Exhibit 10.5
GEORGETOWN SAVINGS BANK
ENDORSEMENT SPLIT DOLLAR LIFE INSURANCE AGREEMENT
This Endorsement Split Dollar Agreement ("Agreement") is entered into
by Georgetown Savings Bank ("Bank") and Xxxxxx X. Xxxxxxx ("Insured") on June
23, 2008, and shall be effective as of June 30, 2008 ("Effective Date") with
respect to certain life insurance policies (the "Policy" or "Policies") issued
by a duly licensed life insurance company (the "Insurer") set forth on Schedule
A hereto. Georgetown Bancorp, Inc. (the "Company") has executed this Agreement
for the sole purpose of guaranteeing the Bank's payment of premiums hereunder.
Insured is the Senior Vice-President and Chief Financial Officer of the Bank.
The respective rights and duties of the Bank and Insured in the Policy are set
forth herein and on Schedule A attached hereto. This Agreement is intended to be
a non-equity, endorsement split dollar agreement, such that it is not treated as
a impermissible personal loan from the Bank to the Insured under Section 402 of
the Xxxxxxxx-Xxxxx Act of 2002. Except as set forth in Section 7 hereof, this
Agreement shall remain in effect only for so long as the Insured remains
employed by the Bank.
1. Policy Title and Ownership; Endorsement.
---------------------------------------
(a) Policy title and ownership shall reside in the Bank for its use and
for the use of the Insured, all in accordance with this Agreement. Such Policy
shall be treated as "bank owned life insurance" ("BOLI") and is held subject to
the provisions and limitations set forth in the Interagency Statement on the
Purchase and Risk Management of Life Insurance (OCC 2004-56). The Bank may, to
the extent of its interest, exercise the right to borrow or withdraw on the
Policy cash values. Where the Bank and the Insured (or assignee, with the
consent of the Insured) mutually agree to exercise the right to increase the
coverage under the Policy, then, in such event, the rights, duties and benefits
of the parties to such increased coverage shall continue to be subject to the
terms of this Agreement.
(b) An endorsement on the form provided by the Insurer must be
completed and filed with the Insurer for each Policy identified on Schedule A in
order to implement the rights and obligations set forth in this Agreement. The
parties agree that the Policy shall be subject to the terms and conditions of
this Agreement and of the endorsement filed with the Insurer.
(c) The Bank agrees that, except as otherwise provided herein, it shall
not sell, assign, transfer, surrender or cancel the policy, or change the
beneficiary designation without the express written consent of the Insured.
2. Beneficiary Designation Rights. The Insured (or assignee) shall have
------------------------------
the right and power to designate a beneficiary or beneficiaries to receive the
Insured's share of the Policy proceeds payable upon the death of the Insured,
subject to any right or
interest the Bank may have in such proceeds, as provided in this Agreement. The
Bank shall not terminate, alter or amend the Insured's beneficiary designations
without the written consent of the Insured. The Bank shall be the beneficiary of
any proceeds remaining under the Policy after the payment required under this
Agreement has been made to the Insured's designated beneficiary.
3. Premium Payment. The Bank shall pay an amount equal to the planned
----------------
premiums and any other premium payments that might become necessary to keep the
Policy in force.
4. Taxable Benefit. Annually, the Insured will recognize a taxable
----------------
benefit equal to the assumed cost of insurance required by the Internal Revenue
Service ("IRS"), as determined from time to time. The Bank (or its
administrator) will timely report to the Insured the amount of such imputed
income each year on IRS Form W-2 or its equivalent. The Bank and the Insured
intend that this Agreement will be subject to taxation under the "economic
benefit regime" set forth in Treasury Regulations section 1.61-22(d), such that
the Insured shall have taxable income equal to the annual cost of the current
one-year term life insurance coverage provided under the Policy. The current
one-year term life insurance rate shall be the minimum amount required to be
imputed under IRS Notice 2002-28 or any subsequent applicable authority.
