OLD LINE BANK
Supplemental Life Insurance Agreement   Exhibit 10.7

OLD LINE BANK
SUPPLEMENTAL LIFE INSURANCE AGREEMENT
     THIS SUPPLEMENTAL LIFE INSURANCE AGREEMENT (the “Agreement”) is adopted
this 3rd day of January, 2006, by and between OLD LINE BANK, a state-chartered
commercial bank located in Waldorf, Maryland (the “Bank”), and JOSEPH BURNETT
(the “Executive”).
     The purpose of this Agreement is to retain and reward the Executive, by
dividing the death proceeds of certain life insurance policies which are owned
by the Bank on the life of the Executive with the designated beneficiary of the
Executive. The Bank will pay the life insurance premiums from its general
assets.
Article 1
Definitions

    Whenever used in this Agreement, the following terms shall have the meanings
specified:

1.1   “Bank’s Interest” means the benefit set forth in Section 2.1.   1.2  
“Beneficiary” means each designated person, or the estate of the deceased
Executive, entitled to benefits, if any, upon the death of the Executive.   1.3
  “Beneficiary Designation Form” means the form established from time to time by
the Plan Administrator that the Executive completes, signs and returns to the
Plan Administrator to designate one or more Beneficiaries.   1.4   “Board” means
the Board of Directors of the Bank as from time to time constituted.   1.5  
“Code” means the Internal Revenue Code of 1986, as amended.   1.6   “Disability”
means the 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 twelve (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 twelve (12) months, receiving income replacement benefits for a period of
not less than three (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 the Social Security
Administration’s or provider’s determination.   1.7   “Executive’s Interest”
means the benefit set forth in Section 2.2.

 

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OLD LINE BANK
Supplemental Life Insurance Agreement

1.8   “Insurer” means the insurance company issuing the Policy on the life of
the Executive.   1.9   “Net Death Proceeds” means the total death proceeds of
the Policy minus the greater of (i) the cash surrender value or (ii) the
aggregate premiums paid by the Bank.   1.10   “Plan Administrator” means the
plan administrator described in Article 11.   1.11   “Policy” or “Policies”
means the individual insurance policy or policies adopted by the Bank for
purposes of insuring the Executive’s life under this Agreement.   1.14  
“Separation from Service” means the termination of the Executive’s employment
with the Bank for reasons other than death or Disability. Whether a Separation
from Service takes place is determined based on the facts and circumstances
surrounding the termination of the Executive’s employment and whether the Bank
and the Executive intended for the Executive to provide significant services for
the Bank following such termination. A termination of employment will not be
considered a Separation from Service if:

  (a)   the Executive continues to provide services as an employee of the Bank
at an annual rate that is twenty percent (20%) or more of the services rendered,
on average, during the immediately preceding three full calendar years of
employment (or, if employed less than three years, such lesser period) and the
annual remuneration for such services is twenty percent (20%) or more of the
average annual remuneration earned during the final three full calendar years of
employment (or, if less, such lesser period), or     (b)   the Executive
continues to provide services to the Bank in a capacity other than as an
employee of the Bank at an annual rate that is fifty percent (50%) or more of
the services rendered, on average, during the immediately preceding three full
calendar years of employment (or if employed less than three years, such lesser
period) and the annual remuneration for such services is fifty percent (50%) or
more of the average annual remuneration earned during the final three full
calendar years of employment (or if less, such lesser period).

Article 2
Policy Ownership/Interests

2.1   Bank’s Interest. The Bank shall own the Policies and shall have the right
to exercise all incidents of ownership and, subject to Article 3, the Bank may
terminate a Policy without the consent of the Executive. The Bank shall be the
beneficiary of the remaining death proceeds of the Policies after the
Executive’s Interest is determined according to Section 2.2 below.   2.2  
Executive’s Interest. The Executive, or the Executive’s assignee, shall have the
right to designate the Beneficiary of an amount of death proceeds equal to
seventy-five percent (75%) of the Net Death Proceeds. The Executive shall also
have the right to elect and

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Supplemental Life Insurance Agreement

    change settlement options with respect to the Executive’s Interest by
providing written notice to the Bank and the Insurer.   2.3   Forfeiture of
Benefit. The Executive will forfeit his or her benefit if: (i) the Executive
violates any of the provisions detailed in Article 5; (ii) the Executive becomes
gainfully employed by an entity other than the Bank following a Separation from
Service due to Disability; or (iii) the Executive provides written notice to the
Bank declining further participation in the Agreement.

