Exhibit 10.13

 

FIRST RELIANCE BANK

ADDENDUM A

 

ENDORSEMENT SPLIT DOLLAR AGREEMENT

 

          This ENDORSEMENT SPLIT DOLLAR AGREEMENT (this “Agreement”) is entered
into as of this         day of                                , 2006 by and
between First Reliance Bank, a South Carolina-chartered bank (the “Bank”), and
Jeffrey A. Paolucci, an executive of the Bank (the “Executive”).  This Agreement
shall append the Split Dollar Policy Endorsement entered into on even date
herewith or as subsequently amended, by and between the aforementioned parties.

          WHEREAS, to encourage the Executive to remain an employee of the Bank,
the Bank is willing to divide the death proceeds of a life insurance policy on
the Executive’s life, and

          WHEREAS, the Bank will pay life insurance premiums from its general
assets.

          NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.

ARTICLE 1
GENERAL DEFINITIONS

          Capitalized terms not otherwise defined in this Agreement are used
herein as defined in the Salary Continuation Agreement dated as of the date of
this Agreement between the Bank and the Executive.  The following terms shall
have the meanings specified.

          1.1     “Administrator” means the administrator described in Article
7.

          1.2     “Executive’s Interest” means the benefit set forth in section
2.2.

          1.3     “Insured” means the Executive.

          1.4     “Insurer” means each life insurance carrier for which there is
a Split Dollar Policy Endorsement attached to this Agreement.

          1.5     “Net Death Proceeds” means the total death proceeds of the
Policy minus the cash surrender value.

          1.6     “Policy” means the specific life insurance policy or policies
issued by the Insurer.

          1.7     “Split Dollar Policy Endorsement” means the form required by
the Administrator or the Insurer to indicate the Executive’s interest, if any,
in a Policy on the Executive’s life.

ARTICLE 2
POLICY OWNERSHIP/INTERESTS

          2.1     Bank Ownership.  The Bank is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership.  The Bank shall be
the beneficiary of the remaining death proceeds of the Policy after the
Executive’s interest is paid according to section 2.2 below.

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          2.2     Death Benefit.  Provided the Executive’s death occurs before
the Executive’s Separation from Service, at the Executive’s death the
Executive’s beneficiary designated in accordance with the Split Dollar Policy
Endorsement shall be entitled to 100% of the Net Death Proceeds (the
“Executive’s Interest”).  The Executive’s Interest shall be extinguished when
the Executive’s Separation from Service occurs and the Executive’s beneficiary
shall be entitled to no benefits under this Agreement for the Executive’s death
occurring thereafter.  The Executive shall have the right to designate the
beneficiary of the Executive’s Interest.

          2.3     Option to Purchase.  The Bank shall not sell, surrender, or
transfer ownership of the Policy before the Executive’s Separation from Service
without first giving the Executive or the Executive’s transferee the option to
purchase the Policy for a period of 60 days.  The purchase price shall be an
amount equal to the Policy cash surrender value.  The option to purchase the
Policy shall lapse if not exercised within 60 days after the date the Bank gives
written notice of the Bank’s intention to sell, surrender, or transfer ownership
of the Policy.  This provision shall not impair the Bank’s right to terminate
this Agreement.

          2.4     Comparable Coverage.  The Bank shall maintain the Policy in
full force and effect.  The Bank may not amend, terminate, or otherwise abrogate
the Executive’s interest in the Policy before the Executive’s Separation from
Service unless the Bank replaces the Policy with a comparable insurance policy
to cover the benefit provided under this Agreement and executes a new split
dollar agreement and endorsement for the comparable insurance policy.  The
Policy or any comparable policy shall be subject to claims of the Bank’s
creditors.

          2.5     Internal Revenue Code Section 1035 Exchanges.  The Executive
recognizes and agrees that the Bank may after this Agreement is adopted wish to
exchange the Policy of life insurance on the Executive’s life for another
contract of life insurance insuring the Executive’s life.  Provided that the
Policy is replaced or intended to be replaced with a comparable policy of life
insurance, the Executive agrees to provide medical information and cooperate
with medical insurance-related testing required by a prospective insurer for
implementing the Policy or, if necessary, for modifying or updating to a
comparable insurer.

