AMENDED AND RESTATED TEMECULA VALLEY BANK SALARY CONTINUATION AGREEMENT
EXHIBIT
10.27
AMENDED
AND RESTATED
TEMECULA
VALLEY BANK
SALARY
CONTINUATION AGREEMENT
THIS
AGREEMENT is adopted this 29th
day of
December 2006, by and between the TEMECULA VALLEY BANK, located in Temecula,
California (the "Company") and XXXXXX
X. XXXXXXXX
(the
"Executive"), amending, restating and replacing the Amended and Restated
Temecula Valley Bank, Salary Continuation Agreement dated September 30, 2004,
and which was originally entered into on January 1, 2000.
The
purpose of the current amendment and restatement is to bring this agreement
into
documentary compliance with the requirements of Section 409A of the Internal
Revenue Code. In addition, the benefit under this Agreement is increased to
$80,000 annually.
INTRODUCTION
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, prior to actual receipt of benefits.
Article
1
Definitions
Whenever
used in this Agreement, the following words and phrases shall have the meanings
specified:
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 “Change
in Control”
means a
change in ownership or control of the Company as defined in Treasury Regulation
§1.409A-3(g)(5) or any subsequently applicable Treasury Regulation.
1.3 “Code”
means
the Internal Revenue Code of 1986, as amended.
1.4 “Disability”
means
the Executive suffering a sickness, accident or injury which has been determined
by the carrier of any individual or group disability insurance policy covering
the Executive, or by the Social Security Administration, to be a disability
rendering the Executive totally and permanently disabled. The Executive must
submit proof to the Company of the carrier’s or Social Security Administration’s
determination upon the request of the Company.
1.5 “Early
Termination”
means
the Termination of Employment before Normal Retirement Age for reasons other
than death, Disability, Termination for Cause or following a Change in
Control.
1.6 “Early
Termination Date”
means
the month, day and year in which Early Termination occurs.
1.7 “Effective
Date”
means
January 1, 2005.
1.8 “Normal
Retirement Age”
means
the Executive’s 65th birthday.
1.9 “Normal
Retirement Date”
means
the later of the Normal Retirement Age or Termination of
Employment.
1.10 “Plan
Year”
means a
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
Agreement.
1.11 “Separation
from Service”
shall
mean that the Executive has experienced a Termination of Employment from the
Company. Where the Executive continues to perform services for the Company
following a Termination of Employment, however, and the facts and circumstances
indicate that such services are intended by the Company 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”
See
Section 5.1.
1.13 “Termination
of Employment”
means
that the Executive ceases to be employed by the Company for any reason
whatsoever other than by reason of a leave of absence, which is approved by
the
Company. For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive’s Termination of
Employment, the Company shall have the sole and absolute right to determine
the
termination date.
Article
2
Lifetime
Benefits
2.1 Normal
Retirement Benefit.
Upon
Termination of Employment on the Normal Retirement Date for reasons other than
death, the Company shall pay to the Executive the benefit described in this
Section 2.1 in lieu of any other benefit under this Agreement.
2.1.1 Amount
of Benefit.
The
annual benefit under this Section 2.1 is $80,000 (Eighty Thousand Dollars).
The
Board of Directors may in its sole and absolute discretion may unilaterally
increase the annual benefit amount at the end of each Plan Year from the date
of
this Agreement to the Executive’s Normal Retirement Date.
2.1.2 Payment
of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following the Executive’s Separation from Service. The Company shall pay this
annual benefit to the Executive for 15 years.
2.1.3 Benefit
Increases.
Commencing on the first anniversary of the first benefit payment, and continuing
on each subsequent anniversary, the Company's Board of Directors, in its sole
discretion, may increase the benefit.
2.2 Early
Termination Benefit.
Upon
Early Termination, the Company shall pay to the Executive the benefit described
in this Section 2.2 in lieu of any other benefit under this
Agreement.
2.2.1 Amount
of Benefit.
