until
the policy is either paid in full or the Director dies, at which time
said policy shall terminate.
If the Director elects said long term care policy, then, on the date
said long term care policy is provided, the balance in the Director's
accrued liability retirement account on said date shall be credited
interest on each anniversary date of said long term care policy at a
rate equal to the yield of a one-year Treasury Xxxx. The balance of
said accrued liability retirement account, with interest, shall be
paid to the Director in a lump sum within thirty (30) days of the
Director's Retirement Date (Subparagraph I [C]).
Upon the exercise of the option set forth herein, the Director shall
not be entitled to any benefit set forth in Subparagraphs II (A), (B),
(E), or Paragraph IV.
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III. RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any fund
or money with which to pay its obligations under this Director Plan. The
Director, their beneficiary(ies), or any successor in interest shall be and
remain simply a general creditor of the Bank in the same manner as any
other creditor having a general claim for matured and unpaid compensation.
The Bank reserves the absolute right, at its sole discretion, to either
fund the obligations undertaken by this Director Plan or to refrain from
funding the same and to determine the extent, nature and method of such
funding. Should the Bank elect to fund this Director Plan, in whole or in
part, through the purchase of life insurance, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At
no time shall any Director be deemed to have any lien nor right, title or
interest in or to any specific funding investment or to any assets of the
Bank.
If the Bank elects to invest in a life insurance, disability or annuity
policy upon the life of the Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
IV. CHANGE OF CONTROL
Notwithstanding other terms of this Agreement, upon a Change of Control
(Subparagraph I [H]), if the Director subsequently suffers a Termination of
Service (Subparagraph I [D]), then the Director shall receive the benefits
promised in this Director Plan upon attaining Normal Retirement Age, as if
the Director had been continuously serving the Bank until the Director's
Normal Retirement Age. The Director will also remain eligible for all
promised death benefits in this Director Plan. In addition, no sale,
merger, or consolidation of the Bank shall take place unless the new or
surviving entity expressly acknowledges the obligations under this Director
Plan and agrees to abide by its terms.
V. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
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Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Director Plan shall have any power
or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits
payable hereunder nor shall any of said benefits be subject to seizure
for the payment of any debts, judgments, alimony or separate
maintenance owed by the Director or the Director's beneficiary(ies),
nor be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the
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Director or any beneficiary attempts assignment, commutation,
hypothecation, transfer or disposal of the benefits hereunder, the
Bank's liabilities shall forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest:
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The Bank shall not merge or consolidate into or with another bank or
sell substantially all of its assets to another bank, firm or person
until such bank, firm or person expressly agrees, in writing, to
assume and discharge the duties and obligations of the Bank under this
Director Plan. This Director Plan shall be binding upon the parties
hereto, their successors, beneficiaries, heirs and personal
representatives.
C. Amendment or Revocation:
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It is agreed by and between the parties hereto that, during the
lifetime of the Director, this Director Plan may be amended or revoked
at any time or times, in whole or in part, by the mutual written
consent of the Director and the Bank.
D. Gender:
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Whenever in this Director Plan words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans:
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Nothing contained in this Director Plan shall affect the right of the
Director to participate in or be covered by any qualified or
non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part
of the Bank's existing or future compensation structure.
F. Headings:
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Headings and subheadings in this Director Plan are inserted for
reference and convenience only and shall not be deemed a part of this
Director Plan.
G. Applicable Law:
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The validity and interpretation of this Agreement shall be governed by
the laws of the State of North Carolina.
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H. 12 U.S.C. Section 1828(k):
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Any payments made to the Director pursuant to this Director Plan, or
otherwise, are subject to and conditioned upon their compliance with
12 U.S.C. Section 1828(k) or any regulations promulgated thereunder.
I. Partial Invalidity:
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If any term, provision, covenant, or condition of this Director Plan
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 Director Plan shall remain in full force and
effect notwithstanding such partial invalidity.