ARTICLE 3
PREMIUMS

          3.1    Premium Payment.  The Bank shall pay any premiums due on the
Policy.

          3.2     Economic Benefit.  The Administrator shall annually 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 Executive’s beneficiary.   The “life insurance premium factor” is
the minimum factor applicable under guidance published pursuant to Treasury Reg.
section 1.61-22(d)(3)(ii) or any subsequent authority.

          3.3     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.

ARTICLE 4
ASSIGNMENT

          The Executive may irrevocably assign without consideration all of the
Executive’s interest in the Policy and in this Agreement to any person, entity,
or trust established by the Executive or the Executive’s spouse.  If the
Executive transfers all of the Executive’s interest in the Policy, all of the
Executive’s interest in the Policy and in the Agreement shall be vested in the
Executive’s transferee, who shall be substituted as a party hereunder and the
Executive shall have no further interest in this Agreement.

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ARTICLE 5
INSURER

          The Insurer shall be bound by the terms of the Policy only.  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 entities or
persons.  The Insurer shall not be bound by or be deemed to have notice of the
provisions of this Agreement.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

          6.1     Claims Procedure.  Any person or entity who has not received
benefits under this Agreement that he or she believes should be paid (the
“claimant”) shall make a claim for benefits as follows –

 

          6.1.1     Initiation – written claim.  The claimant initiates a claim
by submitting to the Administrator a written claim for the benefits.  If the
claim relates to the contents of a notice received by the claimant, the claim
must be made within 60 days after the notice was received by the claimant.  All
other claims must be made within 180 days after the date of the event that
caused the claim to arise.  The claim must state with particularity the
determination desired by the claimant.

 

 

 

 

 

          6.1.2     Timing of Administrator response.  The Administrator shall
respond to the claimant within 90 days after receiving the claim.  If the
Administrator determines that special circumstances require additional time for
processing the claim, the Administrator can extend the response period by an
additional 90 days by notifying the claimant in writing, before 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
Administrator expects to render its decision.

 

 

 

 

 

          6.1.3     Notice of decision.  If the Administrator denies part or all
of the claim, the Administrator shall notify the claimant in writing of the
denial.  The Administrator shall write the notification in a manner calculated
to be understood by the claimant.  The notification shall set forth –

 

 

 

 

 

 

(a)

The specific reasons for the denial,

 

 

(b)

A reference to the specific provisions of this Agreement on which the denial is
based,

 

 

(c)

A description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is needed,

 

 

(d)

An explanation of the Agreement’s review procedures and the time limits
applicable to such procedures, and

 

 

(e)

A statement of the claimant’s right to bring a civil action under ERISA section
502(a) after an adverse benefit determination on review.

          6.2     Review Procedure.  If the Administrator denies part or all of
the claim, the claimant shall have the opportunity for a full and fair review by
the Administrator of the denial, as follows –

 

          6.2.1     Initiation – written request.  To initiate the review, the
claimant must file with the Administrator a written request for review within 60
days after receiving the Administrator’s notice of denial.

 

 

 

 

 

          6.2.2     Additional submissions – information access.  The claimant
shall then have the opportunity to submit written comments, documents, records,
and other information relating to the claim.  Upon request and free of charge,
the Administrator shall also provide the claimant 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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          6.2.3     Considerations on review.  In considering the review, the
Administrator shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether the information was
submitted or considered in the initial benefit determination.

 

 

 

 

 

          6.2.4     Timing of Administrator response.  The Administrator shall
respond in writing to the claimant within 60 days after receiving the request
for review.  If the Administrator determines that special circumstances require
additional time for processing the claim, the Administrator can extend the
response period by an additional 60 days by notifying the claimant in writing
before 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 Administrator expects to render its decision.

 

 

 

 

 

          6.2.5     Notice of decision.  The Administrator shall notify the
claimant in writing of its decision on review.  The Administrator shall write
the notification in a manner calculated to be understood by the claimant.  The
notification shall set forth –

 

 

 

 

 

 

(a)

The specific reasons for the denial,

 

 

(b)

A reference to the specific provisions of the Agreement on which the denial is
based,

 

 

(c)

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

 

 

(d)

A statement of the claimant’s right to bring a civil action under ERISA section
502(a).

ARTICLE 7
ADMINISTRATION OF AGREEMENT

          7.1     Administrator Duties.  This Agreement shall be administered by
an Administrator, which shall consist of the Bank’s board of directors or such
committee as the board shall appoint.  The Executive may be a member of the
Administrator.  The Administrator shall also have the discretion and authority
to (x) make, amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Agreement and (y) decide or resolve any and all
questions, including interpretations of this Agreement, as may arise in
connection with the Agreement.

