TEMECULA VALLEY BANK EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
EXHIBIT
10.45
TEMECULA
VALLEY BANK
EXECUTIVE
SUPPLEMENTAL
COMPENSATION
AGREEMENT
Effective
this 29th
day of
December 2006, this SALARY CONTINUATION AGREEMENT (“Agreement”) is adopted by
and between TEMECULA
VALLEY BANK
(“Bank”), a bank located in Temecula Valley, California, and organized under the
laws of the State of California, and XXX XXXXXXX (“Executive”), a member of a
select group of management and highly compensated employees of the Bank.
The
purpose of this Agreement is to further the growth and development of the
Bank
by providing Executive with supplemental retirement income, and thereby
encourage Executive’s productive efforts on behalf of the Bank and the Bank’s
shareholders, and to align the interests of the Executive and those
shareholders.
It
is
intended that the Agreement be "unfunded" for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and not be
construed to provide income to the participant or beneficiary under the Internal
Revenue Code of 1986, as amended (the "Code"), particularly Section 409A
of the
Code and guidance or regulations issued thereunder, prior to actual receipt
of
benefits.
Article
1
Definitions
and Construction
Where
the
following words and phrases appear in the Agreement, they shall have the
respective meanings set forth below, unless their context clearly indicates
to
the contrary:
| 1.1 |
“Accrued
Liability Balance” shall mean the amount accrued by the Company to fund
the future benefit expense associated with this Agreement, as of
the end
of the month preceding the Executive’s Separation from Service. The
Company shall account for this benefit using Generally Accepted Accounting
Principles, regulatory accounting guidance of the Company’s primary
federal regulator, and other applicable accounting guidance, including
APB
12 and FAS 106. Accordingly, the Company shall establish a liability
retirement account for the Executive into which appropriate accruals
shall
be made using a discount that is reasonable, which is consistent
with
guidance issued by the Company’s primary federal regulator, and which may
be adjusted thereafter at the Board’s discretion to comply with regulatory
guidance. This Agreement is intended to be a “non-account balance” plan,
as that term is used under the Code.
|
| 1.2 |
“Board”
shall mean the Board of Directors of the
Bank.
|
| 1.3 |
“Change
in Control” shall mean: a change in ownership or control of the Bank as
defined in Treasury Regulation §1.409A-3(g)(5) or any subsequently
applicable Treasury Regulation.
|
| 1.4 |
“Code”
shall mean the United States Internal Revenue Code of 1986, as
amended.
|
| 1.5 |
“Disability”
shall mean 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 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 12 months, receiving income replacement
benefits for a period of not less than 3 months under an accident
and
health plan covering employees of the Bank. 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 of
the Bank.
Upon the request of the Plan Administrator, the Executive must submit
proof to the Plan Administrator of Social Security Administration’s or the
provider’s determination.
|
| 1.6 |
“Early
Termination” shall mean that Executive’s employment with the Bank has
terminated, voluntarily or involuntarily, prior to Normal Retirement
Age
and such termination is not due to death, Termination for Cause,
Disability, or Separation from Service following a Change in
Control.
|
| 1.7 |
“Effective
Date” shall mean September 1, 2006.
|
| 1.8 |
“Normal
Retirement Age” shall mean the date on which the Executive attains age 65.
|
| 1.9 |
“Plan
Administrator” shall mean the plan administrator described in Article
6.
|
| 1.10 |
“Plan
Year” shall mean each twelve-month period commencing on January 1 and
ending on December 31 of each year. The initial Plan Year shall commence
on the Effective Date of this Plan and end on the following December
31.
|
| 1.11 |
“Separation
from Service” shall mean that the Executive has experienced a Termination
of Employment from the Bank. Where the Executive continues to perform
services for the Bank following a Termination of Employment, however,
and
the facts and circumstances indicate that such services are intended
by
the Bank and the Executive to be more than “insignificant” services, a
Separation from Service will not be deemed to have occurred and any
amounts deferred under this Agreement may not be paid or made available
to
the Executive. The determination of whether such services are considered
“insignificant” will be based upon all facts and circumstances relating to
the termination and upon any applicable rules and regulations issued
under
Section 409A of the Code. Military leave, sick leave, or other bona
fide
leaves of absence are not generally considered terminations of employment.
|
| 1.12 |
“Termination
for Cause” has that meaning set forth in Article
5.
|
| 1.13 |
“Termination
of Employment” shall mean that Executive’s employment with the Bank has
terminated.
|
Article
2
Distributions
During Executive’s Lifetime
|
2.1
|
Normal
Retirement Benefit.
Upon Executive’s attainment of the Normal Retirement Age, the Bank 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 Eighty Thousand Dollars
($80,000). The
Board may, in its sole discretion, increase this benefit from time
to
time.
|
|
2.1.2
|
Form
and Timing of Benefit.