5. Division of Death Proceeds. Upon the death of the Insured while
---------------------------
employed by the Bank, the Bank shall cooperate with the Insured's designated
beneficiary to take whatever action is necessary to collect the death benefit
provided under the Policy. Subject to Sections 6 and 9 below, the division of
the death proceeds of the Policy shall be as follows: the Insured's
beneficiary(ies) designated in accordance with Section 2 shall be entitled to
payment from the Policy proceeds directly from the Insurer of an amount equal to
the lesser of:
--- ------ --
(i)One Million Dollars ($1,000,000.00); or
(ii) The Net Death Benefit. The "Net Death Benefit" shall be
the death benefit payable under the terms of the Policy or Policies reduced by
the aggregate premiums paid by the Bank. Notwithstanding anything to the
contrary herein, Bank shall ensure that the Net Death Benefit under the Policy
is never less than One Million Dollars ($1,000,000.00) for as long as this
Agreement is in effect. In the event that the Bank determines that the Net Death
Benefit has decreased or is likely to decrease below said amount, the Bank shall
either increase the premium payments or purchase additional insurance in order
to avoid this result.
6. Ownership of the Cash Surrender Value of the Policies.
-----------------------------------------------------
The Bank shall at all times be entitled to one hundred percent (100%)
of the Policy's cash value, as that term is defined in the Policy contract, less
any policy loans and unpaid interest or cash withdrawals previously incurred by
the Bank. Such cash value shall be determined as of the date of surrender or
death, as the case may be.
2
7. Extension of Term of Agreement.
------------------------------
(a) If a Change in Control of the Bank or the Company shall occur prior
to the Insured's termination of employment or retirement, then the death benefit
coverage set forth in Section 5 shall remain in effect for thirty-six (36)
months following Insured's termination of employment following the Change in
Control or age 65, unless this Agreement is otherwise terminated pursuant to its
terms prior to such time. For these purposes, "Change in Control" shall mean: a
change in control of a nature that: (i) would be required to be reported in
response to Item 5.01 of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
0000 (xxx "Xxxxxxxx Xxx"); or (ii) results in a Change in Control of the Bank or
the Company within the meaning of the Home Owners' Loan Act, as amended, and
applicable rules and regulations promulgated thereunder (collectively, the
"HOLA") as in effect at the time of the Change in Control; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of Company's outstanding
securities, except for any securities purchased by the Bank's employee stock
ownership plan or trust; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs or is effected; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company is distributed, seeking stockholder
approval of a plan of reorganization, merger or consolidation of the Company or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan are
exchanged for or converted into cash or property or securities not issued by the
Company; or (e) a tender offer is made for 25% or more of the voting securities
of the Company and the shareholders owning beneficially or of record 25% or more
of the outstanding securities of the Company have tendered or offered to sell
their shares pursuant to such tender offer and such tendered shares have been
accepted by the tender offeror. Notwithstanding anything in this subsection to
the contrary, a Change in Control shall not be deemed to have occurred upon the
conversion of the Company's mutual holding company parent to stock form, or in
connection with any reorganization used to effect such a conversion.
(b) In the event of Executive's involuntary termination other than for
"Cause" or in the event of Executive's resignation for "Good Reason", then the
death benefit
3
coverage set forth in Section 5 shall remain in effect for thirty-six months
following Insured's termination of employment, unless this Agreement is
otherwise terminated pursuant to its terms prior to such time. For this purpose,
"Cause" and "Good Reason" shall have the same meanings as under the Employment
Agreement between the Bank and the Insured, as such may be amended from time to
time.
8. Rights of Insured or Assignees. The Insured may not, without the
-------------------------------
written consent of the Bank, assign to any individual, trust or other
organization, any right, title or interest in the subject Policy nor any rights,
options, privileges or duties created under this Agreement.
9. Termination of Agreement.
------------------------
(a) This Agreement shall terminate upon the occurrence of any one of
the following:
(1) The Insured's termination of employment for any reason,
other than as set forth in Section 7 hereof; or
(2) Surrender, lapse or other termination of the Policy by the
Bank, provided, however, that if the Policy is surrendered, lapses or is
terminated in violation of this Agreement, the Insured may have a claim against
the Bank, which may be settled by binding arbitration in accordance with Section
11(i) hereof, without regard to Sections 11(e) through (h) hereof.
