COMMUNITY BANK OF TRI-COUNTY
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT, made and entered into this 12th day of April, 2001, by and
between COMMUNITY BANK OF TRI-COUNTY, a corporation chartered under the laws of
The State of Maryland and the principal office of which is located in the
Waldorf, Maryland (hereinafter called the "Employer") and Xxxxxxx X. Xxxxxxxxx,
an individual residing in Maryland (hereinafter called the "Employee").
WHEREAS, the Employee is a valuable officer of the Employer, and wants to
obtain life insurance under a policy to be paid for by the Employer; and
WHEREAS, the Employer wishes to retain the services of the Employee and to
help the Employee obtain such life insurance not only for the benefit and
protection of the Employee's family (by contributing toward payment of the
premiums due on the policy on the Employee's life), but also through retaining
the right to death benefits that would assist the Employer in replacing the
Employee if necessary due to the Employee's death; and
WHEREAS, the Employee will be the owner of the insurance policy acquired
pursuant to the terms of this Agreement and the policy will be assigned to the
Employer as security for the repayment of the amounts that the Employer will
contribute toward payment of the premiums due on each policy listed on Schedule
A hereto;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, it is agreed as follows:
ARTICLE I
DEFINITIONS
1.01 "Assignment" shall refer to the collateral assignment of the Policy
that the Employee will grant to the Employer and that will be evidenced by an
instrument of assignment filed with the Insurer. The form of such instrument of
assignment is attached as Schedule B hereto.
1.02 "Change of Control" shall refer to the acquisition of the beneficial
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ownership (as that term is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934) of 25 % or more of the
voting securities of the Employer (or of any bank holding company for the
Employer) by any person or by persons acting as a "group" (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934). For purposes of this
subparagraph only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
1.03 "Disability" shall refer to that medically determinable physical or
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mental impairment that disables or incapacitates the Employee to the extent that
he is unable to perform his duties of employment, as stated in his Employment
Agreement with the Employees and that establishes the Employee's eligibility to
receive disability benefits under his Employment Agreement.
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1.04 "Insurer" shall refer to any insurance company that has issued a
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policy.
1.05 "Normal Retirement" shall refer to an Employee's termination of
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service with the Employer on or after the Employee's sixty-second (62nd)
birthday for reasons other than death, Disability Termination for Cause, or
Change of Control.
1.06 "Policy" shall refer to the insurance policy or policies listed on
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Schedule A attached hereto.
1.07 "Recovery Amount" shall mean the total amount of the Employer's share,
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as set forth in Section 2.03(A), of the premiums paid by the Employer toward the
Policy, except that, (i) in the context of the Employee's death while still
owning the Policy, the Recovery Amount shall mean the amount to which the
Employer is entitled under Section 3.02(B), and (ii) in the context either of
the Employee's Termination for Cause or of the Employer's exercise of its rights
pursuant to Section 3.02 to receive the Recovery Amount from the cash value of
the Policy, the Recovery Amount shall mean the lesser of (a) the Employer's
share of the premiums paid toward the Policy and (b) the cash surrender value of
the Policy as of the applicable determination date.
1.08 "Termination for Cause" shall mean:
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(A) the Employer's termination of the Employee as a result of (1) the
Employee's conviction of, or plea of nolo contendere to, a felony
or crime involving moral turpitude; (2) the Employee's personal
dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to
perform stated duties, or willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or
final cease-and-desist order; or (3) the Employee's material
breach of any provision of his Employment Agreement with the
Employer; or
(B) the removal of the Employee and/or permanent prohibition of the
Employee from participating in the conduct of the Employer's
affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of
the Federal Deposit Insurance Act ("FDIA"), 12 U.S.C. ss.
1818(e)(4) or (g)(l).
ARTICLE II
GENERAL TERMS AND CONDITIONS
2.01 Application for Insurance. The Employee will apply to the Insurer(s)
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for a Whole Life Policy or Policies on his life in the face amount totaling
$1,000,000 and will do everything necessary to cause the Policy to be issued.
