Exhibit 10.6
COMMUNITY BANKS, INC.
SURVIVOR INCOME AGREEMENT
THIS AGREEMENT is made this 29th day of August , 2002 by and between
COMMUNITY BANKS, INC., Millersburg, Pennsylvania, , (the "Company"), and DONALD
F. HOLT (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide benefits to the Executive's beneficiary if the
Executive dies prior to terminating employment. The Company will pay the
benefits from its general assets, but only so long as one of its general assets
is a life insurance policy on the Executive's life.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Entitlement to Benefit
1.1 Pre-Termination Survivor Income Benefit. If the Executive dies before
otherwise terminating employment with the Company, and if the Company owns a
life insurance policy on the Executive's life at the time of such death, the
Company shall pay to the Executive's designated beneficiary the survivor income
benefit described in Article 2.
1.2 Disability Continuation. If the Executive terminates employment due to
disability and then dies before recovering from such disability, the Company
shall pay to the Executive's designated beneficiary the survivor income benefit
described in Article 2. Whether the Executive is disabled or has recovered from
a disability shall be determined by the Company in its sole discretion.
1.3 Suicide. No benefits shall be payable if the Executive commits suicide
within two years after the date of this Agreement.
Article 2
Survivor Income Benefit
2.1 Amount of Benefits. The survivor income benefit shall be determined in
accordance with the following formula:
x = y/(1 - t%)
wherein
x = the survivor income benefit payable hereunder
T% = the Company's projected marginal tax rate for federal
income
tax purposes for the year in which the Executive's
death
occurs and
y = the lesser of (1) three times the
Executive's base salary as established by
the Company's Board of Directors for the
calendar year in which the Executive's death
occurs or (2) the life insurance policy
proceeds the Company receives due to the
Executive's death less the cash surrender
value of such policy on the day before the
Executive's death
2.2 Form of Benefits. The survivor income benefit shall be paid to the
Executive's beneficiary in a lump sum within sixty (60) days after the
Executive's death.
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Article 3
Beneficiaries
3.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and if none, to the Executive's surviving children and the
descendants of any deceased child by right of representation, and if no children
or descendants survive, to the Executive's estate.
3.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetency,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
Article 4
Claims and Review Procedures
4.1 Claims Procedure. The Company shall notify the Executive's beneficiary
in writing, within ninety (90) days of his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Agreement. If the Company determines that the beneficiary is not eligible for
benefits or full benefits, the notice shall set forth (1) the specific reasons
for such denial, (2) a specific reference to the provisions of the Agreement on
which the denial is based, (3) a description of any additional information or
material necessary for the
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claimant to perfect his or her claim, and a description of why it is needed, and
(4) an explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the beneficiary wishes to
have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the beneficiary of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
4.2 Review Procedure. If the beneficiary is determined by the Company not
to be eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
beneficiary believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the beneficiary (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the beneficiary of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the beneficiary and the specific
provisions of the Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the beneficiary.
Article 5
Conversion to Split Dollar
If the Executive voluntarily terminates employment after attaining the age
of sixty-five (65) and completes ten (10) years of service, or terminates
employment subsequent to a change of control (as defined herein), unless the
Executive elects otherwise by written notice to the Company, the Split Dollar
Insurance Agreement attached as the Addendum to this
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Agreement shall automatically take effect as of the Executive's termination of
employment. The Company shall take all actions necessary to implement the Split
Dollar Insurance Agreement.
Article 6
Amendments and Termination
Except as provided in Section 1.4 of this Agreement, the Company may amend
or terminate this Agreement at any time prior to the Executive's death by
written notice to the Executive.
Article 7
Miscellaneous
7.1 Exclusive Agreement/Binding Effect. This Agreement is the entire
agreement between the Company and the Executive, written or oral, related to the
Company's obligation to pay any survivor income benefits to the Executive's
beneficiaries or survivors. This Agreement supersedes all prior agreements,
understandings and negotiations. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, administrators and
transferees.
7.2 No Guaranty of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company'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.
7.3 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
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7.4 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the Commonwealth of Pennsylvania, except to the extent
preempted by the laws of the United States of America.
7.5 Unfunded Plan. The beneficiary is a general unsecured creditor of the
Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits. The beneficiary's rights
to such 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 is a general asset of the
Company to which the Executive and designated beneficiary have no preferred or
secured claim.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
COMMUNITY BANKS, INC.
By: /s/ Eddie L. Dunklebarger
--------------------------
/s/ Donald F. Holt Title Chairman, President & CEO
- -------------------
Donald F. Holt
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SPLIT DOLLAR ADDENDUM TO
COMMUNITY BANKS, INC.