(3) Notwithstanding anything to the contrary herein, this
Agreement (and all rights of the Insured and his beneficiary(ies)) will also
terminate if any regulatory agency requires the Bank to sever its relationship
with the Insured, if the Bank is subjected to banking regulatory restrictions
limiting its ability to pay such compensation to the Insured, upon the
occurrence of the bankruptcy, insolvency, receivership or dissolution of the
Bank, or due to adverse tax or accounting consequences that may arise due to tax
law or accounting changes that may arise following the implementation of this
Agreement. In the event of termination of this Agreement under this Section
9(a)(3), the Insured shall not have a claim against the Bank due to such
termination.
(b) Upon such termination, the Insured (or assignee) shall have a sixty
(60) day option to receive from the Bank an absolute assignment of the Policy in
consideration of a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment shall equal the cash value of the Policy on the
date of such assignment.
(c) Except as noted in subsections (a) and (b) above, this Agreement
shall terminate upon distribution of the death benefit proceeds in accordance
with Section 5.
10. Amendment and Revocation. The Insured and the Bank agree that,
--------------------------
during the Insured's lifetime, this Agreement may be amended or revoked at any
time or times, in whole or in part, by the mutual written consent of the Insured
and the Bank.
11. ERISA Provisions.
----------------
4
To the extent this Agreement is treated as a "welfare benefit plan"
within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the following provisions shall apply.
(a) The Bank shall be the named fiduciary for purposes of ERISA under
this Agreement. Accordingly, the Bank shall have authority to control and manage
the operation and administration of this Agreement, including the right to
interpret any provision of this Agreement, and such interpretation shall be
binding on all parties.
(b) All premiums paid with respect to the Policy shall be remitted to
the Insurer when due in accordance with the Agreement.
(c) Benefits under this Agreement shall be paid directly by the
Insurer, with those benefits in turn being based on the payment of premiums as
provided in this Agreement.
(d) For purposes of handling claims with respect to this Agreement, the
"Claims Reviewer" shall be the Bank, unless another person or organizational
unit is designated by the Bank as Claims Reviewer.
(e) An initial claim for benefits under this Agreement must be made by
the Insured or his beneficiary in accordance with the terms of the Agreement or
policy through which the benefits are provided. Not later than 30 days after
receipt of such claim, the Claims Reviewer shall provide its written decision on
the claim to the claimant, unless special circumstances require the extension of
such 30-day period. If such extension is necessary, the Claims Reviewer shall
provide the Insured or the Insured's beneficiary with written notification of
such extension before the expiration of the initial 30-day period.
(f) In the event the Claims Reviewer denies the claim of an Insured or
the Insured's beneficiary in whole or in part, the Claims Reviewer's written
notification shall specify, in a manner calculated to be understood by the
claimant, the reason for the denial; a description of any additional material or
information necessary for the claimant to perfect the claim; an explanation as
to why such information or material is necessary; and an explanation of the
applicable claims procedure.
(g) Should the claimant be dissatisfied with the Claims Reviewer's
disposition of the claim, the claimant may have a full and fair review of the
denied claim by the Bank upon written request therefore submitted by the
claimant or the claimant's duly authorized representative and received by the
Bank within 30 days after the claimant receives written notification that the
claim has been denied. In connection with such appeal, the claimant or the
claimant's duly authorized representative shall be entitled to review pertinent
documents and submit the claimant's views as to the issues in writing. The Bank
shall act to deny or accept the appealed claim within 30 days after receipt of
the claimant's written request for review unless special circumstances require
the extension of such 30-day period. If such extension is necessary, the Bank
shall provide the claimant with written notification of such extension before
the expiration of such
5
initial 30-day period. In all events, the Bank shall act to deny or accept the
claim within 120 days of the receipt of the claimant's written request for
review. The action of the Bank shall be in the form of a written notice to the
claimant and its contents shall include all of the requirements for action on
the original claim.