When the Policy is issued, the policy number, face amount and plan of insurance
will be recorded and attached to this Agreement, and the Policy will then be
subject to the terms of this Agreement.
2.02 Ownership of Policy. The Employee shall be the owner of the Policy and
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may exercise all rights of ownership with respect to the Policy except as
otherwise provided in this Agreement and in the Assignment. The Employee shall
have the right to name or change the beneficiary or beneficiaries
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of the Policy. The Employee shall have the right to borrow against the Policy up
to the maximum loan value of the Policy, reduced by the Recovery Amount, but
shall not otherwise have the right to borrow against the Policy except as set
forth in Section 5.02 of this Agreement. The Employer shall not borrow against
the Policy without the prior written consent of the Employee. While this
Agreement is in force and effect, the Employee shall not sell, assign, transfer,
exchange or surrender or otherwise terminate the Policy without the Employer's
written consent. The Employee may, however, cause the surrender and termination
of the Policy at any time by providing notice of the termination of the
Agreement to the Employer pursuant to Section 5.01.
2.03 Payment of Premiums. Subject to Section 3.01, the Employer shall pay
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the premiums on the Policy during the Employee's term of service with the
Employer and for any period thereafter for which the Employer has the obligation
to pay premiums under the terms of this Agreement. Each premium will be
allocated between the Employee and the Employer as follows:
A. The Employer's share of the premium shall be the amount of the
planned periodic premium reduced by an amount equal to the
economic benefit of the premium to the Employee, as described in
IRS Revenue Rulings 64-328 and 66-110 (the "Economic Benefit").
B. The Employee' s share of the premium shall be the amount of the
Economic Benefit. Such share shall be paid by the Employer as
agent for the Employee and shall be charged to the Employee as
cash compensation, and for all purposes shall be deemed cash
compensation to the Employee and not Employer-paid premiums.
2.04 Employee's Obligation to Employer. The Recovery Amount shall
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constitute indebtedness of the Employee to the Employer. Repayment of such
indebtedness shall be made in accordance with Section 3.02 or 5.02 of this
Agreement.
2.05 Assignment of Policy. The Employee shall collaterally assign the
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Policy to the Employer as security for repayment of the Recovery Amount through
execution of the form of Assignment attached as Schedule B hereto. The
Assignment may not be terminated, altered or changed without the written consent
of the Employer, but will terminate automatically upon the Employer's receipt of
the Recovery Amount pursuant to Section 3.02 or the Employee's payment of the
Recovery Amount to the Employer pursuant to Section 5.02.
2.06 Additional Policy Benefits and Riders. The Employee may at any time
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add a rider to the Policy. Upon written request by the Employer, the Employee
will add a rider to the Policy for the benefit of the Employer. The additional
premium for any rider that is added to the Policy will be paid by the party
entitled to receive the proceeds of the rider.
2.07 Continuation of Employer's Obligations upon Change of Control. Upon a
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Change of Control, the Employer or its successor organization surviving after
the Change of Control shall be deemed to have assumed, and shall be responsible
to discharge, all obligations of the Employer under this Agreement. Upon the
Employer's reorganization, merger, consolidation, or sale of substantially all
of its assets to another organization, the survivor or successor organization
shall be deemed to have assumed, and shall be responsible to discharge, all
obligations of the Employer under this Agreement, and the term "Employer" shall
be deemed to refer to such successor or survivor organization.
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ARTICLE III
EMPLOYER'S FUNDING OBLIGATIONS AND RIGHTS OF RECOVERY
3.01 Employer's Rights and Funding Obligations on Certain Events.
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A. Disability and Normal Retirement. If the Employee resigns from
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the Employer's employ on account of Disability or Normal
Retirement, the Employer shall pay the remaining premiums on the
Policy if, as, and when due in the ordinary course, subject to
Section 2.03(A).
B. Termination for Cause. Notwithstanding any other intervening
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event, upon the Employee's Termination for Cause, the Employer
shall notify the Insurer of the Employee's Termination for Cause,
and all rights, title, and interest in the Policy shall, upon
such notice, be transferred to the Employer under the terms of
the Policy as of the date of such Termination for Cause. The
parties hereby agree that the terms of the Policy shall provide
for the automatic transfer of all rights, title and interest to
the Employer upon the conditions described in this Paragraph.
