EX-10.10 5 ex1010fm10k2001-1494.txt EXHIBIT 10.10 - SPLIT DOLLAR AGREEMENT COMMUNITY BANK OF TRI-COUNTY SPLIT DOLLAR AGREEMENT THIS AGREEMENT, made and entered into this 12th day of April, 2001, by and between COMMUNITY BANK OF TRI-COUNTY, a corporation chartered under the laws of The State of Maryland and the principal office of which is located in the Waldorf, Maryland (hereinafter called the "Employer") and William J. Pasenelli, an individual residing in Maryland (hereinafter called the "Employee"). WHEREAS, the Employee is a valuable officer of the Employer, and wants to obtain life insurance under a policy to be paid for by the Employer; and WHEREAS, the Employer wishes to retain the services of the Employee and to help the Employee obtain such life insurance not only for the benefit and protection of the Employee's family (by contributing toward payment of the premiums due on the policy on the Employee's life), but also through retaining the right to death benefits that would assist the Employer in replacing the Employee if necessary due to the Employee's death; and WHEREAS, the Employee will be the owner of the insurance policy acquired pursuant to the terms of this Agreement and the policy will be assigned to the Employer as security for the repayment of the amounts that the Employer will contribute toward payment of the premiums due on each policy listed on Schedule A hereto; NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, it is agreed as follows: ARTICLE I DEFINITIONS 1.01 "Assignment" shall refer to the collateral assignment of the Policy that the Employee will grant to the Employer and that will be evidenced by an instrument of assignment filed with the Insurer. The form of such instrument of assignment is attached as Schedule B hereto. 1.02 "Change of Control" shall refer to the acquisition of the beneficial ----------------- ownership (as that term is defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934) of 25 % or more of the voting securities of the Employer (or of any bank holding company for the Employer) by any person or by persons acting as a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934). For purposes of this subparagraph only, the term "person" refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. 1.03 "Disability" shall refer to that medically determinable physical or --------- mental impairment that disables or incapacitates the Employee to the extent that he is unable to perform his duties of employment, as stated in his Employment Agreement with the Employees and that establishes the Employee's eligibility to receive disability benefits under his Employment Agreement. -1- 1.04 "Insurer" shall refer to any insurance company that has issued a ------- policy. 1.05 "Normal Retirement" shall refer to an Employee's termination of ------------------ service with the Employer on or after the Employee's sixty-second (62nd) birthday for reasons other than death, Disability Termination for Cause, or Change of Control. 1.06 "Policy" shall refer to the insurance policy or policies listed on ------ Schedule A attached hereto. 1.07 "Recovery Amount" shall mean the total amount of the Employer's share, --------------- as set forth in Section 2.03(A), of the premiums paid by the Employer toward the Policy, except that, (i) in the context of the Employee's death while still owning the Policy, the Recovery Amount shall mean the amount to which the Employer is entitled under Section 3.02(B), and (ii) in the context either of the Employee's Termination for Cause or of the Employer's exercise of its rights pursuant to Section 3.02 to receive the Recovery Amount from the cash value of the Policy, the Recovery Amount shall mean the lesser of (a) the Employer's share of the premiums paid toward the Policy and (b) the cash surrender value of the Policy as of the applicable determination date. 1.08 "Termination for Cause" shall mean: --------------------- (A) the Employer's termination of the Employee as a result of (1) the Employee's conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude; (2) the Employee's personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, or willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or (3) the Employee's material breach of any provision of his Employment Agreement with the Employer; or (B) the removal of the Employee and/or permanent prohibition of the Employee from participating in the conduct of the Employer's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA"), 12 U.S.C. ss. 1818(e)(4) or (g)(l). ARTICLE II GENERAL TERMS AND CONDITIONS 2.01 Application for Insurance. The Employee will apply to the Insurer(s) ------------------------- for a Whole Life Policy or Policies on his life in the face amount totaling $1,000,000 and will do everything necessary to cause the Policy to be issued. When the Policy is issued, the policy number, face amount and plan of insurance will be recorded and attached to this Agreement, and the Policy will then be subject to the terms of this Agreement. 