AGREEMENT AMENDING SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Exhibit 10.42
AGREEMENT AMENDING SUPPLEMENTAL
EXECUTIVE RETIREMENT AGREEMENT
EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is entered into this ___ day of ___, 2006, by and between Midwest Banc
Holdings, Inc., a Delaware corporation (the “Company”), and (the “Executive”).
R E C I T A L S
A. The Executive and the Company wish to memorialize their existing agreements as to an
amendment of the Midwest Banc Holdings, Inc. Supplemental Executive Retirement Agreement dated
XXXXXXXX (the “Supplemental Executive Retirement Agreement”), which existing agreements
provide the Executive with current life insurance protection by way of a compensatory split-dollar
life insurance arrangement instead of the death benefits provided under Article 3 of the
Supplemental Executive Retirement Agreement in the event the Executive dies while in the active
service of the Company.
B. The Company is and will be the owner of the life insurance policy or policies contemplated
by this Agreement (individually the “Policy,” and collectively, the “Policies”) and, as such,
possess all of the incidents of ownership in and to each Policy, subject to the limitations
contained herein.
C. The Company will endorse to the Executive the right to designate the beneficiary of a
portion of the death benefits payable under the Policies as provided and limited herein.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, the
parties memorialize their agreements as follows:
1. Purchase of the Policies. The parties undertake all necessary actions to cause each Policy
to be issued to the Company and to cause each Policy to conform to the terms of this Agreement.
Each Policy will be subject to the terms and conditions of this Agreement and of the endorsement
filed with the insurance company issuing each Policy (the “Insurer”). The Policies that are
subject to this Agreement as of the date hereof are listed on Schedule A hereto.
2. Ownership of the Policies.
(a) The Company will own each Policy at all times and may exercise all ownership rights and
incidents of ownership granted to the particular Policy’s owner by the Insurer, except the
Executive’s right to direct the distribution of the Policies’ death benefits up to the Current Life
Insurance Protection Amount defined in paragraph 3.
(b) The Company alone may, to the extent of its interest, exercise the right to borrow or
withdraw on each Policy’s cash surrender values. The Company may pledge or assign the policy,
subject to the terms and conditions of this Agreement, in order to secure a loan or loans from the
Insurer or from a third party. Interest charges on such loans shall be the responsibility of and
shall be paid by the Company.
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(c) The Company shall have the sole right to surrender or cancel any Policy or Policies and to
receive from the Insurer the amount due the owner under each Policy.
(d) The Company shall retain all rights which each Policy grants to the owner thereof.
(e) The Executive shall take no action with respect to any Policy that would in any way
compromise or jeopardize the Company’s rights without the Company’s express written consent.
3. Economic Benefit Limited to Current Life Insurance Protection Amount.
(a) For each calendar year for which this Agreement is in force, the economic benefit provided
to the Executive under this Agreement is limited to current life insurance protection in an amount
equal to the total age 65 liability accrued on the Company’s records as of the end of the preceding
calendar year (the “Current Life Insurance Protection Amount”). By way of example, the Current
Life Insurance Protection Amount as of the end of 2004 and in effect for all of 2005 up through
December 31, 2005 was $XXX,XXX.
(b) The Executive does not have any current or future right to access any cash surrender value
of any Policy.
(c) The Executive does not have any economic benefits in any Policy other than as provided in
paragraph (a).
(d) The Current Life Insurance Protection Amount shall be determined by the Company following
the close of each calendar year and communicated to the Executive by March 15 of the calendar year
for which it is effective. Each time the Current Life Insurance Protection Amount changes (which
may not be annually), the Company shall effect an endorsement to each Policy with each Insurer to
ensure that each Insurer is obligated to pay the proper portion of the Current Life Insurance
Protection Amount to the Executive’s beneficiaries or estate upon the death of the Executive while
in the active service of the Company (with all remaining Policy proceeds being payable to the
Company).
