Exhibit 99.2
SOUTHCOAST FINANCIAL CORPORATION
ENDORSEMENT SPLIT DOLLAR AGREEMENT
This ENDORSEMENT SPLIT DOLLAR AGREEMENT (this "Agreement") is entered
into as of this day of , by and between Southcoast Financial Corporation, a
South Carolina corporation ("Southcoast"), and ______________, a director of
Southcoast (the "Director").
WHEREAS, to encourage the Director to remain a director of Southcoast,
Southcoast is willing to divide the death proceeds of a life insurance policy on
the Director's life, and
WHEREAS, Southcoast will pay life insurance premiums from its general
assets.
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
ARTICLE 1
GENERAL DEFINITIONS
Capitalized terms not otherwise defined in this Agreement are used
herein as defined in the January 1, 2008 Director Retirement Agreement between
Southcoast Community Bank, a wholly owned subsidiary of Southcoast, and the
Director. The following terms shall have the meanings specified.
1.1 "Administrator" means the administrator described in Article 7.
1.2 "Director's Interest" means the benefit set forth in section 2.2.
1.3 "Insured" means the Director.
1.4 "Insurer" means each life insurance carrier for which there is a
Split Dollar Policy Endorsement attached to this Agreement.
1.5 "Net Death Proceeds" means the total death proceeds of the Policy
minus the cash surrender value immediately before the Director's death.
1.6 "Policy" means the specific life insurance policy or policies
issued by the Insurer.
1.7 "Split Dollar Policy Endorsement" means the form required by the
Administrator or the Insurer to indicate the Director's interest, if any, in a
Policy on the Director's life.
ARTICLE 2
POLICY OWNERSHIP/INTERESTS
2.1 Southcoast Ownership. Southcoast is the sole owner of the Policy
and shall have the right to exercise all incidents of ownership. Southcoast
shall be the beneficiary of the remaining death proceeds of the Policy after the
Director's interest is paid according to section 2.2 below.
2.2 Death Benefit. Provided the Director's death occurs (x) before the
earlier of the date of the Director's Separation from Service or the date on
which the Director attains age 70 or (y) after a Change in Control that occurs
before the Director's Separation from Service, at the Director's death the
Director's beneficiary designated in accordance with the Split Dollar Policy
Endorsement shall be entitled to the lesser of (x) $250,000 or (y) 100% of the
Net Death Proceeds (the "Director's Interest"). Unless a Change in Control
occurs before the Director's Separation from Service, the Director's Interest
shall be extinguished at the earlier of the date of the Director's Separation
from Service or the date on which the Director attains age 70 and the Director's
beneficiary shall be entitled to no benefits under this Agreement for the
Director's death occurring thereafter. If a Change in Control occurs before the
Director's Separation from Service, at the Director's death the Director's
beneficiary designated in accordance with the Split Dollar Policy Endorsement
shall be entitled to the Director's Interest whether the Director dies before or
after Separation from Service. The Director shall have the right to designate
the beneficiary of the Director's Interest.
2.3 Comparable Coverage. Southcoast shall maintain the Policy in full
force and effect. Southcoast may not amend, terminate, or otherwise abrogate the
Director's interest in the Policy unless Southcoast replaces the Policy with a
comparable insurance policy to cover the benefit provided under this Agreement
and executes a new split dollar agreement and endorsement for the comparable
insurance policy. The Policy or any comparable policy shall be subject to claims
of Southcoast's creditors.
2.4 Internal Revenue Code Section 1035 Exchanges. The Director
recognizes and agrees that Southcoast may after this Agreement is adopted wish
to exchange the Policy of life insurance on the Director's life for another
contract of life insurance insuring the Director's life. Provided that the
Policy is replaced or intended to be replaced with a comparable policy of life
insurance, the Director agrees to provide medical information and cooperate with
medical insurance-related testing required by a prospective insurer for
implementing the Policy or, if necessary, for modifying or updating to a
comparable insurer.
ARTICLE 3
PREMIUMS
3.1 Premium Payment. Southcoast shall pay any premiums due on the
Policy.
3.2 Economic Benefit. The Administrator shall annually determine the
economic benefit attributable to the Director based on the life insurance
premium factor for the Director's age multiplied by the aggregate death benefit
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payable to the Director's beneficiary. The "life insurance premium factor" is
the minimum factor applicable under guidance published pursuant to Treasury Reg.
section 1.61-22(d)(3)(ii) or any subsequent authority.
