TEMECULA VALLEY BANK EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
TEMECULA
VALLEY BANK
EXECUTIVE
SUPPLEMENTAL COMPENSATION
AGREEMENT
Effective
this 20th day of
April, 2008, this SALARY CONTINUATION AGREEMENT (“Agreement”) is adopted by and
between TEMECULA VALLEY BANK (“Bank”), a bank located in Temecula Valley,
California, and organized under the laws of the State of California, and ▇▇▇▇▇
▇▇▇▇▇▇▇ (“Executive”), a member of a select group of management and highly
compensated employees of the Bank. 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 and guidance or regulations issued
thereunder, prior to actual receipt of benefits.
Article
1
Definitions
and Construction
Where the
following words and phrases appear in the Agreement, they shall have the
respective meanings set forth below, unless their context clearly indicates to
the contrary:
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1.1
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“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.
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1.2
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“Board”
shall mean the Board of Directors of the
Bank.
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1.3
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“Change
in Control” shall mean: a change in ownership or control of the
Company as defined in Treasury Regulation §1.409A-3(i)(5) or any
subsequently applicable Treasury
Regulation.
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1.4
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“Code”
shall mean the United States Internal Revenue Code of 1986, as
amended.
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1.5
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“Disability”
shall mean Executive (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is, by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than 3 months under an accident and
health plan covering employees of the Bank. Medical
determination of Disability may be made by either the Social Security
Administration or by the provider of an accident or health plan covering
employees of the Bank. Upon the request of the Plan
Administrator, the Executive must submit proof to the Plan Administrator
of Social Security Administration’s or the provider’s
determination.
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1
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1.6
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“Early
Termination” shall mean that Executive’s employment with the Bank has
terminated, voluntarily or involuntarily, prior to Normal Retirement Age
and such termination is not due to death, Termination for Cause,
Disability, or Separation from Service following a Change in
Control.
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1.7
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“Effective
Date” shall mean January 8, 2008.
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1.8
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“Normal
Retirement Age” shall mean the date on which the Executive attains age
65.
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1.9
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“Plan
Administrator” shall mean the plan administrator described in Article
6.
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1.10
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“Plan
Year” shall mean each 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 Plan and end on the following
December 31.
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1.11
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“Separation
from Service” shall mean the Executive has experienced a termination of
employment with the Bank. For purposes of this Agreement,
whether a termination of employment or service has occurred is determined
based on whether the facts and circumstances indicate that the Bank and
Executive reasonably anticipated that no further services would be
performed after a certain date or that the level of bona fide services the
Executive would perform after such date (whether as an Executive or as an
independent contractor) would permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed
(whether as an Executive or an independent contractor) over the
immediately preceding thirty-six (36) month period (or the full period of
services to the Bank if the Executive has been providing services to the
Bank less than 36 months). Facts and circumstances to be
considered in making this determination include, but are not limited to,
whether the Executive continues to be treated as an Executive for other
purposes (such as continuation of salary and participation in Executive
benefit programs), whether similarly situated service providers have been
treated consistently, and whether the Executive is permitted, and
realistically available, to perform services for other service recipients
in the same line of business. An Executive will be presumed not
to have separated from service where the level of bona fide services
performed continues at a level that is fifty percent (50%) or more of the
average level of service performed by the Executive during the immediately
preceding thirty-six (36) month
period.
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1.12
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“Termination
for Cause” has that meaning set forth in Article
5.
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2
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1.13
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“Termination
of Employment” shall mean that Executive’s employment with the Bank has
terminated.
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Article
2
Distributions
During Executive’s Lifetime
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2.1
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Normal Retirement
Benefit. Upon Executive’s attainment of the Normal
Retirement Age, the Bank shall distribute to the Executive the benefit
described in this Section 2.1 in lieu of any other benefit under this
Article.
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2.1.1
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Amount of
Benefit. The annual benefit under this Section 2.1 is
One Hundred Thousand Dollars ($100,000). The Board may, in
its sole discretion, increase this benefit from time to
time.
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2.1.2
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Form and Timing of
Benefit. The Bank shall distribute the annual benefit to
the Executive in twelve (12) equal monthly installments, commencing on the
first day of the month following the Executive’s Normal Retirement
Age. The annual benefit shall be distributed to the Executive
for fifteen (15) years.
