This Life Insurance Split Dollar Agreement involves
Title: SUPPLEMENTAL LIFE INSURANCE AGREEMENT
Governing Law: United States Of America Date: 11/26/2007
MONTEREY COUNTY BANK
Supplemental Life Insurance Agreement
MONTEREY COUNTY BANK
SUPPLEMENTAL LIFE INSURANCE AGREEMENT
EFFECTIVE October 26, 2006
THIS SUPPLEMENTAL LIFE INSURANCE AGREEMENT (the “Agreement”) is adopted this 26th day of October, 2006, by and between MONTEREY COUNTY BANK, a state-chartered commercial bank located in Monterey, California (the “Bank”), and CHARLES T. CHRIETZBERG (the “Executive”).
The purpose of this Agreement is to retain and reward the Executive, by dividing the death proceeds of certain life insurance policies which are owned by the Bank on the life of the Executive with the designated beneficiary of the Executive. The Bank will pay the life insurance premiums from its general assets.
Whenever used in this Agreement, the following terms shall have the meanings specified:
1.1 “ Agreement 1 ” refers to the Survivor Income Agreement between the Bank and the Executive and the Split Dollar addendum thereto, all dated December 31, 1993.
1.2 “Agreement 2 ” refers to the Life Insurance Agreement Endorsement Method Split Dollar Plan Agreement between the Bank and the Executive, effective October 12, 1999, and the two amendments thereto dated August 15, 2001 and August 16, 2001, respectively.
1.3 Bank’s Interest ” means the benefit set forth in Section 2.1.
1.4 “ Beneficiary ” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive.
1.5 “ Beneficiary Designation Form ” means the form established from time to time by the Plan Administrator that the Executive completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.
1.6 “ Board ” means the Board of Directors of the Bank as from time to time constituted.
1.7 “ Code ” means the Internal Revenue Code of 1986, as amended.
1.8 “ Executive’s Interest ” means the benefit set forth in Section 2.2.
1.9 “ Insurer ” means the insurance company issuing the Policy on the life of the Executive.
1.10 “ Net Death Proceeds ” means the total death proceeds of the Policy minus the greater of (i) the cash surrender value or (ii) the aggregate premiums paid by the Bank.
1.11 “ Plan Administrator ” means the plan administrator described in Article 12.
1.12 “ Policy ” or “ Policies ” means the individual insurance policy or policies adopted by the Bank for purposes of insuring the Executive’s life under this Agreement.
1.13 “ Separation from Service ” means the termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A termination of employment will not be considered a Separation from Service if:
(a) the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or
(b) the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such less period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period).
1.14 “Vested Insurance Benefit ” means the Bank will provide the Executive with continued insurance coverage from the date of vesting until death, subject to the forfeiture provisions detailed in Section 3.2 and Article 6. Article 3 explains how the Executive achieves vested status.
2.1 Bank’s Interest . The Bank shall own the Policies and shall have the right to exercise all incidents of ownership and, subject to Article 4, the Bank may terminate a Policy without the consent of the Executive. The Bank shall be the beneficiary of the remaining death proceeds of the Policies after the Executive’s Interest is determined according to Section 2.2 below.
2.2 Executive’s Interest . The Executive, or the Executive’s assignee, shall have the right to designate the Beneficiary of an amount of death proceeds as specified in Section 2.2.1 or 2.2.2. The Executive shall also have the right to elect and change settlement options with respect to the Executive’s Interest by providing written notice to the Bank and the Insurer.
2.2.1 Death Prior to Separation from Service . If the Executive dies while employed by the Bank, the Executive’s Beneficiary shall be entitled to a benefit equal to one hundred percent (100%) of the Net Death Proceeds minus the benefit amounts paid to the Executive’s beneficiary pursuant to Agreement 1 and Agreement 2.
2.2.2 Death After Separation from Service . If, pursuant to Article 3, the Executive has a Vested Insurance Benefit at the date of death, the Executive’s Beneficiary shall be entitled to a benefit equal to the Net Death Proceeds minus the benefit amounts paid to the Executive’s beneficiary pursuant to Agreement 1 and Agreement 2. If the Executive has not achieved a Vested Insurance Benefit on the date of death, the Beneficiary will not be entitled to a benefit under this Agreement.