3.3 Imputed Income. (a) Southcoast shall impute the economic benefit to
the Director on an annual basis, by adding the economic benefit to the
Director's W-2, or if applicable, Form 1099.
ARTICLE 4
ASSIGNMENT
The Director may irrevocably assign without consideration all of the
Director's interest in the Policy and in this Agreement to any person, entity,
or trust established by the Director or the Director's spouse. If the Director
transfers all of the Director's interest in the Policy, all of the Director's
interest in the Policy and in the Agreement shall be vested in the Director's
transferee, who shall be substituted as a party hereunder and the Director shall
have no further interest in this Agreement.
ARTICLE 5
INSURER
The Insurer shall be bound by the terms of the Policy only. The Insurer
shall not be bound by the provisions of this Agreement.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 Claims Procedure. Southcoast shall notify any person or entity that
makes a claim for benefits under this Agreement (the "Claimant") in writing,
within 90 days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If Southcoast
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (w) the specific reasons for the denial, (x) a specific
reference to the provisions of the Agreement on which the denial is based, (y) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (z) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If Southcoast determines that there are special circumstances
requiring additional time to make a decision, Southcoast shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional 90 days.
6.2 Review Procedure. If the Claimant is determined by Southcoast not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by Southcoast by filing a petition for
review with Southcoast within 60 days after receipt of the notice issued by
Southcoast. The petition shall state the specific reasons the Claimant believes
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entitle him or her to benefits or to greater or different benefits. Within 60
days after receipt by Southcoast of the petition, Southcoast shall give the
Claimant (and counsel, if any) an opportunity to present his or her position to
Southcoast verbally or in writing, and the Claimant (or counsel) shall have the
right to review the pertinent documents. Southcoast shall notify the Claimant of
its decision in writing within the 60-day period, stating specifically the basis
of its decision, written in a manner to be understood by the Claimant and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the 60-day period is not sufficient, the decision may
be deferred for up to another 60 days at the election of Southcoast, but notice
of this deferral shall be given to the Claimant.
ARTICLE 7
ADMINISTRATION OF AGREEMENT
7.1 Administrator Duties. This Agreement shall be administered by an
Administrator, which shall consist of Southcoast's board of directors or such
committee as the board shall appoint. The Director may not be a member of the
Administrator. The Administrator shall have the discretion and authority to (x)
make, amend, interpret, and enforce all appropriate rules and regulations for
the administration of this Agreement and (y) decide or resolve any and all
questions that may arise, including interpretations of this Agreement.
7.2 Agents. In the administration of this Agreement, the 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 Southcoast.
7.3 Binding Effect of Decisions. The decision or action of the
Administrator concerning any question arising out of the administration,
interpretation, and application of this Agreement and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Agreement.
7.4 Indemnification of Administrator. Southcoast shall indemnify and
hold harmless the members of the 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 Administrator or any of its members.
7.5 Information. To enable the Administrator to perform its functions,
Southcoast shall supply full and timely information to the Administrator on all
matters relating to the date and circumstances of the retirement, death, or
Separation from Service of the Director, and such other pertinent information as
the Administrator may reasonably require.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Termination of Agreement. This Agreement may be
amended or terminated solely by a written agreement signed by Southcoast and the
Director. However, this Agreement shall terminate upon the first to occur of (x)
distribution of the death benefit proceeds in accordance with section 2.2 above,
or (y) the earlier of the date of the Director's Separation from Service or the
date on which the Director attains age 70, except that this Agreement shall not
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terminate if a Change in Control occurs before the Director's Separation from
Service (provided the Separation from Service does not occur after the Director
attains age 70), or (z) termination of the January 1, 2008 Director Retirement
Agreement between Southcoast Community Bank and the Director under Article 5 of
that agreement.
8.2 Binding Effect. This Agreement shall bind the Director and
Southcoast and their beneficiaries, survivors, executors, administrators, and
transferees, and any Policy beneficiary.
8.3 No Guarantee of Service. This Agreement is not a contract for
services. It does not give the Director the right to remain a Director of
Southcoast nor does it interfere with the right of the Board not to nominate the
Director for reelection to the Board, the right of Southcoast's shareholders not
to re-elect the Director or the right of the shareholders or the Board to remove
an individual as a director of Southcoast. The Agreement also does not require
the Director to remain a director or interfere with the Director's right to
terminate service at any time.