J. Notices:
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All notices required or permitted to be given pursuant to this
Agreement shall be in writing, unless otherwise specified, and shall
be delivered personally, deposited in the United States mail,
registered or certified and postage prepaid with return receipt
requested, or deposited with a reputable overnight courier which
provides a day and time stamped receipt, addressed to Director, Bank
or Trustee, as applicable, at the address set forth herein or to such
other address as hereafter may be furnished to the other parties in
writing pursuant to this paragraph. All notices so given shall be
deemed effective and received upon the earlier of (i) actual receipt,
(ii) receipt and refusal; or (iii) five (5) days from (1) the postmark
date, if deposited with the United States Postal Service, or (2) the
date of deposit, if deposited with an overnight courier, unless
otherwise provided herein.
Bank: The Xxxx Xxxxxxxx Xxxx
Xxx. 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Trustee: Xxxxxx X. Xxxxxxxx
Eastern Bank & Trust Co.
0 Xxxxx Xxxxx, XX00
Xxxxxx, XX 00000-0000
Director:
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VI. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
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The "Named Fiduciary and Plan Administrator" of this Director Plan
shall be The East Carolina Bank, until its resignation or removal by
the Board. As Named Fiduciary and Plan Administrator, the Bank shall
be responsible for the management, control and administration of the
Director Plan. The Named Fiduciary may delegate to others certain
aspects of the management and operation responsibilities of the
Director Plan including the employment of advisors and the delegation
of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
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In the event a dispute arises over benefits under this Director Plan
and benefits are not paid to the Director (or to the Director's
beneficiary(ies) in the case of the Director`s death) 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 within sixty (60) days from the date
payments are refused. The Named Fiduciary and Plan Administrator shall
review the written claim and if the claim is denied, in whole or in
part, they shall provide in writing within sixty (60) days of receipt
of such claim the specific reasons for such denial, reference to the
provisions of this Director Plan upon which the denial is based and
any additional material or information necessary to perfect the claim.
Such written notice shall further indicate the additional steps to be
taken by claimants if a further review of the claim denial is desired.
A claim shall be deemed denied if the Named Fiduciary and Plan
Administrator fail to take any action within the aforesaid sixty-day
period.
If claimants desire a second review they shall notify the Named
Fiduciary and Plan Administrator in writing within sixty (60) days of
the first claim denial. Claimants may review this Director Plan or any
documents relating thereto and submit any written issues and comments
it may feel appropriate. In their sole discretion, the Named Fiduciary
and Plan Administrator shall then review the second claim and provide
a written decision within sixty (60) days of receipt of such claim.
This decision shall likewise state the specific reasons for the
decision and shall include reference to specific provisions of the
Plan Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Director Plan or the meaning and effect
of the terms and conditions thereof, then claimants may submit the
dispute to an arbitrator for final arbitration. The arbitrator shall
be selected by mutual agreement of the Bank and the claimants. The
arbitrator shall operate
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under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's discharge of the Director "for
cause," such dispute shall likewise be submitted to arbitration as
above described and the parties hereto agree to be bound by the
decision thereunder.
VII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW,
RULES OR REGULATIONS
The Bank is entering into this Agreement upon the assumption that certain
existing tax laws, rules and regulations will continue in effect in their
current form. If any said assumptions should change and said change has a
detrimental effect on this Director Plan as determined by the Bank in its
sole discretion, then the Bank reserves the right to terminate or modify
this Agreement accordingly. Upon a Change of Control (Subparagraph I [H]),
this paragraph shall become null and void effective immediately upon said
Change of Control.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read
this Agreement and executed the original thereof on the first day set forth
hereinabove, and that upon execution, each has received a conforming copy.
THE EAST CAROLINA BANK
Engelhard, North Carolina
By:
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Witness Title
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Witness Director
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BENEFICIARY DESIGNATION FORM
FOR THE DIRECTOR SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
PRIMARY DESIGNATION:
Name Address Relationship
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SECONDARY (CONTINGENT) DESIGNATION:
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All sums payable under the Director Supplemental Retirement Plan Director
Agreement by reason of my death shall be paid to the Primary Beneficiary, if he
or she survives me, and if no Primary Beneficiary shall survive me, then to the
Secondary (Contingent) Beneficiary.
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Director Date
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EXHIBIT "A-1"
End of Benefit
Year Age: Amount
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Director 70 $12,516
71 $12,707
72 $12,911
73 $13,145
74 $13,371
75 $13,583
76 $13,853
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