          7.2     Agents.  In the administration of this Agreement, the
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.

          7.3     Binding Effect of Decisions.  The decision or action of the
Administrator about any question arising out of or in connection with the
administration, interpretation, and application of this Agreement and the rules
and regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Agreement.

          7.4     Indemnity of Administrator.  The Bank shall indemnify and hold
harmless the members of the 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
Administrator or any of its members.

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          7.5     Information.  To enable the Administrator to perform its
functions, the Bank shall supply full and timely information to the
Administrator on all matters relating to the date and circumstances of the
retirement, death, or Separation from Service of the Executive, and such other
pertinent information as the Administrator may reasonably require.

ARTICLE 8
MISCELLANEOUS

          8.1     Amendment and Termination of Agreement.  This Agreement may be
amended or terminated solely by a written agreement signed by the Bank and the
Executive.  However, this Agreement shall terminate upon the first to occur of
(x) distribution of the death benefit proceeds in accordance with section 2.2
above, or (y) termination of the Salary Continuation Agreement under Article 5
of the Salary Continuation Agreement, or (z) the Executive’s Separation from
Service.

          8.2     Binding Effect.  This Agreement shall bind the Executive and
the Bank and their beneficiaries, survivors, executors, administrators, and
transferees, and any Policy beneficiary.

          8.3     No Guarantee 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 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 or interfere with the Executive’s right to terminate employment at any
time.

          8.4     Successors; Binding Agreement.  By an assumption agreement in
form and substance satisfactory to the Executive, the Bank shall require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of the Bank to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Bank would be required to perform this Agreement if no
succession had occurred.

          8.5     Applicable Law.  This Agreement and all rights hereunder shall
be governed by and construed according to the laws of the State of South
Carolina, except to the extent preempted by the laws of the United States of
America.

          8.6     Entire Agreement.  This Agreement and the Salary Continuation
Agreement constitute the entire agreement between the Bank and the Executive
concerning the subject matter.  No rights are granted to the Executive under
this Agreement other than those specifically set forth.

          8.7     Severability.  If any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of this Agreement
not held invalid, and each such other provision shall continue in full force and
effect to the full extent consistent with law.  If any provision of this
Agreement is held invalid in part, such invalidity shall not affect the
remainder of the provision not held invalid, and the remainder of the provision
together with all other provisions of this Agreement shall continue in full
force and effect to the full extent consistent with law.

          8.8     Headings.  Headings and subheadings herein are included solely
for convenience of reference and shall not affect the meaning or interpretation
of any provision of this Agreement.

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          8.9     Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid, to the following addresses or to such
other address as either party may designate by like notice.  Unless otherwise
changed by notice, notice shall be properly addressed to the Executive if
addressed to the address of the Executive on the books and records of the Bank
at the time of the delivery of such notice, and properly addressed to the Bank
if addressed to the board of directors, First Reliance Bank, 2170 West Palmetto
Street, Florence, South Carolina 29501.

          IN WITNESS WHEREOF, the Executive and a duly authorized representative
of the Bank have executed this Endorsement Split Dollar Agreement as of the date
first written above.

EXECUTIVE:

 

BANK:

 

 

First Reliance Bank

 

 

 

 

 

 

Jeffrey A. Paolucci

 

By:

 

 

 

 

 

Its:

 

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE
CODE sECTION 1035 EXCHANGE

          I acknowledge that I have read the Endorsement Split Dollar Agreement
and agree to be bound by its terms, particularly the covenant on my part set
forth in section 2.5 of the Endorsement Split Dollar Agreement to provide
medical information and cooperate with medical insurance-related testing
required by an insurer to issue a comparable insurance policy to cover the
benefit provided under this Endorsement Split Dollar Agreement.

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Witness

 

Jeffrey A. Paolucci

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SPLIT DOLLAR POLICY ENDORSEMENT

Insured:

Jeffrey A. Paolucci

Insurer:

Massachusetts Mutual Life Insurance Company

Policy No.:

 

          According to the terms of the First Reliance Bank Endorsement Split
Dollar Agreement dated as of                                 , 2006, the
undersigned Owner requests that the above-referenced policy issued by the
Insurer provide for the following beneficiary designation and limited contract
ownership rights to the Insured:

          1.          Upon the death of the Insured, proceeds shall be paid in
one sum to the Owner, its successors or assigns, to the extent of the Owner’s
interest in the policy.  It is hereby provided that the Insurer may rely solely
upon a statement from the Owner as to the amount of proceeds it is entitled to
receive under this paragraph.