The
benefit under this Section 2.2 is the Accrued Liability Balance for the Plan
Year ending immediately prior to the Early Termination Date, except, however,
the Executive shall not be entitled to any benefit if he voluntarily terminates
his employment prior to the end of the fifth Plan Year.
2.2.2 Payment
of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following the Executive’s Separation from Service. The Company shall pay this
annual benefit to the Executive for 15 years.
2.3 Disability
Benefit.
If the
Executive terminates employment due to Disability prior to Normal Retirement
Age, the Company shall pay to the Executive the benefit described in this
Section 2.3 in lieu of any other benefit under this Agreement.
2.3.1 Amount
of Benefit.
The
benefit under this Section 2.3 is the Accrued Liability Balance for the Plan
Year ending immediately prior to the date in which the Termination of Employment
occurs.
2.3.2 Payment
of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Separation from Service. The Company shall pay this annual benefit
to
the Executive for 15 years.
2.4 Change
in Control Benefit.
Upon a
Change in Control followed by Executive’s Termination of Employment, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu
of
any other benefit under this Agreement.
2.4.1 Amount
of Benefit.
The
benefit under this Section 2.4 is the Accrued Liability Balance,.
2.4.2 Payment
of Benefit.
The
company shall pay 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 (as described under the “Separation from Service” provision
herein) if, pursuant to Internal Revenue Code Section 409A, Executive is
considered a “specified employee” under Internal Revenue Code Section
416(i). In the event a distribution is delayed pursuant to this Section 2.6,
the
originally scheduled distribution shall be delayed for 6 months, and shall
commence instead on the first day of the seventh month following Separation
from
Service. 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 Company 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
Death
Benefits
The
Company shall not pay a death benefit under this Agreement. A death benefit
may
be provided according to the terms of a separate Split Dollar Agreement entered
into by the Company and the Executive.
Article
4
Beneficiaries
Executive’s
beneficiary shall not have the right to any benefit payments under this
Agreement.
Article
5
General
Limitations
5.1 Termination
for Cause.
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not pay any benefit under this Agreement if the Company terminates the
Executive's employment for:
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(a)
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any
act of embezzlement, fraud, breach of fiduciary duty or
dishonesty;
|
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(b)
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deliberate
or repeated disregard of the policies and rules of Company as adopted
by
Company’s Board of Directors;
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(c)
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unauthorized
use or disclosure of any of the trade secrets or confidential information
of Company;
|
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(d)
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competition
with Company, inducement of any customer of the Company to breach
a
contract with the Company, or inducement of any principal for whom
the
Company acts as agent to terminate such agency
relationship;
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(e)
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gross
negligence adversely impacting the Company; or
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(f)
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willful
breach of this Agreement or any other willful misconduct.
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5.2 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 shareholder
in a corporation, or becomes associated with, in the capacity of employee,
director, 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 Company within 2 years of Termination of Employment, which
enterprise is, or may 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. This section shall not apply following a Change in Control.
5.3 Suicide
or Misstatement.
No
benefits shall be payable if the Executive commits suicide within two years
after the date of this Agreement, or if the Executive has made any material
misstatement of fact on any application for life insurance purchased by the
Company.
Article
6
Claims
and Review Procedures
6.1 Claims
Procedure.
Any
person or entity who has not received benefits under the Plan that he or she
believes should be paid (“claimant”) shall make a claim for such benefits as
follows:
6.1.1 Initiation
- Written Claim.
The
claimant initiates a claim by submitting to the Company a written claim for
the
benefits.
6.1.2 Timing
of Company Response.
The
Company shall respond to such claimant within 90 days after receiving the claim.
If the Company determines that special circumstances require additional time
for
processing the claim, the Company 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
Company expects to render its decision.
6.1.3 Notice
of Decision.
If the
Company denies part or all of the claim, the Company shall notify the claimant
in writing of such denial. The Company shall write the notification in a manner
calculated to be understood by the claimant. The notification shall set
forth:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Plan on which the denial
is
based,
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(c)
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A
description of any additional information or material necessary
for the
claimant to perfect the claim and an explanation of why it is needed,
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(d)
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An
explanation of the Plan’s review procedures and the time limits applicable
to such procedures, and
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(e)
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A
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a) following an adverse benefit determination on review.