8.4 Successors; Binding Agreement. By an assumption agreement in form
and substance satisfactory to the Director, Southcoast shall require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of Southcoast
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that Southcoast would be required to perform this Agreement
had no succession occurred.
8.5 Applicable Law. This Agreement and all rights hereunder shall be
governed by and construed according to the laws of the State of South Carolina,
except to the extent preempted by the laws of the United States of America.
8.6 Entire Agreement. This Agreement constitutes the entire agreement
between Southcoast and the Director concerning the subject matter. No rights are
granted to the Director under this Agreement other than those specifically set
forth.
8.7 Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect any other provision of this Agreement not held
invalid, and each such other provision shall continue in full force and effect
to the full extent consistent with law. If any provision of this Agreement is
held invalid in part, such invalidity shall not affect the remainder of the
provision not held invalid, and the remainder of the provision together with all
other provisions of this Agreement shall continue in full force and effect to
the full extent consistent with law.
8.8 Headings. Headings and subheadings herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Agreement.
8.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
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requested, with postage prepaid, to the following addresses or to such other
address as either party may designate by like notice. Unless otherwise changed
by notice, notice shall be properly addressed to the Director if addressed to
the address of the Director on the books and records of Southcoast at the time
of the delivery of such notice, and properly addressed to Southcoast if
addressed to the board of directors, Southcoast Financial Corporation, 000
Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000.
IN WITNESS WHEREOF, the Director and a duly authorized representative
of Southcoast have executed this Endorsement Split Dollar Agreement as of the
date first written above.
DIRECTOR: SOUTHCOAST:
Southcoast Financial Corporation
____________________________
By:_____________________________
Its:
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AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT
TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE
I acknowledge that I have read the Endorsement Split Dollar Agreement
and agree to be bound by its terms, particularly the covenant on my part set
forth in section 2.4 of the Endorsement Split Dollar Agreement to provide
medical information and cooperate with medical insurance-related testing
required by an insurer to issue a comparable insurance policy to cover the
benefit provided under this Endorsement Split Dollar Agreement.
--------------------------------- ----------------------------
Witness
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SPLIT DOLLAR POLICY ENDORSEMENT
Insured: ______________
Insurer: Lincoln Benefit Life Insurance Company
Policy No.: ______________
According to the terms of the Southcoast Financial Corporation
Endorsement Split Dollar Agreement dated as of , 2007, the undersigned Owner
requests that the above-referenced policy issued by the Insurer provide for the
following beneficiary designation and limited contract ownership rights to the
Insured:
1. Upon the death of the Insured, proceeds shall be paid in one sum to
the Owner, its successors or assigns, to the extent of the Owner's interest in
the policy. It is hereby provided that the Insurer may rely solely upon a
statement from the Owner as to the amount of proceeds it is entitled to receive
under this paragraph.
2. Any proceeds at the death of the Insured in excess of the amount
paid under the provisions of the preceding paragraph shall be paid in one sum
to:
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PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER
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CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER
The exclusive rights to change the beneficiary for the proceeds payable under
this paragraph and to assign all rights and interests granted under this
paragraph 2 are hereby granted to the Insured. The sole signature of the Insured
shall be sufficient to exercise the rights. The Owner retains all contract
rights not granted to the Insured under this paragraph.
3. It is agreed by the undersigned that this designation and limited
assignment of rights shall be subject in all respects to the contractual terms
of the policy.
4. Any payment directed by the Owner under this endorsement shall be a
full discharge of the Insurer, and such discharge shall be binding on all
parties claiming any interest under the policy.
5. This Split Dollar Policy Endorsement supersedes and replaces all
prior endorsements of the Insured relating to the above-referenced policy issued
by the Insurer.
6. The exercise by the Owner of the right to surrender the policy shall
terminate the rights of the Insured.
7. The Owner of the policy is Southcoast Financial Corporation. The
Owner alone may exercise all policy rights, except that the Owner will not have
the rights specified in paragraph 2 of this Split Dollar Policy Endorsement.
The undersigned for the Owner is signing in a representative capacity
and warrants that he or she has the authority to bind the entity on whose behalf
this document is executed.
Signed at Mt. Pleasant, South Carolina this ___ day of _____________,
2007.
INSURED: OWNER:
Southcoast Financial Corporation
By: _____________________________
_____________________________ Its:_____________________________
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