Article 3
Comparable Coverage

3.1   Insurance Policies. If the Executive is entitled to a benefit, the Bank
may provide such benefit through the Policies purchased at the commencement of
this Agreement, or may provide comparable insurance coverage to the Executive
through whatever means the Bank deems appropriate. If the Executive waives or
forfeits his or her right to the benefit, the Bank shall choose to cancel the
Policy or Policies on the Executive, or may continue such coverage and become
the direct beneficiary of the entire death proceeds.   3.2   Offer to Purchase.
If the Bank discontinues a Policy while the Executive is employed by the Bank at
the date of discontinuance or while the Executive has a benefit that has not
been forfeited, the Bank shall give the Executive at least thirty (30) days to
purchase such Policy. The purchase price shall be the fair market value of the
Policy, as determined under Treasury Reg. §1.61-22(g)(2) or any subsequent
applicable authority. Such notification shall be in writing.

Article 4
Premiums and Imputed Income

4.1   Premium Payment. The Bank shall pay all premiums due on all Policies.  
4.2   Economic Benefit. The Bank shall determine the economic benefit
attributable to the Executive based on the life insurance premium factor for the
Executive’s age multiplied by the aggregate death benefit payable to the
Beneficiary. The “life insurance premium factor” is the minimum factor
applicable under guidance published pursuant to Treasury Reg. §
1.61-22(d)(3)(ii) or any subsequent authority.   4.3   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 5
General Limitations

5.1   Excess Parachute or Golden Parachute Payment. If the payments and benefits
pursuant to this Agreement, either alone or together with other payments and
benefits which the

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Supplemental Life Insurance Agreement

    Executive has the right to receive from the Bank, would constitute an
“excess parachute payment” under Section 280G of the Code, or would be a
prohibited golden parachute payment pursuant to 12 C.F.R. §359.2 and for which
the appropriate federal banking agency has not given written consent to pay
pursuant to 12 C.F.R. §359.4, the payments and benefits pursuant to this
Agreement shall be reduced, in the manner determined by the Executive in the
case of the application of Section 280G of the Code, by the amount, if any,
which is the minimum necessary to result in (i) no portion of the payments and
benefits under this Agreement being non-deductible to the Bank pursuant to
Section 280G of the Code and subject to the excise tax imposed under
Section 4999 of the Code, and (ii) no adverse consequence to the Bank under or
pursuant to such banking regulations. All benefits payable under this Agreement
shall also be subject to limitations or prohibitions imposed by subsequent
changes or amendments to the cited laws and regulations except to the extent
that any benefits payable under this Agreement are grandfathered or otherwise
exempt or excluded from the change or amendment.   5.2   Termination for Cause.
Notwithstanding any provision of this Agreement to the contrary, the Executive
shall forfeit any right to a benefit under this Agreement if the Bank terminates
the Executive’s employment for cause. Termination of the Executive’s employment
for “Cause” shall mean termination because of personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order or material breach of any provision of the Agreement. For
purposes of this paragraph, no act or failure to act on the Executive’s part
shall be considered “willful” unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the Executive’s
action or omission was in the best interest of the Bank.   5.3   Removal.
Notwithstanding any provision of this Agreement to the contrary, the Executive’s
rights in the Agreement shall terminate if the Executive is subject to a final
removal or prohibition order issued by an appropriate federal banking agency
pursuant to Section 8(e) of the Federal Deposit Insurance Act (“FDIA”).   5.4  
Suicide or Misstatement. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, or if the insurance
company denies coverage (i) for material misstatements of fact made by the
Executive on any application for life insurance purchased by the Bank, or
(ii) for any other reason.

Article 6
Beneficiaries

6.1   Beneficiary. The Executive shall have the right, at any time, to designate
a Beneficiary(ies) to receive any benefits payable under the Agreement upon the
death of the Executive. The Beneficiary designated under this Agreement may be
the same as or different from the beneficiary designation under any other
Agreement of the Bank in which the Executive participates.

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OLD LINE BANK
Supplemental Life Insurance Agreement

6.2   Beneficiary Designation; Change. The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation Form, and
delivering it to the Bank or its designated agent. 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. The Executive shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Bank’s rules and procedures, as in effect
from time to time. Upon the acceptance by the Bank of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be
cancelled. The Bank shall be entitled to rely on the last Beneficiary
Designation Form filed by the Executive and accepted by the Bank prior to the
Executive’s death.   6.3   Acknowledgment. No designation or change in
designation of a Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Bank or its designated agent.   6.4   No
Beneficiary Designation. If the Executive dies without a valid designation of
beneficiary, or if all designated Beneficiaries predecease the Executive, then
the Executive’s surviving spouse shall be the designated Beneficiary. If the
Executive has no surviving spouse, the benefits shall be made payable to the
personal representative of the Executive’s estate.   6.5   Facility of Payment.
If the Bank determines in its discretion that a benefit is to be paid to a
minor, to a person declared incompetent, or to a person incapable of handling
the disposition of that person’s property, the Bank may direct payment of such
benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent person or incapable person. The Bank may
require proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the benefit. Any payment of a benefit shall
be a payment for the account of the Executive and the Executive’s Beneficiary,
as the case may be, and shall be a complete discharge of any liability under the
Agreement for such payment amount.

