EXHIBIT 10.14
THE CORTLAND SAVINGS AND BANKING COMPANY
ENDORSEMENT SPLIT DOLLAR AGREEMENT
THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT is entered into as of this ______
day of ____________, 2005, by and between The Cortland Savings and Banking
Company, an Ohio-chartered bank (the "Bank") and Xxxxxx X. Xxxxx (the
"Executive").
WHEREAS, the Bank and the Executive entered into a Split Dollar Agreement
dated as of February 23, 2001, as amended by letter amendment dated of as of
August 15, 2002, which agreement grants to the Executive the right to designate
the beneficiary of death proceeds from a policy on the Executive's life,
WHEREAS, the amount of death proceeds for which the Executive has the right
to designate the beneficiary of death proceeds under the February 23, 2001 Split
Dollar Agreement is equal to one times the Executive's base salary when the
Executive's employment with the Bank terminates,
WHEREAS, the parties intend that the February 23, 2001 Split Dollar
Agreement, as the same may have been or may hereafter be amended, shall remain
in full force and effect, unaffected in any way by this Endorsement Split Dollar
Agreement,
WHEREAS, the Bank and the Executive also entered into an Amended Salary
Continuation Agreement and an associated Amended Split Dollar Agreement, each
dated as of August 15, 2002,
WHEREAS, the August 15, 2002 Amended Salary Continuation Agreement provides
for specified retirement benefits for the Executive after termination of his
employment, and the associated August 15, 2002 Amended Split Dollar Agreement
provides instead for a death benefit of $523,203 under an insurance policy on
the Executive's life if the Executive dies in active service to the Bank,
WHEREAS, the August 15, 2002 Amended Split Dollar Agreement associated with
the August 15, 2002 Amended Salary Continuation Agreement has terminated because
the agreement provides that it shall terminate on the Executive's 70th birthday,
which occurred in September 2005, and the Executive therefore no longer has any
right to designate the beneficiary of $523,203 of the insurance policy death
benefits under the August 15, 2002 Amended Split Dollar Agreement,
WHEREAS, the Executive has contributed substantially to the success of the
Bank and its parent company, Cortland Bancorp, an Ohio corporation, and
WHEREAS, the Bank is willing to divide the death proceeds of a life
insurance policy on the Executive's life.
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 Endorsement Split Dollar
Agreement shall have the same meaning given in the August 15, 2002 Amended
Salary Continuation Agreement. 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(a).
1.3 Insured means the Executive.
1.4 Insurer means each life insurance carrier in 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 Insurers.
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 such 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 any death proceeds remaining after the Executive's interest has
been paid under Section 2.2 below.
2.2 Death Benefit. (a) Executive's Interest If the Policy Is Not Cancelled.
The Executive shall have the right to designate the beneficiary of the
Executive's Interest. Provided the Policy is not cancelled, surrendered,
terminated, or allowed to lapse, if at the time of Termination of Employment the
Executive is entitled to benefits under the August 15, 2002 Amended Salary
Continuation Agreement in effect when Termination of Employment occurs, or if
Termination of Employment occurs because of the Executive's death, then the
Executive's beneficiary designated in accordance with the Split Dollar Policy
Endorsement shall be entitled to the Net Death Proceeds less the amount of death
proceeds for which the Executive has the right to designate the beneficiary
under the February 23, 2001 Split Dollar Agreement. The amount to which the
Executive's beneficiary is entitled is referred to in this Endorsement Split
Dollar Agreement as the "Executive's Interest." Whether under this Endorsement
Split Dollar Agreement or the February 23, 2001 Split Dollar Agreement, in no
case shall the Executive have the right to designate the beneficiary or
beneficiaries of an amount of death proceeds in the aggregate exceeding the Net
Death Benefit. The Executive or the Executive's transferee shall also have the
right to elect and change settlement options that may be permitted for the
Executive's Interest.