2.02 Ownership of Policy. The Employee shall be the owner of the Policy and ------------------- may exercise all rights of ownership with respect to the Policy except as otherwise provided in this Agreement and in the Assignment. The Employee shall have the right to name or change the beneficiary or beneficiaries -2- of the Policy. The Employee shall have the right to borrow against the Policy up to the maximum loan value of the Policy, reduced by the Recovery Amount, but shall not otherwise have the right to borrow against the Policy except as set forth in Section 5.02 of this Agreement. The Employer shall not borrow against the Policy without the prior written consent of the Employee. While this Agreement is in force and effect, the Employee shall not sell, assign, transfer, exchange or surrender or otherwise terminate the Policy without the Employer's written consent. The Employee may, however, cause the surrender and termination of the Policy at any time by providing notice of the termination of the Agreement to the Employer pursuant to Section 5.01. 2.03 Payment of Premiums. Subject to Section 3.01, the Employer shall pay ------------------- the premiums on the Policy during the Employee's term of service with the Employer and for any period thereafter for which the Employer has the obligation to pay premiums under the terms of this Agreement. Each premium will be allocated between the Employee and the Employer as follows: A. The Employer's share of the premium shall be the amount of the planned periodic premium reduced by an amount equal to the economic benefit of the premium to the Employee, as described in IRS Revenue Rulings 64-328 and 66-110 (the "Economic Benefit"). B. The Employee' s share of the premium shall be the amount of the Economic Benefit. Such share shall be paid by the Employer as agent for the Employee and shall be charged to the Employee as cash compensation, and for all purposes shall be deemed cash compensation to the Employee and not Employer-paid premiums. 2.04 Employee's Obligation to Employer. The Recovery Amount shall ------------------------------------- constitute indebtedness of the Employee to the Employer. Repayment of such indebtedness shall be made in accordance with Section 3.02 or 5.02 of this Agreement. 2.05 Assignment of Policy. The Employee shall collaterally assign the --------------------- Policy to the Employer as security for repayment of the Recovery Amount through execution of the form of Assignment attached as Schedule B hereto. The Assignment may not be terminated, altered or changed without the written consent of the Employer, but will terminate automatically upon the Employer's receipt of the Recovery Amount pursuant to Section 3.02 or the Employee's payment of the Recovery Amount to the Employer pursuant to Section 5.02. 2.06 Additional Policy Benefits and Riders. The Employee may at any time --------------------------------------- add a rider to the Policy. Upon written request by the Employer, the Employee will add a rider to the Policy for the benefit of the Employer. The additional premium for any rider that is added to the Policy will be paid by the party entitled to receive the proceeds of the rider. 2.07 Continuation of Employer's Obligations upon Change of Control. Upon a -------------------------------------------------------------- Change of Control, the Employer or its successor organization surviving after the Change of Control shall be deemed to have assumed, and shall be responsible to discharge, all obligations of the Employer under this Agreement. Upon the Employer's reorganization, merger, consolidation, or sale of substantially all of its assets to another organization, the survivor or successor organization shall be deemed to have assumed, and shall be responsible to discharge, all obligations of the Employer under this Agreement, and the term "Employer" shall be deemed to refer to such successor or survivor organization. -3- ARTICLE III EMPLOYER'S FUNDING OBLIGATIONS AND RIGHTS OF RECOVERY 3.01 Employer's Rights and Funding Obligations on Certain Events. ----------------------------------------------------------- A. Disability and Normal Retirement. If the Employee resigns from --------------------------------- the Employer's employ on account of Disability or Normal Retirement, the Employer shall pay the remaining premiums on the Policy if, as, and when due in the ordinary course, subject to Section 2.03(A). B. Termination for Cause. Notwithstanding any other intervening ----------------------- event, upon the Employee's Termination for Cause, the Employer shall notify the Insurer of the Employee's Termination for Cause, and all rights, title, and interest in the Policy shall, upon such notice, be transferred to the Employer