C. Termination or Resignation for Other Reasons. In the event the
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Employee is terminated or resigns from service with the Employer
for reasons other than Termination for Cause, Disability, or
Normal Retirement, this Agreement shall continue in full force
and effect, except that Employer shall have no further obligation
to pay premiums on the Policy upon such termination or
resignation.
D. Termination of Agreement by Employee. In the event that the
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Employee provides written notice of termination of this Agreement
to the Employer pursuant to Section 5.01, the Employer shall have
no further obligation to pay premiums on the Policy upon receipt
of such notice.
3.02 Employers Recovery Upon Death Resignation or Termination of Agreement.
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A. Disability or Normal Retirement. If the Employee terminates
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employment with the Employer on account of Disability or Normal
Retirement, the Employer shall have the right, subject to Section
5.02, to receive the Recovery Amount from the death benefit or
the cash value of the Policy, upon the earlier of the Employee's
death or the Employee's provision of notice of termination of the
Agreement pursuant to Section 5.01.
B. Death of Employee. If the Employee dies while he still owns the
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Policy (whether or not the Employee is then an Employee of the
Employer), the Employer shall have the right to receive one half
of the death benefit payable under the Policy.
C. Termination of Agreement by Employee; Termination or Resignation
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of Employee for Other Reasons. In the event the Employee either
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provides written notice of termination of this Agreement pursuant
to Section 5.01 hereof, or is terminated or resigns from service
with the Employer for reasons other than Termination for Cause,
Disability or Normal Retirement, the Employer shall have the
right, subject to Section 5.02, to
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receive the Recovery Amount from the death benefit or cash value
of the Policy upon such provision of notice, termination or
resignation.
ARTICLE IV
PAYMENTS UPON DEATH OF EMPLOYEE
4.01 Employer's Actions. Upon the death of the Employee, the Employer shall
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promptly take all actions necessary to obtain the Recovery Amount from the death
benefit of the Policy.
4.02 Payment of Death Benefit to Beneficiary. Subject to the terms of the
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Assignment and to Section 3.02(B) hereof, the balance of the death benefit
provided under the Policy, if any, shall be paid directly to the beneficiary or
beneficiaries of the Policy in the manner designated by the Employee. No payment
shall be made to the beneficiary or beneficiaries of the Policy until the
Recovery Amount has been paid to the Employer in accordance with Section 3.02(B)
hereof. The parties hereto agree that the beneficiary designation provision of
the Policy shall conform to the provisions hereof.
ARTICLE V
RIGHTS OF EMPLOYEE
5.01 Employee's Right to Terminate Agreement. The Employee may at any time
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effect the termination of this Agreement by providing written notice to the
Board of Directors of the Employer. Following such notice, the Agreement shall
terminate either upon the Employee's exercise of his option pursuant to Section
5.02 or upon the Employer's receipt of the Recovery Amount pursuant to Section
3.02(C).
5.02 Employee's Option to Receive Release of Assignment. Upon the
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occurrence of any of the events set forth in Section 3.02 that give the Employer
the right to receive the Recovery Amount from the cash value of the Policy, the
Employee shall have a 60-day option to receive from the Employer a release of
the Assignment in consideration of the Employee's cash payment of the Recovery
Amount to the Employer. The Employer agrees that the Employee (solely for the
purpose of facilitating his payment of the Recovery Amount to the Employer) may
borrow or withdraw from the Policy cash value amounts in excess of the
Employee's share of the cash value of the Policy. If the Employee does not make
payment of the Recovery Amount within the 60-day period, the Employer may
enforce its right to receive the Recovery Amount from the cash value or death
benefit of the Policy.
ARTICLE VI
MISCELLANEOUS
6.01 Termination of Agreement. This Agreement shall terminate when either
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of the following events occur:
A. Receipt by the Employer of the Recovery Amount under Section
3.02, 4.01, or 5.02.
