EXHIBIT 10.7
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: Beneficial Life Insurance #XX0000000
Jefferson Pilot Insurance #XX0000000
Massachusetts Mutual Life
Insurance #0000000
Bank: Southwest Community Bank
Insured: Xxxxx X. Xxxxxxxxxxx
Relationship of Insured to Bank: Executive Officer
Date:
The respective rights and duties of the Bank, the Mercardante 2001 Irrevocable
Trust (the "Trust") and 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 Trust 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 Trust, 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 shall have the right and power to require the Bank to
designate a beneficiary or beneficiaries to receive the proceeds
payable upon the death of the Insured, subject to any right or interest
the Bank may have in such proceeds, as provided in this Agreement.
Pursuant to said right, the Insured irrevocably directs the Bank and
the Bank agrees to designate the Trust as beneficiary of the Policy.
Said designation shall be irrevocable and thus may not be changed by
anyone, except in the event the Agreement terminates as provided under
Article X herein and the Policy is not assigned to the Trust.
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 additional compensation equal to the
assumed cost of insurance as required by the Internal Revenue Service
plus the amount of any taxes paid and taxes on taxes paid (collectively
"Taxes") related to the receipt of the benefit ("gross up"). This
amount shall not exceed $8,620 per year. For example:
If the taxable income is $10,000 and the highest combined marginal
Federal and California income tax bracket plus FICA taxes and the
Medicare tax is 40%, then the Taxes would be $10,000 multiplied by 40%
($4,000) divided by .60 = $6,667. 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.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows: ,
1. If death occurs on or before the attainment of age sixty-five
(65), the Trust shall be entitled to an amount equal to the
lesser of $1,820,000, or one hundred percent (100%) of the net
at risk insurance portion of the proceeds. If death occurs
after age sixty-five (65) but on or before age seventy (70),
the Trust shall be entitled to the lesser of $1,400,000, or
one hundred percent (100%) of the net at risk insurance
proceeds. If death occurs after age seventy (70) but on or
before age eighty (80), the Trust shall be entitled to the
lesser of $980,000, or one hundred percent (100%) of the net
at risk insurance proceeds. If death occurs after age eighty
(80), the Trust shall be entitled to the lesser of $560,000,
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. The Bank and the Trust 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 Trust, respectively, bears to
the total proceeds, excluding any such interest.
3. 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 Trust 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.
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 trust 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.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured and the Trust 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
October 17, 2001 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 Insured'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 Bank, which has a material adverse
financial effect upon the Bank; or
(b) The Insured'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 financial effect on the Employer.
Upon such termination, the Trust 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 an amount equal to the
Policy's cash value, as that term is defined in the Policy, and shall
not take into account the amount of any premiums that have been paid by
the Bank.
Should the Trust fail to exercise this option within the prescribed
ninety (90) day period, the Trust agrees that all of its 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.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
Neither the Insured nor the Trust may 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, the Trust, 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 The Benefit Marketing Group, Inc.
(770-952-1529). 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
F4duciary 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 flamed 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.
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/ Xxxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxxxxx
Chairman
THE MERCARDANTE 2001
IRREVOCABLE TRUST
By
_________________________________
Trustee
IRREVOCABLE BENEFICIARY DESIGNATION FORM
NAME
The Mercardante 2001 Irrevocable Trust
By _________________________________
Southwest Community Bank
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Chairman
Exhibit 10.7