under the terms of the Policy as of the date of such Termination for Cause. The parties hereby agree that the terms of the Policy shall provide for the automatic transfer of all rights, title and interest to the Employer upon the conditions described in this Paragraph. C. Termination or Resignation for Other Reasons. In the event the ---------------------------------------------- Employee is terminated or resigns from service with the Employer for reasons other than Termination for Cause, Disability, or Normal Retirement, this Agreement shall continue in full force and effect, except that Employer shall have no further obligation to pay premiums on the Policy upon such termination or resignation. D. Termination of Agreement by Employee. In the event that the ---------------------------------------- Employee provides written notice of termination of this Agreement to the Employer pursuant to Section 5.01, the Employer shall have no further obligation to pay premiums on the Policy upon receipt of such notice. 3.02 Employers Recovery Upon Death Resignation or Termination of Agreement. --------------------------------------------------------------------- A. Disability or Normal Retirement. If the Employee terminates ---------------------------------- employment with the Employer on account of Disability or Normal Retirement, the Employer shall have the right, subject to Section 5.02, to receive the Recovery Amount from the death benefit or the cash value of the Policy, upon the earlier of the Employee's death or the Employee's provision of notice of termination of the Agreement pursuant to Section 5.01. B. Death of Employee. If the Employee dies while he still owns the ----------------- Policy (whether or not the Employee is then an Employee of the Employer), the Employer shall have the right to receive one half of the death benefit payable under the Policy. C. Termination of Agreement by Employee; Termination or Resignation ----------------------------------------------------------------- of Employee for Other Reasons. In the event the Employee either ----------------------------- provides written notice of termination of this Agreement pursuant to Section 5.01 hereof, or is terminated or resigns from service with the Employer for reasons other than Termination for Cause, Disability or Normal Retirement, the Employer shall have the right, subject to Section 5.02, to -4- receive the Recovery Amount from the death benefit or cash value of the Policy upon such provision of notice, termination or resignation. ARTICLE IV PAYMENTS UPON DEATH OF EMPLOYEE 4.01 Employer's Actions. Upon the death of the Employee, the Employer shall ------------------ promptly take all actions necessary to obtain the Recovery Amount from the death benefit of the Policy. 4.02 Payment of Death Benefit to Beneficiary. Subject to the terms of the --------------------------------------- Assignment and to Section 3.02(B) hereof, the balance of the death benefit provided under the Policy, if any, shall be paid directly to the beneficiary or beneficiaries of the Policy in the manner designated by the Employee. No payment shall be made to the beneficiary or beneficiaries of the Policy until the Recovery Amount has been paid to the Employer in accordance with Section 3.02(B) hereof. The parties hereto agree that the beneficiary designation provision of the Policy shall conform to the provisions hereof. ARTICLE V RIGHTS OF EMPLOYEE 5.01 Employee's Right to Terminate Agreement. The Employee may at any time --------------------------------------- effect the termination of this Agreement by providing written notice to the Board of Directors of the Employer. Following such notice, the Agreement shall terminate either upon the Employee's exercise of his option pursuant to Section 5.02 or upon the Employer's receipt of the Recovery Amount pursuant to Section 3.02(C). 5.02 Employee's Option to Receive Release of Assignment. Upon the -------------------------------------------------------- occurrence of any of the events set forth in Section 3.02 that give the Employer the right to receive the Recovery Amount from the cash value of the Policy, the Employee shall have a 60-day option to receive from the Employer a release of the Assignment in consideration of the Employee's cash payment of the Recovery Amount to the Employer. The Employer agrees that the Employee (solely for the purpose of facilitating his payment of the Recovery Amount to the Employer) may borrow or withdraw from the Policy cash value amounts in excess of the Employee's share of the cash value of the Policy. If the Employee does not make payment of the Recovery Amount within the 60-day period, the Employer may enforce its right to receive the Recovery Amount from the cash value or death benefit of the Policy. ARTICLE VI MISCELLANEOUS 6.01 Termination of Agreement. This Agreement shall terminate when either ------------------------ of the following events occur: A. Receipt by the Employer of the Recovery Amount under Section 3.02, 4.01, or 5.02. B. A transfer of rights to the Employer pursuant to Section 3.01(B). -5- 6.02 Suspension of Employer's Obligations. In the event of the bankruptcy, ------------------------------------ receivership or dissolution of the Employer, or the "default" of the Employer, as defined under Section 3(x)(1) of the FDIA, 12 U.S.C.ss.1813 (x)(l), the Employer's obligations under Section 2.03 shall be suspended. 