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2.2
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Early Termination
Benefit. Upon the Executive’s Early Termination, the
Bank shall distribute to the Executive the benefit described in this
Section 2.2 in lieu of any other benefit under this
Article. Notwithstanding anything to the contrary in this
Section 2.2, Executive shall not be entitled to a benefit under this
Section 2.2 if Executive terminates employment prior to the fulfillment of
five full Plan Years from the date of this Agreement. For
purposes of this Section 2.2, if the first Plan Year is only a partial
calendar year, the partial calendar year shall be considered one full Plan
Year.
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2.2.1
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Amount of
Benefit. The benefit under this Section 2.2 is the
Accrued Liability Balance, calculated as of the end of the Plan Year
immediately preceding Executive’s Separation from
Service.
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2.2.2
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Form and Timing of
Benefit. The Bank shall distribute the annual benefit to
the Executive in a lump sum within 60 days following a Separation from
Service.
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2.3
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Disability
Benefit. Upon
Executive’s Separation from Service due to Disability, the Bank shall
distribute to the Executive the benefit described in this Section 2.3 in
lieu of any other benefit under this
Article.
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2.3.1
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Amount of
Benefit. The
benefit under this Section 2.3 is the Accrued Liability Balance,
determined as of the end of the Plan Year immediately preceding
notification of Disability and subsequent Separation from
Service.
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2.3.2
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Form and Timing of
Benefit. The Bank shall distribute the benefit to the
Executive in a lump sum within 60 days following Separation from
Service.
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2.4
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Change in Control
Benefit. Upon a Change in Control followed by
Executive’s Termination of Employment, the Executive shall be entitled to
the benefit described in this Section 2.4 in lieu of any other benefit
under this Article.
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3
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2.4.1
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Amount of
Benefit. The
benefit under this Section 2.4 is the Accrued Liability Balance,
calculated as of the date of Termination of
Employment.
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2.4.2
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Form and Timing of
Benefit. The Bank shall
distribute the benefit to the Executive in a lump sum within 60 days
following Executive’s Separation from
Service.
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2.5
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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 if, pursuant to Section 409A of the Code and regulations
and guidance promulgated thereunder, Executive is considered a “specified
employee” under Section 416(i) of the Code. In the event a
distribution is delayed pursuant to this Section 2.6, the originally
scheduled payment shall be delayed for 6 months, and shall commence
instead on the first day of the seventh month following the
delay. 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.
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2.6
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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
Bank 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.
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Article
3
Distribution
Upon Death
No death
benefit shall be payable under this Agreement.
Article
4
Beneficiaries
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Executive’s
beneficiary(ies), if any, shall not have any rights under this
Agreement.
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Article
5
General
Limitations
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5.1
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Termination for
Cause. Notwithstanding any provision of this Agreement
to the contrary, the Bank shall not distribute any benefit under this
Agreement if Executive’s service is terminated by the Board
for:
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(a)
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Gross
negligence or gross neglect of duties to the Bank;
or
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(b)
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Conviction
of a felony or of a gross misdemeanor involving moral turpitude in
connection with the Executive’s employment with the Bank;
or
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(c)
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Fraud,
disloyalty, dishonesty or willful violation of any law or significant Bank
policy committed in connection with the Executive's employment and
resulting in a material adverse effect on the
Bank.
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4
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5.2
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Suicide or
Misstatement. No benefits shall be distributed if the
Executive commits suicide within two years after the Effective Date of
this Agreement, or if an insurance company which issued a life insurance
policy covering the Executive and owned by the Bank denies coverage (i)
for material misstatements of fact made by the Executive on an application
for such life insurance, or (ii) for any other
reason.
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5.3
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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 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 Bank within 2 years after Separation from Service, which
enterprise is, or may be 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.
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Article
6
Administration
of Agreement
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6.1
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Plan Administrator
Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or
person(s) as the Board shall appoint. The Plan Administrator
shall also have the discretion and authority to (i) make, amend, interpret
and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and
all questions including interpretations of this Agreement, as may
arise in connection with the
Agreement.
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6.2
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Agents. In
the administration of this Agreement, the Plan Administrator may employ
agents and delegate to them such administrative duties as it sees fit,
(including acting through a duly appointed representative), and may from
time to time consult with counsel who may be counsel to the
Bank.