3.1 Vested Insurance Benefit . The Executive shall have a Vested Insurance Benefit equal to the amount specified in Section 2.2 at the earliest of the following events:
3.1.1 Attainment of age sixty-five (65) while in the employ of the Bank; or
3.1.2 Adoption, by the Board at its discretion, of a resolution entitling the Executive to the Vested Insurance Benefit in Section 2.2 under circumstances not otherwise addressed in this Section 3.1.
3.2 Forfeiture of Benefit . Notwithstanding the provisions of Section 3.1, the Executive will forfeit his Vested Insurance Benefit if: (i) the Executive violates any of the provisions detailed in Article 6; or (ii) the Executive provides written notice to the Bank declining further participation in the Agreement.
4.1 Insurance Policies . If the Executive has a Vested Insurance Benefit, the Bank may provide such benefit through the Policies purchased at the commencement of this Agreement, or may provide comparable insurance coverage to the Executive through whatever means the Bank deems appropriate. If the Executive waives or forfeits his right to the Vested Insurance Benefit, the Bank shall choose to cancel the Policies on the Executive, or may continue such coverage and become the direct beneficiary of the entire death proceeds.
4.2 Offer to Purchase . If the Bank discontinues a Policy while the Executive is employed by the Bank at the date of discontinuance or while the Executive has a Vested Insurance Benefit that has not been forfeited, the Bank shall give the Executive at least thirty (30) days to purchase such Policy. The purchase price shall be the fair market value of the Policy, as determined under Treasury Reg. §1.61-22(g)(2) or any subsequent applicable
authority. Such notification shall be in writing.
Premiums and Imputed Income
5.1 Premium Payment . The Bank shall pay all premiums due on all Policies.
5.2 Economic Benefit . The Bank shall determine the economic benefit attributable to the Executive based on the life insurance premium factor for the Executive’s age multiplied by the aggregate death benefit payable to the Beneficiary hereunder. The “life insurance premium factor” is the minimum factor applicable under guidance published pursuant to Treasury Reg. § 1.61-22(d)(3)(ii) or any subsequent authority.
5.3 Imputed Income . The Bank shall impute the economic benefit to the Executive on an annual basis, by adding the economic benefit to the Executive’s W-2, or if applicable, Form 1099.
6.1 Excess Parachute or Golden Parachute Payment . If the payments and benefits pursuant to this Agreement, either alone or together with other payments and benefits which the Executive has the right to receive from the Bank, would constitute an “excess parachute payment” under Section 280G of the Code, or would be a prohibited golden parachute payment pursuant to 12 C.F.R. §359.2 and for which the appropriate federal banking agency has not given written consent to pay pursuant to 12 C.F.R. §359.4, the payments and benefits pursuant to this Agreement shall be reduced, in the manner determined by the Executive in the case of the application of Section 280G of the Code, by the amount, if any, which is the minimum necessary to result in (i) no portion of the payments and benefits under this Agreement being non-deductible to the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code, and (ii) no adverse consequence to the Bank under or pursuant to such banking regulations. All benefits payable under this Agreement shall also be subject to limitations or prohibitions imposed by subsequent changes or amendments to the cited laws and regulations except to the extent that any benefits payable under this Agreement are grandfathered or otherwise exempt or excluded from the change or amendment.
6.2 Termination for Cause . Notwithstanding any provision of this Agreement to the contrary, the Executive shall forfeit any right to a benefit under this Agreement if the Bank terminates the Executive’s employment for cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order or material breach of any provision of the Agreement. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Bank.
6.3 Removal . Notwithstanding any provision of this Agreement to the contrary, the Executive’s rights in the Agreement shall terminate if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act (“FDIA”).
6.4 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 insurance company denies coverage (i) for material misstatements of fact made by the Executive on any application for life insurance purchased by the Bank, or (ii) for any other reason; provided, however that the Bank shall evaluate the reason for the denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial.
7.1 Beneficiary . The Executive shall have the right, at any time, to designate a Beneficiary to receive any benefits payable under the Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other Agreement of the Bank in which the Executive participates.
7.2 Beneficiary Designation; Cha