The Bank shall distribute the annual benefit to the Executive in
twelve
(12) equal monthly installments, commencing on the first day of
the month
following the Executive’s Normal Retirement Age. The annual benefit shall
be distributed to the Executive for fifteen (15) years.
|
|
2.2
|
Early
Termination Benefit.
Upon the Executive’s Early Termination, the Bank shall distribute to the
Executive the benefit described in this Section 2.2 in lieu of
any other
benefit under this Article. Notwithstanding anything to the contrary
in
this Section 2.2, Executive shall not be entitled to a benefit
under this
Section 2.2 if Executive terminates employment prior to the fulfillment
of
five full Plan Years from the date of this Agreement. For purposes
of this
Section 2.2, if the first Plan Year is only a partial calendar
year, the
partial calendar year shall be considered one full Plan Year.
|
|
2.2.1
|
Amount
of Benefit.
The benefit under this Section 2.2 is the Accrued Liability Balance,
calculated as of the end of the Plan Year immediately preceding
Executive’s Separation from Service.
|
|
2.2.2
|
Form
and Timing of Benefit.
The Bank shall distribute the annual benefit to the Executive in
a lump
sum within 60 days following a Separation from Service.
|
|
2.3
|
Disability
Benefit.
Upon Executive’s Separation from Service due to Disability, the Bank shall
distribute to the Executive the benefit described in this Section
2.3 in
lieu of any other benefit under this
Article.
|
|
2.3.1
|
Amount
of Benefit.
The benefit under this Section 2.3 is the Accrued Liability Balance,
determined as of the end of the Plan Year immediately preceding
notification of Disability and subsequent Separation from
Service.
|
|
2.3.2
|
Form
and Timing of Benefit.
The Bank shall distribute the benefit to the Executive in a lump
sum
within 60 days following Separation from Service.
|
|
2.4
|
Change
in Control Benefit.
Upon a Change in Control followed by Executive’s Termination of
Employment, the Executive shall be entitled to 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 the Accrued Liability Balance,
calculated as of the date of Termination of Employment.
|
| 2.4.2 |
Form
and Timing of Benefit. The
Bank shall distribute the benefit to the Executive in a lump sum
within 60
days following Executive’s Separation from Service.
|
|
2.5
|
Restriction
on Timing of Distribution.
Notwithstanding any provision of this Agreement to the contrary,
distributions to Executive may not commence earlier than six (6)
months
after the date of a Separation from Service if, pursuant to Section
409A of the Code and regulations and guidance promulgated thereunder,
Executive is considered a “specified employee” under Section 416(i)
of the Code. In the event a distribution is delayed pursuant to
this
Section 2.5, the originally scheduled payment shall be delayed
for 6
months, and shall commence instead on the first day of the seventh
month
following the delay. If payments are scheduled to be made in installments,
the first six months of installment payments shall be delayed,
aggregated,
and paid instead on the first day of the seventh month, after which
all
installment payments shall be made on their regular schedule. If
payment
is scheduled to be made in a lump sum, the lump sum payment shall
be
delayed for six months and instead be made on the first day of
the seventh
month.
|
|
2.6
|
Payments
Upon Income Inclusion.
Should amounts deferred under this Agreement become includable
in the
Executive’s income by reason of a failure of this Agreement to comply with
the requirements of Section 409A of the Code, the Bank shall distribute
to
the Executive an amount necessary to cover the includable amounts,
as well
as other amounts necessary to cover FICA, employment, and income
taxes, to
the extent such distributions do not exceed the Executive’s vested account
balances.
|
Article
3
Distribution
Upon Death
No
death
benefit shall be payable under this Agreement.
Article
4
Beneficiaries
|
Executive’s
beneficiary(ies), if any, shall not have any rights under this
Agreement.
|
Article
5
General
Limitations
| 5.1 |
Termination
for Cause.
Notwithstanding any provision of this Agreement to the contrary,
the Bank
shall not distribute any benefit under this Agreement if Executive’s
service is terminated by the Board for:
|
| (a) |
Gross
negligence or gross neglect of duties to the Bank;
or
|
| (b) |
Conviction
of a felony or of a gross misdemeanor involving moral turpitude in
connection with the Executive’s employment with the Bank; or
|
| (c) |
Fraud,
disloyalty, dishonesty or willful violation of any law or significant
Bank
policy committed in connection with the Executive's employment and
resulting in a material adverse effect on the
Bank.
|
|
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 Bank 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 |
Competition
After Termination of Employment.