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6.3
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Binding Effect of
Decisions. The decision or action of the Plan
Administrator with respect to any question arising out of or in connection
with the administration, interpretation and application of the Agreement
and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Agreement.
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6.4
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Indemnity of Plan
Administrator. The Bank shall indemnify and hold
harmless the members of the Plan Administrator against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Agreement, except in the case of
willful misconduct by the Plan Administrator or any of its
members.
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6.5
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Bank
Information. To enable the Plan Administrator to perform
its functions, the Bank shall supply full and timely information to the
Plan Administrator on all matters relating to the date and
circumstances of the retirement, Disability, or Separation from
Service of the Executive, and such other pertinent information as the Plan
Administrator may reasonably
require.
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6.6
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Annual
Statement. The Plan Administrator shall provide to the Executive,
within one hundred twenty (120) days after the end of each Plan Year, a
statement setting forth the benefits to be distributed under this
Agreement.
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5
Article
7
Claims
And Review Procedures
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7.1
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Claims
Procedure. An Executive who has not received benefits
under the Agreement that he or she believes should be distributed shall
make a claim for such benefits as
follows:
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7.1.1
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Initiation – Written
Claim. The claimant initiates a claim by submitting to
the Plan Administrator a written claim for the
benefits.
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7.1.2
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Timing of Plan
Administrator Response. The Plan
Administrator shall respond to such claimant within 90 days after
receiving the claim. If the Plan Administrator determines that
special circumstances require additional time for processing the claim,
the Plan Administrator 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 Plan Administrator expects to render its
decision.
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7.1.3
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Notice of
Decision. If the Plan Administrator denies part or all
of the claim, the Plan Administrator shall notify the claimant in writing
of such denial. The Plan Administrator 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 Agreement 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 Agreement’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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7.2
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Review
Procedure. If the Plan Administrator denies part or all
of the claim, the claimant shall have the opportunity for a full and fair
review by the Plan Administrator of the denial, as
follows:
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7.2.1
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Initiation – Written
Request. To initiate the review, the claimant, within 60
days after receiving the Plan Administrator’s notice of denial, must file
with the Plan Administrator a written request for
review.
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6
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7.2.2
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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 Plan Administrator 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.
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7.2.3
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Considerations on
Review. In considering the review, the Plan
Administrator 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.
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7.2.4
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Timing of Plan
Administrator Response. The Plan Administrator shall
respond in writing to such claimant within 60 days after receiving the
request for review. If the Plan Administrator determines that
special circumstances require additional time for processing the claim,
the Plan Administrator 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 Plan Administrator expects to render its
decision.
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7.2.5
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Notice of
Decision. The Plan Administrator shall notify the
claimant in writing of its decision on review. The Plan
Administrator 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 Agreement 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)
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A
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).
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Article
8
Amendments
and Termination
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8.1
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This
Agreement may be amended or terminated only by a written agreement signed
by the Bank and the Executive. Provided, however, if the Board determines
in good faith that the Executive is no longer a member of a select group
of management or highly compensated employees, as that phrase applies to
ERISA, for reasons other than death, Disability or retirement, the Bank
may terminate this Agreement. Additionally, the Bank may also
amend this Agreement to conform to written directives to the Bank from its
banking regulators or to comply with regulations and guidance promulgated
under Section 409A of the Code. Upon a plan termination, no
distributions will be made, except as permitted under the terms of Article
2 of this Agreement.
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7
Article 9
Miscellaneous
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9.1
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Binding
Effect. This Agreement shall bind the Executive and the
Bank.
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9.2
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No Guarantee of
Employment. This Agreement is not a contract for
employment. It does not give the Executive the right to remain
as an employee of the Bank, nor does it interfere with the Bank'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.
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9.3
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Non-Transferability. Benefits
under this Agreement cannot be sold, transferred, assigned, pledged,
attached or encumbered in any
manner.
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9.4
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Tax
Withholding. The Bank shall withhold any taxes that are
required to be withheld, under Section 409A of the Code and regulations
thereunder, from the benefits provided under this
Agreement. The Executive acknowledges that the Bank’s sole
liability regarding taxes is to forward any amounts withheld to the
appropriate taxing authority(ies).
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9.5
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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.
