EX-10.VI.C 10 dex10vic.htm ENDORSEMENT SPLIT DOLLAR AGREEMENT BETWEEN BANK OF NORTH CAROLINA & DAVID B BANK OF NORTH CAROLINA ENDORSEMENT SPLIT DOLLAR AGREEMENT
Exhibit 10(vi)(c)
BANK OF NORTH CAROLINA
ENDORSEMENT SPLIT DOLLAR AGREEMENT
THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this “Agreement”) is entered into as of this 31st day of December, 2004 by and between Bank of North Carolina, a North Carolina-chartered commercial bank (the “Bank”), and Xxxxx Xxxxxxx, its Chief Financial Officer (the “Executive”). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by and between the aforementioned parties.
To encourage the Executive to remain an employee of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Executive’s life. The Bank will pay life insurance premiums from its general assets.
The Bank and the Executive agree as set forth herein.
Article 1
Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms shall have the meanings specified:
1.1 Administrator means the administrator described in Article 7.
1.2 Executive’s Interest means the benefit set forth in Section 2.2(a).
1.3 Insured means the Executive.
1.4 Insurer means each life insurance carrier in 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.
1.6 Policy means the specific life insurance policy or policies issued by the Insurers.
1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive’s interest, if any, in a Policy on such Executive’s life.
Article 2
(b) If the Policy Is Cancelled. If the Policy is cancelled, surrendered, terminated, or allowed to lapse, in any such case without replacement, the Executive’s beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to death proceeds payable by the Bank in an amount in cash equal to the sum of (1) the amount specified in paragraph (a) of this Section 2.2, measured at the time the Policy is cancelled, surrendered, terminated, or allowed to lapse, plus (2) a tax gross-up payment to compensate for federal and state taxes imposed on the benefit specified in clause (1) of this Section 2.2(b). The tax gross-up payment required under this clause (2) of Section 2.2(b) shall be calculated in two steps, first by dividing the total death benefit specified in clause (1) of this Section 2.2(b) by one minus the sum of (x) the highest marginal individual federal income tax rate under the Internal Revenue Code at the time of the Executive’s death (offset or reduced to account for the deductibility at the federal level of state income taxes), plus (y) the highest marginal individual state income tax rate under North Carolina law at the time of the Executive’s death. Second, the death benefit specified in clause (1) of this Section 2.2(b) shall then be subtracted from the amount calculated in that first step. The difference shall be the additional tax gross-up payment to be made to compensate for taxes, regardless of whether it exceeds or is less than taxes imposed on the Executive’s estate for “income in respect of a decedent.” To illustrate with a simple hypothetical based on an assumed death benefit amount of $100,000 paid directly by the Bank under clause (1) of this Section 2.2(b), the additional tax gross-up payment would be calculated as follows if the highest marginal individual income tax rates are 34% (federal) and 7.5% (North Carolina), taking into account the deductibility at the federal level of state income taxes:
First Step: | $ 100,000 / divided by (1 - ((34% + 7.5%) - (34% x 7.5%)) | |
= $ 100,000 / divided by (1 minus 38.95%) | ||
= | $ 100,000 / divided by 61.05%, or .6105 | |
= $ 163,800 | ||
Second Step: | $ 163,800 minus $ 100,000 | |
= | $ 63,800, the amount of the additional tax gross-up payment |
2.4 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive’s life for another contract of life insurance insuring the Executive’s life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive 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. The Bank shall pay any premiums due on the Policy.
3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis.
Article 4
The Executive may irrevocably assign without consideration all of the Executive’s rights and interest in this Agreement to any person, entity, or trust established by the Executive or the Executive’s spouse. If the Executive transfers all of the Executive’s rights and interest in this Agreement, then all of the Executive’s rights and interest in the Agreement shall be vested in the Executive’s transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement.
Article 5
The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement.
Article 6
(a) | The specific reasons for the denial, |
(b) | A reference to the specific provisions of this Agreement on which the denial is based, |
(c) | A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, |
(d) | An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and |
(e) | A statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. |
shall also provide the claimant 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.
(a) | The specific reasons for the denial, |
(b) | A reference to the specific provisions of the Agreement on which the denial is based, |
(c) | 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 |
(d) | A statement of the claimant’s right to bring a civil action under ERISA section 502(a). |
Article 7
Article 8
8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America.
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 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 Executive if addressed to the address of the Executive on the books and records of the Bank at the time of the delivery of such notice, and properly addressed to the Bank if addressed to the Board of Directors, Bank of North Carolina, 000 Xxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000.
EXECUTIVE: | BANK: | |||
Bank of North Carolina | ||||
/s/ Xxxxx X. Xxxxxxx | By: | /s/ X. Xxxxxx Xxxxxx, Jr. | ||
Xxxxx X. Xxxxxxx | ||||
Its: | Chairman | |||
And By: | /s/ X. Xxxxx Xxxxxxxxxx, Jr. | |||
Its: | President and CEO |
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.
/s/ X. Xxxxx Xxxxxxxxxx, Jr. | /s/ Xxxxx X. Xxxxxxx | |
Witness | Executive |
SPLIT DOLLAR POLICY ENDORSEMENT
Insured: Xxxxx X. Xxxxxxx | Insurers: Xxxx Xxxxxxx and Mass Mutual | |
Policy No. Confidential |
Pursuant to the terms of the Bank of North Carolina Endorsement Split Dollar Agreement dated as of December 31, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides 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 its 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:
Confidential Personal Information |
PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER |
Confidential Personal Information |
CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER |
The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said 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.
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 being executed.
Signed at Thomasville, North Carolina, this 31st day of December, 2004.
INSURED: | Owner: | |||
Bank of North Carolina | ||||
/s/ Xxxxx X. Xxxxxxx | By: | /s/ X. Xxxxx Xxxxxxxxxx, Jr. | ||
Xxxxx X. Xxxxxxx | ||||
Its: | President and CEO |