EXHIBIT 10.37
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: Massachusetts Mutual Life Insurance Co.
Policy No. 0066426
New York Life Insurance Company Policy No.
00000000
Bank: Southwest Community Bank
Insured: Xxxx X. Xxxx
Relationship of Insured to Bank: Executive
Date: 6-15-2005
The respective rights and duties of Southwest Community Bank (hereinafter the
"Bank") and Xxxx X. Xxxx (hereinafter the "Insured") in the above policy(ies)
(the "Policy" or Policies) shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
the Insured's beneficiary[ies] or assignee[s], with the consent of the
Insured) mutually agree to exercise the right to increase the coverage
under the subject split dollar Policy, then, in such event, the
rights, duties and benefits of the parties to such increased coverage
shall continue to be subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
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elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Insured the amount
of imputed income received each year on Form W-2 or its equivalent.
The bank agrees to reimburse ("gross-up") the Insured for taxes paid
related to the receipt of this benefit based on the Table below, or as
adjusted based on then prevailing income tax rates:
Federal Tax State Tax FICA Tax Medicare Tax
Rate Rate Rate Rate
---------------- -------------- ------------- --------------
39.60% 9.30% 7.65% * 1.45%
*The Social Security portion of the FICA tax only applies in years
where the Employee has not otherwise reached the maximum tax. The
Medicare tax only applies in years where the Employee has otherwise
reached the maximum non-Medicare portion of the FICA tax.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policies is as follows:
1. If death occurs on or before the attainment of age seventy (70), the
Insured's beneficiary(ies), (designated in accordance with Paragraph
III), shall be entitled to an amount equal to the lesser of one million
dollars ($1,000,000), or one hundred percent (100%) of the net at risk
insurance portion of the proceeds. If death occurs after age seventy
(70) but on or before age eighty (80), the Insured's beneficiary(ies)
shall be entitled to the lesser of seven hundred thousand dollars
($700,000), or one hundred percent (100%) of the net at risk insurance
proceeds. If death occurs after age eighty (80), the Insured's
beneficiaries shall be entitled to the lesser of four hundred thousand
dollars ($400,000), or one hundred percent (100%) of the net at risk
insurance proceeds. The net at risk insurance portion is the total
proceeds less the cash value of the Policy.
2. Payment of the death benefit determined by the preceding paragraph
shall be made and distributed from the Policies in the following order,
with resort to each succeeding policy only to the extent that the
proceeds of each prior listed Policy are insufficient to satisfy the
specified death benefit in full: (a) Massachusetts Mutual Life
Insurance Co. Policy No. 0066426; (b) New York Life Insurance Company
Policy No. 56610020.
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3. The Bank and the Insured (or beneficiary[ies] or assignee[s]) shall
share in any interest due on the death proceeds on a pro rata basis in
the ratio that the proceeds due the Bank and the Insured, respectively,
bears to the total proceeds, excluding any such interest.
4. In the event that the Policy is terminated other than as a result of
(a) a termination of this Agreement pursuant to paragraph X or (b) any
intentional act of the Insured which results in the termination of the
Policy, then the Bank shall pay to the Insured's beneficiary(ies) an
amount which will provide a total after-tax death benefit equal to the
benefit that the Insured would have received if the Policy had not been
terminated.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
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X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Supplemental Compensation Agreement effective as of
January 20, 2005 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
(a) The Employee's deliberate violation of (i) any state
or federal banking or securities laws, or of the Bylaws, rules,
policies or resolutions of the Employer, or (ii) of the rules or
regulations of the California Department of Financial
Institutions, the Federal Deposit Insurance Corporation, the
Federal Reserve Board of Governors, the Office of the Comptroller
of the Currency or any other regulatory agency or governmental
authority having jurisdiction over the Employer, which has a
material adverse effect upon the Employer; or
(b) The Employee's conviction of (i) any felony or (ii) a
crime involving moral turpitude or a fraudulent or dishonest act
which, in each case, has a material adverse effect on the
Employer.
Upon such termination, the Insured (or beneficiary[ies] or
assignee[s]) shall have a ninety (90) day option to receive from
the Bank an absolute assignment of the Policy in consideration of
a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment shall be the greater of:
3. The Bank's share of the cash value of the Policy on the date of
such assignment, as defined in this Agreement.
4. The amount of the premiums which have been paid by the Bank prior
to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to
exercise this option within the prescribed ninety (90) day
period, the Insured (or beneficiary[ies] or assignee[s]) agrees
that all of his or her rights, interest and claims in the Policy
shall terminate as of the date of the termination of this
Agreement.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with
Paragraph VI above.
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XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED XXXXXXXXX AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control, and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operations
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting Benmark. Inc. (800-544-6079). When the Named
Fiduciary has a claim which may be covered under the provisions
described in the Policy, it should contact the office named above, and
they will either complete a claim form and forward it to an authorized
representative of the Insurer or advise the named Fiduciary what
further requirements are necessary. The Insurer will evaluate and make
a decision as to payment. If the claim is payable, a benefit check will
be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
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XVI. GENDER
Whenever in this Agreement 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.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
SOUTHWEST COMMUNITY BANK INSURED
/s/ Xxxxx X. Xxxxxxxxxxx /s/ Xxxx X. Xxxx
-------------------------------- ------------------------------
Xxxxx X. Xxxxxxxxxxx Xxxx X. Xxxx
President and CEO
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