SURVIVOR INCOME AGREEMENT
THIS ADDENDUM is part of the Survivor Income Agreement between, COMMUNITY
BANKS, INC., Pennsylvania (the "Company"), DONALD F. HOLT (the "Executive").
INTRODUCTION
Under the terms of the Survivor Income Agreement between the Executive and
the Company, effective 29th day of August, 2002, the parties desire to divide
the death proceeds of a life insurance policy on the Executive's life if he
voluntarily terminates employment after age 65 and completes (10) years of
service.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insurer" means the insurance company issuing the life insurance policy
on the life of the insured.
1.2 "Policy" or "Policies" means the individual insurance policy (or
policies) adopted by the Board of Directors for purposes of insuring an
Executive's life under this plan.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company owns the Policy and shall have the right
to exercise all incidents of ownership and to receive the Policy values in
excess of the Executive's interest described in Section 2.2.
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2.2 Executive's Interest. The Executive shall have the right to designate
the beneficiary of the death proceeds of the Policy to the extent the proceeds
exceed the cash surrender value of the Policy on the day before the Executive's
death. The Executive shall also have the right to elect and change settlement
options that may be permitted for such beneficiary.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premiums due on the Policy.
3.2 Imputed Income. The Company shall then impute income to the Executive
in an amount equal to the current term rate for the Executive's age multiplied
by the aggregate death benefit payable to the Executive's beneficiary. The
"current term rate" is the minimum amount required to be imputed under Internal
Revenue Notice 2002-8, or any subsequent applicable authority.
3.3 Cash Payment. If the Executive's termination of employment occurs after
the Normal Retirement Date, the Company shall annually pay to the Executive the
amount necessary to pay the federal and state income taxes attributable to the
imputed income and to the additional cash payments under this sentence. In
calculating the cash payments, the Company shall use the highest marginal income
tax brackets. The cash payments shall continue until the Executive's death.
Article 4
Assignment
The Executive may assign without consideration all interests in the Policy
and in this Addendum to any person, entity, or trust.
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Article 5
Insurer
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 persons. The Insurer
shall not be bound by or be deemed to have notice of the provisions of this
Addendum.
Article 6
Claims and Review Procedures
6.1 Claims Procedure. An Executive or beneficiary ("claimant") who has not
received benefits under this Addendum that he or she believes should be paid
shall make a claim for such benefits as follows:
6.1.1 Initiation - Written Claim. The claimant initiates a claim by
submitting to the Company a written claim for the benefits.
6.1.2 Timing of Company Response. The Company shall respond to such
claimant within 90 days after receiving the claim. If the Company
determines that special circumstances require additional time for
processing the claim, the Company 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 Company expects to render its decision. 6.1.3 Notice of
Decision. If the Company denies part or all of the claim, the Company shall
notify the claimant in writing of such denial. The Company shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall be set forth:
6.1.3.1 The specific reasons for the denial,
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6.1.3.2 A reference to the specific provisions of the Agreement
on which the denial is based,
6.1.3.3 A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of
why it is needed,
6.1.3.4 An explanation of the Agreement's review procedures and
the time limits applicable to such procedures, and
6.1.3.5 A statement of the claimant's right to bring a civil
action under ERISA section 502(a) following an adverse benefit
determination on review.
Article 7
Amendments and Termination
The Company may amend this Addendum at any time prior to the Executive's
death by written notice to the Executive. Either party may terminate this
Addendum at any time prior to the Executive's death by written notice to the
other party.
Upon termination of this Addendum, the Executive may purchase the Policy
from the Company for an amount equal to the Policy's cash surrender value as of
the date of the termination, provided the purchase is completed within sixty
(60) days of notification by the Company.
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Article 8
Miscellaneous
8.1 Binding Effect. This Addendum shall bind the Executive and the Company,
their beneficiaries, survivors, executors, administrators and transferees, and
any Policy beneficiary.
8.2 No Guaranty of Employment. This Addendum is not an employment policy or
contract. It does not give the Executive the right to remain an employee of the
Company, nor does it interfere with the Company'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.
8.3 Applicable Law. The Addendum and all rights hereunder shall be governed
by and construed according to the laws of the Commonwealth of Pennsylvania,
except to the extent preempted by the laws of the United States of America.
8.4 Administration. The Company shall have powers which are
necessary to administer this plan, including but not limited to:
(a) Interpreting the provisions of the Agreement and Addendum;
(b) Establishing and revising the method of accounting for the
Agreement and Addendum;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement and Addendum.
8.5 Named Fiduciary. The Company shall be named fiduciary and plan
administrator under this Plan. It may delegate to others certain aspects of the
management and
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operational responsibilities including the service of advisors and the
delegation of ministerial duties to qualified individuals.
The parties' signatures on the Survivor Income Agreement witness their
agreement to the terms of this Addendum.
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