(b) If the Policy Is Cancelled. If the Policy is cancelled, surrendered,
terminated, or allowed to lapse, in any such case without replacement, provided
that at the time of Termination of Employment the Executive is entitled to
benefits under the August 15, 2002 Amended Salary Continuation Agreement in
effect at the time of Termination of Employment, or if Termination of Employment
occurs because of the Executive's death, then the Executive's beneficiary
designated in accordance with the Split Dollar Policy Endorsement shall be
entitled to death proceeds payable by the Bank in an amount in cash equal to the
sum of (1) the amount specified in paragraph (a) of this Section 2.2, measured
at the time the Policy is cancelled, surrendered, terminated, or allowed to
lapse, plus (2) a tax gross-up payment to compensate for federal and state
income taxes imposed on the benefit specified in clause (1) of this Section
2.2(b). The tax gross-up payment required under this clause (2) of Section
2.2(b) shall be calculated in two steps, first by dividing the total death
benefit specified in clause (1) of this Section 2.2(b) by one minus the sum of
(x) the highest marginal individual federal income tax rate under the Internal
Revenue Code at the time of the Executive's death (offset or reduced to account
for the deductibility at the federal level of state income taxes), plus (y) the
highest marginal individual state income tax rate under Ohio law at the time of
the Executive's death. Second, the death benefit specified in clause (1) of this
Section 2.2(b) shall then be subtracted from the amount calculated in that first
step. The difference shall be the additional tax gross-up payment to be made to
compensate for taxes, regardless of whether it exceeds or is less than taxes
imposed on the Executive's estate for "income in respect of a decedent." To
illustrate with a simple hypothetical based on an assumed death benefit amount
of $100,000 paid directly by the Bank under clause (1) of this Section 2.2(b),
the additional tax gross-up payment would be calculated as follows if the
highest marginal individual income tax rates are 35% (federal) and 7.5% (Ohio),
taking into account the deductibility at the federal level of state income
taxes:
First Step: $100,000/divided by (1-((35% + 7.5%) - (35% X 7.5%))
= $100,000/divided by (1 minus 39.875%)
= $100,000/divided by 60.125%, or .60125
= $166,320
Second Step: $166,320 minus $ 100,000
= $66,320, the amount of the additional tax gross-up payment
2.3 Option to Purchase. The Bank shall not sell, surrender or transfer
ownership of the Policy while this Endorsement Split Dollar Agreement is in
effect without first giving the Executive or the Executive's transferee a right
of first refusal to purchase the Policy for the Policy's interpolated terminal
reserve value. Such right of first refusal to purchase the Policy must be
exercised within 60 days from 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 right of the Bank to terminate this Endorsement Split
Dollar Agreement.
ARTICLE 3
PREMIUMS
3.1 Premium Payment. The Bank shall pay any premiums due on the Policy.
3.2 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
Executive's Beneficiary. The life insurance premium factor is the minimum amount
required to be imputed under Internal Revenue Service Regulations, section
1.61-22(d)(3)(ii), or any subsequent applicable authority. The Bank shall impute
the economic benefit to the Executive on an annual basis by adding the economic
benefit to the Executive's Form W-2 or, if applicable, Form 1099.
ARTICLE 4
ASSIGNMENT
The Executive may assign without consideration all interests in the Policy
and in this Endorsement Split Dollar Agreement to any person, entity or trust.
If the Executive transfers all of the Executive's interest in the Policy, then
all of the Executive's interest in the Policy and in the Endorsement Split
Dollar 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 the Policy or in this Endorsement Split Dollar Agreement.
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 entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Endorsement Split Dollar Agreement.
ARTICLE 6
CLAIMS PROCEDURE
6.1 Claims Procedure. A person or beneficiary ("claimant") who has not
received benefits under this Endorsement Split Dollar Agreement 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 Bank a written claim for the benefits.
6.1.2 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, 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 Bank expects to
render its decision.
6.1.3 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:
6.1.3.1 The specific reasons for the denial,
6.1.3.2 A reference to the specific provisions of this Endorsement
Split Dollar 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 this Endorsement Split Dollar 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 (the Employee Retirement Income Security Act of 1974)
section 502(a) after an adverse benefit determination on review.
6.2 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:
6.2.1 Initiation - Written Request. To initiate the review, within 60 days
after receiving the Bank's notice of denial the claimant must file
with the Bank a written request for review.
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 Bank 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.
6.2.3 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.
6.2.4 Timing of Bank 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, 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 Bank expects to render its
decision.
6.2.5 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:
6.2.5.1 The specific reason for the denial,
6.2.5.2 A reference to the specific provisions of this Endorsement
Split Dollar Agreement on which the denial is based,
6.2.5.3 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
6.2.5.4 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 Endorsement Split Dollar Agreement shall be
administered by an Administrator, which shall consist of the board 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
(a) make, amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Endorsement Split Dollar Agreement and (b) decide
or resolve any and all questions, including interpretations of this Endorsement
Split Dollar Agreement, as may arise in connection with the Endorsement Split
Dollar Agreement.