6.03 Amendment. This Agreement shall not be modified or amended except by a --------- writing signed by the Employer and the Employee. This Agreement shall be binding upon the heirs, administrators or executors and the successors and assigns of each party to this Agreement. 6.04 Unfunded Arrangement. The split-dollar arrangement established hereby -------------------- is an unfunded employee benefit plan maintained by the Employer primarily for the purpose of providing a life insurance death benefit for an Employee who is a member of a select group of management and a highly compensated employee, and the parties acknowledge and agree that this Agreement is exempt from Parts 2, 3 and 4 of the Employee Retirement Income Security Act of 1974. 6.05 Claims Procedures. The Employer, Employee, or any beneficiary under ----------------- the Policy may file a claim for benefits with the Insurer, and shall be subject to the claims procedure thereof. 6.06 Binding Agreement. This Agreement shall be binding upon and inure to ------------------ the benefit of the Employer and its successors and assignees and the Employee and his assignees, heirs, executors, administrators and beneficiaries 6.07 Governing Law. This Agreement shall be subject to and shall be -------------- construed in accordance with the laws of the State of Maryland. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. COMMUNITY BANK OF TRI-COUNTY Attest: /s/ Christy M. Lombardi By: /s/ H. Beaman Smith ----------------------- ----------------------------------- H. Beaman Smith Acting in his capacity as a Director Witness: Christy M. Lombardi /s/ William J. Pasenelli ------------------- ------------------------------------ William J. Pasenelli -6- COMMUNITY BANK OF TRI-COUNTY -------------------------------------------------------------------------------- SPLIT DOLLAR AGREEMENT: SCHEDULE A --------------------------------------------------------------------------------
LIFE INSURANCE POLICY COMPANY NAME NUMBER TYPE OF POLICY FACE AMOUNT ---------------------------------------------------------------------------------------------------- Valley Forge Life Insurance Flexible Premium #AUCK002631 Adjustable Life $1,000,000 ---------------------------------------------------------------------------------------------------- Whole Life # Insurance $ ----------------------------------------------------------------------------------------------------
-7- COMMUNITY BANK OF TRI-COUNTY SPLIT DOLLAR AGREEMENT: SCHEDULE B ASSIGNMENT A. FOR VALUE RECEIVED, the undersigned (hereinafter the "Owner") does hereby assign, transfer and set over to Community Bank of Tri-County, a corporation with principal offices and place of business in Waldorf, Maryland, its successors and assigns (hereinafter the "Assignee"), the following specific rights in and to each and every policy listed in Schedule A, which is attached hereto and made a part hereof, issued by each and every insurance company named in said Schedule A (hereinafter the "Insurer") and any supplementary contract or contracts issued in connection therewith (said policy and any such contracts hereinafter collectively referred to as the "Policy" as the context may require) insuring the life of William J. Pasenelli, (hereinafter the "Insured"), subject to all the terms and conditions of the Policy and to all superior liens, if any, that the Insurer may have against the Policy. The Owner, by this assignment (the "Assignment"), and the Assignee, by acceptance of the assignment of the Policy to it hereunder, agree to the terms and conditions contained herein. B. This Assignment is made pursuant to, and the Policy is to be held as collateral security for all liabilities of the Owner to the Assignee now existing or hereafter arising under, that certain Split Dollar Agreement, by and between the Owner and the Assignee, dated April 12, 2001 (hereinafter the "Agreement"), which is attached hereto as Exhibit 1, and made a part hereof. The Owner reserves all rights and powers in and to the Policy, except those specific, limited rights granted in the Policy to the Assignee hereby, as security for the liabilities of the Owner to the Assignee under the Agreement and except as otherwise provided by the Agreement. The parties hereto agree that the provisions of the Agreement shall take precedence over this Assignment. -8- C. It is expressly