          2.          Any proceeds at the death of the Insured in excess of the
amount paid under the provisions of the preceding paragraph shall be paid in one
sum to:

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PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

 

 

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CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

The exclusive rights to change the beneficiary for the proceeds payable under
this paragraph and to assign all rights and interests granted under this
paragraph are hereby granted to the Insured.  The sole signature of the Insured
shall be sufficient to exercise the rights.  The Owner retains all contract
rights not granted to the Insured under this paragraph.

          3.          It is agreed by the undersigned that this designation and
limited assignment of rights shall be subject in all respects to the contractual
terms of the policy.

          4.          Any payment directed by the Owner under this endorsement
shall be a full discharge of the Insurer, and such discharge shall be binding on
all parties claiming any interest under the policy.

          5.          This Split Dollar Policy Endorsement supersedes and
replaces all prior endorsements of the Insured relating to the above-referenced
policy issued by the Insurer.

          6.          The exercise by the Owner of the right to surrender the
policy shall terminate the rights of the Insured.

          7.          The Owner of the policy is First Reliance Bank.  The Owner
alone may exercise all policy rights, except that the Owner will not have the
rights specified in paragraph 2 of this Split Dollar Policy Endorsement.

          The undersigned for the Owner is signing in a representative capacity
and warrants that he or she has the authority to bind the entity on whose behalf
this document is executed.

          Signed at                                    , South Carolina this
          day of                                     , 2006.

INSURED:

 

OWNER:

 

 

First Reliance Bank

 

 

 

 

 

 

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By:

Jeffrey A. Paolucci

 

 

 

 

Its:

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SPLIT DOLLAR POLICY ENDORSEMENT

Insured:

Jeffrey A. Paolucci

Insurer:

Jefferson Pilot Life Insurance Company

Policy No.:

 

          According to the terms of the First Reliance Bank Endorsement Split
Dollar Agreement dated as of                                  , 2006, the
undersigned Owner requests that the above-referenced policy issued by the
Insurer provide for the following beneficiary designation and limited contract
ownership rights to the Insured:

          1.          Upon the death of the Insured, proceeds shall be paid in
one sum to the Owner, its successors or assigns, to the extent of the Owner’s
interest in the policy.  It is hereby provided that the Insurer may rely solely
upon a statement from the Owner as to the amount of proceeds it is entitled to
receive under this paragraph.

          2.          Any proceeds at the death of the Insured in excess of the
amount paid under the provisions of the preceding paragraph shall be paid in one
sum to:

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PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

 

 

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CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

The exclusive rights to change the beneficiary for the proceeds payable under
this paragraph and to assign all rights and interests granted under this
paragraph are hereby granted to the Insured.  The sole signature of the Insured
shall be sufficient to exercise the rights.  The Owner retains all contract
rights not granted to the Insured under this paragraph.

          3.          It is agreed by the undersigned that this designation and
limited assignment of rights shall be subject in all respects to the contractual
terms of the policy.

          4.          Any payment directed by the Owner under this endorsement
shall be a full discharge of the Insurer, and such discharge shall be binding on
all parties claiming any interest under the policy.

          5.          This Split Dollar Policy Endorsement supersedes and
replaces all prior endorsements of the Insured relating to the above-referenced
policy issued by the Insurer.

          6.          The exercise by the Owner of the right to surrender the
policy shall terminate the rights of the Insured.

          7.          The Owner of the policy is First Reliance Bank.  The Owner
alone may exercise all policy rights, except that the Owner will not have the
rights specified in paragraph 2 of this Split Dollar Policy Endorsement.

          The undersigned for the Owner is signing in a representative capacity
and warrants that he or she has the authority to bind the entity on whose behalf
this document is executed.

          Signed at                                    , South Carolina this
          day of                                     , 2006.

INSURED:

 

OWNER:

 

 

First Reliance Bank

 

 

 

 

 

 

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By:

Jeffrey A. Paolucci

 

 

 

 

Its:

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