Article 7
Assignment
     The Executive may irrevocably assign without consideration all of the
Executive’s Interest in this Agreement to any person, entity, or trust. In the
event the Executive shall transfer all of the Executive’s Interest, then all of
the Executive’s Interest in this 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.
Article 8
Insurer
     The Insurer shall be bound only by the terms of its given Policy. The
Insurer shall not be bound by or deemed to have notice of the provisions of this
Agreement. The Insurer shall have

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OLD LINE BANK
Supplemental Life Insurance Agreement
the right to rely on the Bank’s representations with regard to any definitions,
interpretations or Policy interests as specified under this Agreement.
Article 9
Claims And Review Procedure

9.1   Claims Procedure. The Executive or Beneficiary (“claimant”) who has not
received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:

  9.1.1   Initiation – Written Claim. The claimant initiates a claim by
submitting to the Bank a written claim for the benefits. If such a claim relates
to the contents of a notice received by the claimant, the claim must be made
within sixty (60) days after such notice was received by the claimant. All other
claims must be made within one hundred eighty (180) days of the date on which
the event that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the claimant.     9.1.2   Timing of
Bank Response. The Bank shall respond to such claimant within 90 days after
receiving the claim. If the Bank determines that special circumstances require
additional time for processing the claim, the Bank 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 Bank expects to render its decision.     9.1.3   Notice of Decision.
If the Bank denies part or all of the claim, the Bank shall notify the claimant
in writing of such denial. The Bank 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
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) following an adverse benefit
determination on review.

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

  9.2.1   Initiation – Written Request. To initiate the review, the claimant,
within 60 days after receiving the Bank’s notice of denial, must file with the
Bank a written

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Supplemental Life Insurance Agreement

      request for review.     9.2.2   Additional Submissions – Information
Access. The claimant shall then have the opportunity to submit written comments,
documents, records and other information relating to the claim. The Bank 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.  
  9.2.3   Considerations on Review. In considering the review, the Bank 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.     9.2.4   Timing of Bank’s
Response. The Bank shall respond in writing to such claimant within 60 days
after receiving the request for review. If the Bank determines that special
circumstances require additional time for processing the claim, the Bank 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 Bank expects to render its decision.    
9.2.5   Notice of Decision. The Bank shall notify the claimant in writing of its
decision on review. The Bank 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 10
Amendments And Termination
     Notwithstanding any other provision in this Agreement, the Bank may amend
or terminate the Agreement at any time, or may amend or terminate the
Executive’s rights under the Agreement at any time prior to the Executive’s
death, by providing written notice of such to the Executive. Upon termination of
the Executive’s rights under this Agreement, the Executive will be eligible for
any life insurance benefit offered to the general employees of the Bank

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OLD LINE BANK
Supplemental Life Insurance Agreement
Article 11
Administration

11.1   Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or persons as
the Board may choose. 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 this Agreement.   11.2   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.   11.3   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 this
Agreement and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in this Agreement.  
11.4   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.   11.5   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 Base
Salary of the Executive, the date and circumstances of the retirement,
Disability, death or Separation from Service of the Executive, and such other
pertinent information as the Plan Administrator may reasonably require.

Article 12
Miscellaneous

12.1   Binding Effect. This Agreement shall bind the Executive and the Bank,
their beneficiaries, survivors, executors, administrators and transferees and
any Beneficiary.   12.2   No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an Executive 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
Executive nor interfere with the Executive’s right to terminate employment at
any time.

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Supplemental Life Insurance Agreement

12.3   Applicable Law. The Agreement and all rights hereunder shall be governed
by and construed according to the laws of the State of Maryland, except to the
extent preempted by the laws of the United States of America.   12.4  
Reorganization. The Bank shall not merge or consolidate into or with another
company, or reorganize, or sell substantially all of its assets to another
company, firm or person unless such succeeding or continuing company, 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 company.   12.5
  Notice. Any notice or filing required or permitted to be given to the Bank
under this Agreement shall be sufficient if in writing and hand-delivered, or
sent by registered or certified mail, to the address below:

Chief Financial Officer
Old Line Bank
P.O. Box 1890
Waldorf, Md. 20604

    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 or 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.   12.6   Entire Agreement. This Agreement, along with the Executive’s
Beneficiary Designation Form, constitutes the entire agreement between the Bank
and the Executive as to the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those specifically set forth herein.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
indicated above.

              EXECUTIVE:   BANK:    
 
                Old Line Bank    
 
           
/s/ Joseph E. Burnett
  By   Christine M. Rush                  
JOSEPH BURNETT
           
 
  Title   Chief Financial Officer    

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