agreed that the Assignee's interest in the Policy under and by virtue of this Assignment shall be limited to the rights provided for in the Agreement, the following specific rights, and no others: (a) the right to be paid the total amount due it under the Agreement by recovering said amount directly from the Insurer out of the net death proceeds of the Policy, upon the death of the Insured; (b) the right to be paid the total amount due it under the Agreement by recovering said amount from the net cash surrender proceeds of the Policy, pursuant to the terms and conditions of the Agreement; and (c) the right to have the Policy transferred to the Assignee in the event of the Owner's Termination for Cause. The Assignee shall have no other rights or powers in or to the Policy as a result of the assignment to it hereunder. and specifically, the Assignee shall not have the right or power to borrow against or obtain loans or advances on the Policy, make withdrawals from the Policy, nor cancel or surrender the Policy or exercise any other option or incident of ownership with respect to the Policy, except as otherwise provided under the Agreement. D. Subject to the Agreement, the Owner shall retain all incidents of ownership in and to the Policy, subject to the terms and conditions of the Agreement, including, but not limited to: (a) the right to cause the cancellation or surrender of the Policy and to receive the Owner's share of the surrender value thereof at any time provided by the terms of the Policy and at such other times as the Insurer may allow; (b) the right to collect and receive all distributions or share of surplus, dividend deposits or additions to the Policy now or hereafter made or apportioned thereto, and to exercise any and all options contained in the Policy with respect thereto; (c) the right to exercise all non-forfeiture rights permitted by the terms of the Policy or allowed by the Insurer and to receive all benefits and advantages derived therefrom; (d) the right to designate and change the beneficiary of the Policy; (e) the right to borrow against, obtain loans or advances on, or make withdrawals from the Policy; (f) the right to assign the Policy (subject to the terms of this Assignment and the Agreement); and (g) the right -9- to collect directly from the Insurer that portion of the net death proceeds of the Policy in excess of those proceeds payable to the Assignee under the Agreement. E. The Assignee agrees with the Owner as follows (a) any balance of any amount received by the Assignee hereunder from the Insurer remaining after payment of the then existing liabilities of the Owner to the Assignee under the Agreement shall be paid by the Assignee to the persons entitled thereto under the terms of the Policy had this Assignment not been executed; and (b) if the Policy is in the possession of the Assignee, the Assignee will, upon request, forward the Policy to the Insurer, without unreasonable delay, for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder. F. Except as otherwise provided under the terms of the Agreement, the Assignee shall be under no obligation to pay any premium on the Policy or the principal of or interest on any loans or advances on the Policy, whether or not obtained by the Assignee, or any other charges on the Policy. G. The Insurer shall be fully protected in recognizing the request made by the Owner for cancellation or surrender of the Policy, with the written consent of the Assignee, and upon such cancellation or surrender, the Policy shall be terminated and be of no further force or effect. H. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall promptly release this Assignment and thereby reassign to the Owner all specific rights in the Policy included herein. I. Is The Assignee may take or release other security, may grant extensions, renewals or indulgences with respect to the obligations of the Owner or the Assignee under the Agreement, or may apply the proceeds of the Policy hereby assigned or any amount received on account of the Policy by the exercise of any right permitted under this Assignment, without resorting to or regard to other security for such obligations if any. -10- J. The Owner declares that no proceedings in bankruptcy are pending against the Owner, and that the Owner's property is not subject to any assignment for the benefit of creditors of the Owner. K. This Assignment supersedes any prior assignment entered into by the Owner with respect to the Policy. Signed and sealed as of the 12th day of April, 2001. /s/ William J. Pasenelli -------------------------------------------- William J. Pasenelli, Owner COMMUNITY BANK OF TRI-COUNTY, ASSIGNEE /s/ Christy M. Lombardi By: /s/ H. Beaman Smith --------------------------- ------------------------------ Witness H. Beaman Smith Acting in his capacity as a Director Endorsed By: _____________________________ Insurer -11-