7.2 Agents. In the administration of this Endorsement Split Dollar
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 with respect to any question arising out of or in connection with
the administration, interpretation, and application of this Endorsement Split
Dollar Agreement and the rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons having any interest in the
Endorsement Split Dollar 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 Endorsement Split Dollar Agreement, except in the case of willful
misconduct by the Administrator or any of its members.
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
Termination of Employment of the Executive and such other pertinent information
as the Administrator may reasonably require.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Termination. This Endorsement Split Dollar Agreement may
be amended or terminated only by a written agreement signed by the Bank and the
Executive.
8.2 Binding Effect. This Endorsement Split Dollar 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 Endorsement Split Dollar 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 nor interfere with the Executive's right to terminate employment at any
time.
8.4 Successors; Binding Agreement. The Bank will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Bank, by an
assumption agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Endorsement Split Dollar Agreement in
the same manner and to the same extent that the Bank would be required to
perform this Endorsement Split Dollar Agreement if no such succession had taken
place.
8.5 Applicable Law. This Endorsement Split Dollar Agreement and all rights
hereunder shall be governed by and construed according to the laws of the State
of Ohio, except to the extent preempted by the laws of the United States of
America.
8.6 Entire Agreement. This Endorsement Split Dollar Agreement constitutes
the entire agreement between the Bank and the Executive concerning the subject
matter hereof.
However, nothing in this Endorsement Split Dollar Agreement affects in any way
the February 23, 2001 Split Dollar Agreement, as the same may have been or may
hereafter be amended, which agreement shall remain in full force and effect,
unaffected in any way by this Endorsement Split Dollar Agreement. No rights are
granted to the Executive under this Endorsement Split Dollar Agreement other
than those specifically set forth herein.
8.7 Severability. If any provision of this Endorsement Split Dollar
Agreement is held invalid, such invalidity shall not affect any other provision
of this Endorsement Split Dollar 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 Endorsement Split Dollar Agreement is held
invalid in part, such invalidity shall not affect the remainder of such
provision not held invalid, and the remainder of such provision, together with
all other provisions of this Endorsement Split Dollar Agreement, shall continue
in full force and effect to the full extent consistent with law.
8.8 Headings. The headings of sections herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Endorsement Split Dollar Agreement.
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, The Cortland Savings and Banking Company, 000 Xxxx Xxxx
Xxxxxx, X.X. Xxx 00, Xxxxxxxx, Xxxx 00000-0000.
IN WITNESS WHEREOF, the Bank and the Executive have executed this
Endorsement Split Dollar Agreement as of the date first set forth above.
EXECUTIVE: BANK:
THE CORTLAND SAVINGS AND BANKING COMPANY
By:
------------------------------------- ------------------------------------
Xxxxx X. Xxxxx Xxxxxxxx X. Xxxxxxxxx
Its: Senior Vice President, Controller,
Chief Financial Officer, and
Secretary-Treasurer
SPLIT DOLLAR POLICY ENDORSEMENT
THE CORTLAND SAVINGS AND BANKING COMPANY
Insured: Xxxxxx X. Xxxxx Insurer: Great-West Life & Annuity Insurance Company
Policy No. 85998035
Pursuant to the terms of The Cortland Savings and Banking Company
Endorsement Split Dollar Agreement dated as of _______________, 2005, the
undersigned Owner requests that the above-referenced policy issued by the
Insurer provides 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 the Owner 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:
________________________________________________________________________________
PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER
________________________________________________________________________________
CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER
The exclusive right to change the beneficiary for the proceeds payable under
this paragraph, to elect any optional method of settlement for the proceeds paid
under this paragraph which are available under the terms of the policy 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 said 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.
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 being executed.
Signed at _____________________, Ohio, this ______ day of __________, 2005.
INSURED: OWNER:
The Cortland Savings and Banking Company
By:
------------------------------------- ------------------------------------
Xxxxxx X. Xxxxx Xxxxxxxx X. Xxxxxxxxx
Its: Senior Vice President, Controller,
Chief Financial Officer, and
Secretary-Treasurer