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6.2 Review
Procedure.
If the
Company denies part or all of the claim, the claimant shall have the opportunity
for a full and fair review by the Company of the denial, as
follows:
6.2.1 Initiation
- Written Request.
To
initiate the review, the claimant, within 60 days after receiving the Company’s
notice of denial, must file with the Company a written request for review.
6.2.2 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 Company 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.
6.2.3 Considerations
on Review.
In
considering the review, the Company 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.
6.2.4 Timing
of Company Response.
The
Company shall respond in writing to such claimant within 60 days after receiving
the request for review. If the Company determines that special circumstances
require additional time for processing the claim, the Company 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 Company expects to render its decision.
6.2.5 Notice
of Decision.
The
Company shall notify the claimant in writing of its decision on review. The
Company shall write the notification in a manner calculated to be understood
by
the claimant. The notification shall set forth:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Plan on which the denial
is
based,
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(c)
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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
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(d)
|
A
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).
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Article
7
Amendments
and Termination
7.1 This
Agreement may be amended or terminated only by a written agreement signed by
the
Company and the Executive.
7.2 Plan
Terminations under Section 409A.
Notwithstanding anything to the contrary in this Agreement, the Company may
make
distributions under certain circumstances following Plan termination under
this
Section 7.3. Any such distribution shall be made according to the rules set
forth in the regulations promulgated under Section 409A of the Code, and shall
conform to the following requirements:
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(a)
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Within
30 days before, or 12 months after a Change in
Control
|
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(b)
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Upon
the Company’s dissolution or with the approval of a bankruptcy court;
or
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(c)
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Upon
the Company’s termination of this and all similar plans with respect to
all participants, provided (1) that all distributions are made
no earlier
than 12 months and no later than 24 months following such termination;
(2)
the Company does not adopt any new similar plans for a minimum
of 5 years
following the date of such termination; and (3) no payments,
other than
those payments that would otherwise have been payable under
the terms of
the arrangement if the termination had not occurred, are made
pursuant to
this provision.
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Article
8
Miscellaneous
8.1 Binding
Effect.
This
Agreement shall bind the Executive and the Company, and their beneficiaries,
survivors, executors, successors, administrators and transferees.
8.2 No
Guarantee of Employment.
This
Agreement is not an employment policy or contract. It does not give the
Executive the right to remain an employee of the Company, nor does it interfere
with the Company'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.
8.3 Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned, pledged,
attached or encumbered in any manner.
8.4 Tax
Withholding.
The
Company shall withhold any taxes that are required to be withheld from the
benefits provided under this Agreement, including any taxes withheld pursuant
to
Section 409A of the Code.
8.5 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.
8.6 Unfunded
Arrangement.
The
Executive and beneficiary are general unsecured creditors of the Company for
the
payment of benefits under this Agreement. The benefits represent the mere
promise by the Company to pay 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 is a general asset of the Company to which the Executive
and beneficiary have no preferred or secured claim.
8.7
Entire Agreement. This
Agreement constitutes the entire agreement between the Company 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.
8.8 Administration.
The
Company shall have powers which are necessary to administer this Agreement,
including but not limited to:
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(a)
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Interpreting
the provisions of the Agreement;
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(b)
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Establishing
and revising the method of accounting for the
Agreement;
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(c)
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Maintaining
a record of benefit payments; and
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(d)
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Establishing
rules and prescribing any forms necessary or desirable to administer
the
Agreement.
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IN
WITNESS WHEREOF, the Executive and a duly authorized Company officer consent
to
this Agreement.
EXECUTIVE: COMPANY:
TEMECULA
VALLEY
BANK
| By: /s/ Xxxxxx X. Xxxxxxxx | By: /s/ Xxxxxx X. Xxxxxxx | ||
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| Executive Vice President and Chief Financial Officer |