4. Beneficiary Designation Rights. The Company shall endorse to the Executive the right and
power to designate a beneficiary or beneficiaries to receive an aggregate sum payable upon the
death of the Executive equal to the Current Life Insurance Protection Amount. This endorsement
shall be effected using a form provided by the Insurer or Insurer. A Policy’s endorsement shall
not be terminated, altered, or amended without the express written consent of the Executive. To
change a beneficiary, the Executive must execute a new endorsement and comply with the requirements
of the particular Policy. Failure to comply with the terms of the individual Policy will result in
the change not becoming effective. The parties shall take all actions necessary to cause such an
endorsement to conform to the provisions of this Agreement.
5. Premium Payments. Subject to the Company’s absolute right to surrender or terminate any
Policy at any time and for any reason, the Company shall pay the entire premiums owed under the
Policies to the Insurers. Upon request, the Company shall promptly furnish to the Executive
evidence of timely payment of such premiums.
6. Income Taxation of Current Life Insurance Protection Amount. Consistent with the federal
income tax regulations governing the taxation of compensatory split-dollar life insurance
arrangements, the parties agree that the value of the economic benefits provided to the Executive
hereunder for a taxable year is equal to the cost of the Current Life Insurance Protection Amount
in effect for that year. Such cost equals the Current Life Insurance Protection Amount multiplied
by the life insurance premium factor designated or permitted in guidance published by the Internal
Revenue Service. The Company shall annually furnish to the Executive a statement of the amount of
income reportable by the Executive for federal and state income tax purposes consistent therewith.
The Executive agrees to report the amount reflected in the statement on his or her personal income
tax return.
7. Death of the Executive.
(a) Upon the death of the Executive while in the active service of the Company, the Company
and the Executive’s beneficiaries designated under the Policies (or if no beneficiary is
designated, the estate of the Executive) shall promptly take all action necessary to obtain the
death benefits provided under each Policy. The Company shall have the unqualified right to receive
that portion of such death benefits that exceeds the Current Life Insurance Protection Amount for
the calendar year in which the Executive’s death occurs. The balance of the Policy death benefits
(i.e., the Current Life Insurance Protection Amount) shall be paid to the Executive’s beneficiaries
designated under the Policies (or if no beneficiary is designated, the estate of the Executive) in
the manner and in the amount provided in the Policy’s provisions. In no event shall the aggregate
amounts payable under the Policies (and this Agreement) to the Executive’s beneficiaries (or
estate) exceed the Current Life Insurance Protection Amount for the calendar year in which the
Executive’s death occurs.
(b) To the extent an amount is paid to the Executive’s beneficiaries (or the estate of the
Executive) hereunder, then such amount will satisfy, replace, and render void all obligations of
the Company to pay such amount under Article 3 of the Supplemental Executive Retirement Agreement.
(c) If the Executive dies while not in the active service of the Company, neither the
Executive’s estate nor any of the Executive’s beneficiaries shall have any rights to any portion of
any death benefits payable under any Policy.
8. Exchange of Policies. The Company may unilaterally and without the consent of the
Executive exchange any Policies that are the subject matter of this Agreement, with or without
replacing said Policies.
9. No Assignment Rights of Executive. The Executive may not, without the written consent of
the Company, assign to any individual, trust or other organization, any right, title or interest in
any Policy, nor any rights, options, privileges or duties created under this Agreement.
10. Insurance Company Not a Party to This Agreement. No Insurer shall be deemed a party to
this Agreement, but is expected to respect the rights of the parties as herein developed upon
receiving an executed copy of this Agreement. The Insurer shall be fully discharged from its
obligations under the applicable Policy by payment of the Policy’s death benefit to the
beneficiaries named in the Policy, subject to the Policy’s terms and conditions and
endorsements. No provision in this Agreement shall in any way be construed as enlarging, changing,
varying, or in any other way affecting the Insurer’s obligations as expressly provided in the
Policy, except insofar as the provisions of this Agreement are made a part of the Policy by the
endorsement document executed by the Company and filed with the Insurer in connection with this
Agreement.
IN WITNESS WHEREOF, the Executive and a duly authorized Officer of the Company have executed
this Agreement on this ___ day of ___, 2006.
| MIDWEST BANC HOLDINGS, INC., a Delaware Corporation |
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| By: | ||||
| Xxxxx X. Xxxxxxxx, President and CEO | ||||