B. A transfer of rights to the Employer pursuant to Section 3.01(B).
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6.02 Suspension of Employer's Obligations. In the event of the bankruptcy,
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receivership or dissolution of the Employer, or the "default" of the Employer,
as defined under Section 3(x)(1) of the FDIA, 12 U.S.C.ss.1813 (x)(l), the
Employer's obligations under Section 2.03 shall be suspended.
6.03 Amendment. This Agreement shall not be modified or amended except by a
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writing signed by the Employer and the Employee. This Agreement shall be binding
upon the heirs, administrators or executors and the successors and assigns of
each party to this Agreement.
6.04 Unfunded Arrangement. The split-dollar arrangement established hereby
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is an unfunded employee benefit plan maintained by the Employer primarily for
the purpose of providing a life insurance death benefit for an Employee who is a
member of a select group of management and a highly compensated employee, and
the parties acknowledge and agree that this Agreement is exempt from Parts 2, 3
and 4 of the Employee Retirement Income Security Act of 1974.
6.05 Claims Procedures. The Employer, Employee, or any beneficiary under
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the Policy may file a claim for benefits with the Insurer, and shall be subject
to the claims procedure thereof.
6.06 Binding Agreement. This Agreement shall be binding upon and inure to
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the benefit of the Employer and its successors and assignees and the Employee
and his assignees, heirs, executors, administrators and beneficiaries
6.07 Governing Law. This Agreement shall be subject to and shall be
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construed in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMMUNITY BANK OF TRI-COUNTY
Attest: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ X. Xxxxxx Xxxxx
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X. Xxxxxx Xxxxx
Acting in his capacity as a Director
Witness: Xxxxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
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COMMUNITY BANK OF TRI-COUNTY
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SPLIT DOLLAR AGREEMENT:
SCHEDULE A
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LIFE INSURANCE POLICY
COMPANY NAME NUMBER TYPE OF POLICY FACE AMOUNT
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Valley Forge Life Insurance Flexible Premium
#AUCK002631 Adjustable Life $1,000,000
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Whole Life
# Insurance $
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COMMUNITY BANK OF TRI-COUNTY
SPLIT DOLLAR AGREEMENT:
SCHEDULE B
ASSIGNMENT
A. FOR VALUE RECEIVED, the undersigned (hereinafter the "Owner") does
hereby assign, transfer and set over to Community Bank of Tri-County, a
corporation with principal offices and place of business in Waldorf, Maryland,
its successors and assigns (hereinafter the "Assignee"), the following specific
rights in and to each and every policy listed in Schedule A, which is attached
hereto and made a part hereof, issued by each and every insurance company named
in said Schedule A (hereinafter the "Insurer") and any supplementary contract or
contracts issued in connection therewith (said policy and any such contracts
hereinafter collectively referred to as the "Policy" as the context may require)
insuring the life of Xxxxxxx X. Xxxxxxxxx, (hereinafter the "Insured"), subject
to all the terms and conditions of the Policy and to all superior liens, if any,
that the Insurer may have against the Policy. The Owner, by this assignment (the
"Assignment"), and the Assignee, by acceptance of the assignment of the Policy
to it hereunder, agree to the terms and conditions contained herein.
B. This Assignment is made pursuant to, and the Policy is to be held as
collateral security for all liabilities of the Owner to the Assignee now
existing or hereafter arising under, that certain Split Dollar Agreement, by and
between the Owner and the Assignee, dated April 12, 2001 (hereinafter the
"Agreement"), which is attached hereto as Exhibit 1, and made a part hereof. The
Owner reserves all rights and powers in and to the Policy, except those
specific, limited rights granted in the Policy to the Assignee hereby, as
security for the liabilities of the Owner to the Assignee under the Agreement
and except as otherwise provided by the Agreement. The parties hereto agree that
the provisions of the Agreement shall take precedence over this Assignment.