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9.6
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Unfunded
Arrangement. The Executive is a general unsecured
creditor of the Bank for the distribution of benefits under this
Agreement. The benefits represent the mere promise by the Bank
to distribute 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 or other
informal funding asset is a general asset of the Bank to which the
Executive has no preferred or secured
claim.
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9.7
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Reorganization. The Bank shall
not merge or consolidate into or with another bank, or reorganize, or sell
substantially all of its assets to another bank, firm, or person unless
such succeeding or continuing bank, firm, or person agrees to assume and
discharge the obligations of the Bank under this
Agreement. Upon the occurrence of such event, the term “Bank”
as used in this Agreement shall be deemed to refer to the successor or
survivor bank.
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9.8
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Entire
Agreement. This Agreement
constitutes the entire agreement between the Bank 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.
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9.9
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Interpretation. Wherever
the fulfillment of the intent and purpose of this Agreement requires, and
the context will permit, the use of the masculine gender includes the
feminine and use of the singular includes the
plural.
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8
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9.10
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Alternative
Action. In the event it shall become impossible for the
Bank or the Plan Administrator to perform any act required by this
Agreement, the Bank or Plan Administrator may in its discretion perform
such alternative act as most nearly carries out the intent and purpose of
this Agreement and is in the best interests of the
Bank.
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9.11
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Headings. Article
and section headings are for convenient reference only and shall not
control or affect the meaning or construction of any of its
provisions.
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9.12
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Validity. In
case any provision of this Agreement shall be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Agreement shall be construed and enforced as if such
illegal and invalid provision has never been inserted
herein.
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9.13
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Notice. Any
notice or filing required or permitted to be given to the Bank or Plan
Administrator under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below:
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Temecula Valley
Bank
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▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇-▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇
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Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.
Any
notice or filing required or permitted to be given to the Executive under this
Agreement shall be sufficient if in writing and hand-delivered, or sent by mail,
to the last known address of the Executive.
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9.14
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Opportunity to Consult
with Independent Advisors. The Executive acknowledges
that he has been afforded the opportunity to consult with independent
advisors of his choosing including, without limitation, accountants or tax
advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect
the Executive's right to these benefits and (ii) personal tax effects of
such benefits including, without limitation, the effects of any federal or
state taxes, Section 280G of the Code, Section 409A of the Code and
guidance or regulations thereunder, and any other taxes, costs, expenses
or liabilities whatsoever related to such benefits, which in any of the
foregoing instances the Executive acknowledges and agrees shall be the
sole responsibility of the Executive notwithstanding any other term or
provision of this Agreement. The Executive further acknowledges
and agrees that the Bank shall have no liability whatsoever related to any
such personal tax effects or other personal costs, expenses, or
liabilities applicable to the Executive and further specifically waives
any right for himself or herself, and his or her heirs, beneficiaries,
legal representatives, agents, successor and assign to claim or assert
liability on the part of the Bank related to the matters described above
in this Section 9.14. The Executive further acknowledges that
he has read, understands and consents to all of the terms and conditions
of this Agreement, and that he enters into this Agreement with a full
understanding of its terms and
conditions.
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9
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9.15
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Certain Accelerated
Payments. The Bank may make any accelerated distribution
permissible under Treasury Regulation 1.409A-3(j)(4) to the Executive of
deferred amounts, provided that such distribution(s) meets the
requirements of Section
1.409A-3(j)(4).
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9.16
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Subsequent Changes to
Time and Form of Payment. The Bank may permit a
subsequent change to the time and form of benefit
distributions. Any such change shall be considered made only
when it becomes irrevocable under the terms of the
Agreement. Any change will be considered irrevocable not later
than thirty (30) days following acceptance of the change by the Plan
Administrator, subject to the following
rules:
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(1)
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the
subsequent deferral election may not take effect until at least twelve
(12) months after the date on which the election is
made;
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(2)
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the
payment (except in the case of death, disability, or unforeseeable
emergency) upon which the subsequent deferral election is made is deferred
for a period of not less than five (5) years from the date such payment
would otherwise have been paid; and
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(3)
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in
the case of a payment made at a specified time, the election must be made
not less than twelve (12) months before the date the payment is scheduled
to be paid.
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IN
WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank
have signed this Agreement.
EXECUTIVE: BANK:
TEMECULA VALLEY
BANK
/s/ ▇▇▇▇▇
▇▇▇▇▇▇▇
By /s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ Title President & Chief
Executive Officer
10