No benefits shall be payable if the Executive, without the prior
written
consent of the Company, engages in, becomes interested in, directly
or
indirectly, as a sole proprietor, as a partner in a partnership,
or as a
substantial officer, principal, agent, trustee or in any other capacity
whatsoever, any enterprise conducted in the trading area (a 50 mile
radius) of the business of the Bank within 2 years after Separation
from
Service, which enterprise is, or may be deemed to be, competitive
with any
business carried on by the Company as of the date of termination
of the
Executive’s employment or his retirement.
|
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 also have the discretion
and
authority to (i) make, amend, interpret and enforce all appropriate
rules
and regulations for the administra-tion of this Agreement and (ii)
decide
or resolve any and all ques-tions including interpretations of
this
Agreement, as may arise in connection with the
Agreement.
|
|
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
Bank.
|
|
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 Bank 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
|
Bank
Information.
To enable the Plan Administrator to perform its functions, the
Bank shall
supply full and timely information to the Plan Administrator on
all
matters relating to the date and circum-stances of the retirement,
Disability, or Separation from Service 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 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.
|
|
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
|
This
Agreement may be amended or terminated only by a written agreement
signed
by the Bank and the Executive. Provided, however, if the Board
determines
in good faith that the Executive is no longer a member of a select
group
of management or highly compensated employees, as that phrase applies
to
ERISA, for reasons other than death, Disability or retirement,
the Bank
may terminate this Agreement. Additionally, the Bank may also amend
this
Agreement to conform to written directives to the Bank from its
banking
regulators or to comply with regulations and guidance promulgated
under
Section 409A of the Code. Upon a plan termination, no distributions
will
be made, except as permitted under the terms of Article 2 of this
Agreement.
|
Article
9
Miscellaneous
|
9.1
|
Binding
Effect.
This Agreement shall bind the Executive and the
Bank.
|
|
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 Bank, nor does
it
interfere with the Bank's right to discharge the Executive. It
also does
not require the Executive to remain an employee nor interfere with
the
Executive's right to terminate employment at any
time.
|
|
9.3
|
Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned,
pledged, attached or encumbered in any
manner.
|
|
9.4
|
Tax
Withholding.
The Bank shall withhold any taxes that are required to be withheld,
under
Section 409A of the Code and regulations thereunder, from the benefits
provided under this Agreement. The Executive acknowledges that
the Bank’s
sole liability regarding taxes is to forward any amounts withheld
to the
appropriate taxing authority(ies).
|
|
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 is a general unsecured creditor of the Bank for the
distribution of benefits under this Agreement. The benefits represent
the
mere promise by the Bank to distribute such benefits. The rights
to
benefits are not subject in any manner to anticipation, alienation,
sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment
by
creditors. Any insurance on the Executive's life or other informal
funding
asset is a general asset of the Bank to which the Executive has
no
preferred or secured claim.
|
|
9.7
|
Reorganization. The
Bank shall not merge or consolidate into or with another bank,
or
reorganize, or sell substantially all of its assets to another
bank, firm,
or person unless such succeeding or continuing bank, firm, or person
agrees to assume and discharge the obligations of the Bank under
this
Agreement. Upon the occurrence of such event, the term “Bank” as used in
this Agreement shall be deemed to refer to the successor or survivor
bank.
|
|
9.8
|
Entire
Agreement. This
Agreement constitutes the entire agreement between the Bank and
the
Executive as to the subject matter hereof. No rights are granted
to the
Executive by virtue of this Agreement other than those specifically
set
forth herein.
|
|
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 Bank or the Plan
Administrator to perform any act required by this Agreement, the
Bank or
Plan Administrator may in its discretion perform such alternative
act as
most nearly carries out the intent and purpose of this Agreement
and is in
the best interests of the Bank.
|
|
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 Bank
or Plan
Administrator under this Agreement shall be sufficient if in writing
and
hand-delivered, or sent by registered or certified mail, to the
address
below:
|
|
Temecula
Valley Bank
|
|
00000
Xxxxxxxxx Xxx., #X-000
|
|
Xxxxxxxx,
XX 00000
|
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
|
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, Section 409A of the Code and guidance or regulations thereunder,
and
any other taxes, costs, expenses or liabilities whatsoever related
to such
benefits, which in any of the foregoing instances the Executive
acknowledges and agrees shall be the sole responsibility of the
Executive
notwithstanding any other term or provision of this Agreement.
The
Executive further acknowledges and agrees that the Bank shall have
no
liability whatsoever related to any such personal tax effects or
other
personal costs, expenses, or liabilities applicable to the Executive
and
further specifically waives any right for himself or herself, and
his or
her heirs, beneficiaries, legal representatives, agents, successor
and
assign to claim or assert liability on the part of the Bank related
to the
matters described above in this Section 9.14. 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.
|
IN
WITNESS WHEREOF, the Executive and a duly authorized representative of the
Bank
have signed this Agreement.
EXECUTIVE: BANK:
TEMECULA
VALLEY BANK
| By: /s/ Xxx Xxxxxxx | By: /s/ Xxxxxx X. Xxxxxxx | ||
|
|
|
||
| Executive Vice President and Chief Financial Officer |