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C. It is expressly agreed that the Assignee's interest in the Policy under
and by virtue of this Assignment shall be limited to the rights provided for in
the Agreement, the following specific rights, and no others: (a) the right to be
paid the total amount due it under the Agreement by recovering said amount
directly from the Insurer out of the net death proceeds of the Policy, upon the
death of the Insured; (b) the right to be paid the total amount due it under the
Agreement by recovering said amount from the net cash surrender proceeds of the
Policy, pursuant to the terms and conditions of the Agreement; and (c) the right
to have the Policy transferred to the Assignee in the event of the Owner's
Termination for Cause. The Assignee shall have no other rights or powers in or
to the Policy as a result of the assignment to it hereunder. and specifically,
the Assignee shall not have the right or power to borrow against or obtain loans
or advances on the Policy, make withdrawals from the Policy, nor cancel or
surrender the Policy or exercise any other option or incident of ownership with
respect to the Policy, except as otherwise provided under the Agreement.
D. Subject to the Agreement, the Owner shall retain all incidents of
ownership in and to the Policy, subject to the terms and conditions of the
Agreement, including, but not limited to: (a) the right to cause the
cancellation or surrender of the Policy and to receive the Owner's share of the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (b) the right to collect and receive
all distributions or share of surplus, dividend deposits or additions to the
Policy now or hereafter made or apportioned thereto, and to exercise any and all
options contained in the Policy with respect thereto; (c) the right to exercise
all non-forfeiture rights permitted by the terms of the Policy or allowed by the
Insurer and to receive all benefits and advantages derived therefrom; (d) the
right to designate and change the beneficiary of the Policy; (e) the right to
borrow against, obtain loans or advances on, or make withdrawals from the
Policy; (f) the right to assign the Policy (subject to the terms of this
Assignment and the Agreement); and (g) the right
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to collect directly from the Insurer that portion of the net death proceeds of
the Policy in excess of those proceeds payable to the Assignee under the
Agreement.
E. The Assignee agrees with the Owner as follows (a) any balance of any
amount received by the Assignee hereunder from the Insurer remaining after
payment of the then existing liabilities of the Owner to the Assignee under the
Agreement shall be paid by the Assignee to the persons entitled thereto under
the terms of the Policy had this Assignment not been executed; and (b) if the
Policy is in the possession of the Assignee, the Assignee will, upon request,
forward the Policy to the Insurer, without unreasonable delay, for endorsement
of any designation or change of beneficiary, any election of optional mode of
settlement, or the exercise of any other right reserved by the Owner hereunder.
F. Except as otherwise provided under the terms of the Agreement, the
Assignee shall be under no obligation to pay any premium on the Policy or the
principal of or interest on any loans or advances on the Policy, whether or not
obtained by the Assignee, or any other charges on the Policy.
G. The Insurer shall be fully protected in recognizing the request made by
the Owner for cancellation or surrender of the Policy, with the written consent
of the Assignee, and upon such cancellation or surrender, the Policy shall be
terminated and be of no further force or effect.
H. Upon the full payment of the liabilities of the Owner to the Assignee
pursuant to the Agreement, the Assignee shall promptly release this Assignment
and thereby reassign to the Owner all specific rights in the Policy included
herein.
I. Is The Assignee may take or release other security, may grant
extensions, renewals or indulgences with respect to the obligations of the Owner
or the Assignee under the Agreement, or may apply the proceeds of the Policy
hereby assigned or any amount received on account of the Policy by the exercise
of any right permitted under this Assignment, without resorting to or regard to
other security for such obligations if any.
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J. The Owner declares that no proceedings in bankruptcy are pending against
the Owner, and that the Owner's property is not subject to any assignment for
the benefit of creditors of the Owner.
K. This Assignment supersedes any prior assignment entered into by the
Owner with respect to the Policy.
Signed and sealed as of the 12th day of April, 2001.
/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx, Owner
COMMUNITY BANK OF TRI-COUNTY, ASSIGNEE
/s/ Xxxxxxx X. Xxxxxxxx By: /s/ X. Xxxxxx Xxxxx
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Witness X. Xxxxxx Xxxxx
Acting in his capacity as a Director
Endorsed By: _____________________________
Insurer
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