(h) In no event may a claimant commence legal action for benefits the
claimant believes are due to the claimant until the claimant has exhausted all
of the remedies and procedures set forth in this Section and under ERISA, except
as set forth in Section 9(a)(2) hereof.
(i) Any dispute or controversy arising under or in connection with this
Agreement which cannot be settled in the manner set forth above in sub-sections
(e) through (g) hereof, shall be settled exclusively by binding arbitration, as
an alternative to civil litigation and without any trial by jury to resolve such
claims, conducted by a single arbitrator, mutually acceptable to the Bank and
Insured or the Insured's beneficiary, sitting in a location selected by Bank
within fifty (50) miles from the main office of the Bank, in accordance with the
rules of the American Arbitration Association's National Rules for the
Resolution of Employment Disputes ("National Rules") then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
12. Miscellaneous.
-------------
(a) Binding Agreement. The Insured and the Bank agree that this
------------------
Agreement shall be binding on their heirs, successors, personal representatives
and assigns.
(b) Insurance Company Not a Party to this Agreement. The Insurer shall
-----------------------------------------------
not be deemed a party to this Agreement, but will respect the rights of the Bank
and the Insured hereunder by receiving an executed copy of this Agreement.
Payment or other performance in accordance with the Policy provisions shall
fully discharge the Insurer from any and all liability.
(c) Severability. If a provision of this Agreement is held to be
------------
invalid or unenforceable, the remaining provisions shall nonetheless be
enforceable according to their terms.
(d) Governing Law. This Agreement shall be governed by the laws of the
-------------
Commonwealth of Massachusetts, to the extent not pre-empted by federal law,
without regard to conflict of law provisions.
(e) No Guarantee of Employment. This Agreement is not an employment
---------------------------
policy or contract. It does not give the Insured the right to remain an employee
of the Bank, nor does it interfere with the Bank's right to discharge the
Insured from employment.
(f) Payment of Premiums. All premium payments required by this
---------------------
Agreement shall be timely paid in cash or check from the general funds of the
Bank. Any holding company established with respect to the Bank may accede to
this Agreement but
6
only for the purpose of guaranteeing payment of premiums due and provision of
all amounts and benefits due hereunder to Insured.
(g) Notices. Any notice, consent or demand required or permitted to be
-------
given hereunder shall be in writing and shall be signed by the party giving such
notice, consent or demand. If such notice, consent or demand is mailed to a
party hereto, it shall be sent by United States certified mail or reputable
overnight delivery service to such party's last known address as shown on the
Bank's records. The date of the mailing shall be deemed to be the date of the
notice.
7
IN WITNESS WHEREOF, the Bank, the Company and the Insured have executed
this Agreement as of the date first set forth above.
GEORGETOWN SAVINGS BANK
June 23, 2008 By:/s/ Xxxxxxx X. Xxxxxxx
-------------------- -----------------------------
Date
GEORGETOWN BANCORP, INC.
June 23, 2008 By:/s/ Xxxxxxx X. Xxxxxxx
-------------------- -----------------------------
INSURED
June 23, 2008 /s/ Xxxxxx X. Xxxxxxx
-------------------- --------------------------------
Date Xxxxxx X. Xxxxxxx
8
GEORGETOWN SAVINGS BANK
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
SCHEDULE A
----------
--------------------------------------------------------------------------------
Maximum
Insurer Policy Issue Face Amount Policy
Number Date Proceeds
Payable to
Insured
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
GEORGETOWN SAVINGS BANK
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
BENEFICIARY DESIGNATION
-----------------------
The Insured, under the terms of the Georgetown Savings Bank Split
Dollar Life Insurance Agreement, hereby designates the following
Beneficiary(ies) to receive any guaranteed payments or death benefits under such
Plan, following his death:
PRIMARY BENEFICIARY:
Name:________________________________ % of Benefit:___________________
Name:________________________________ % of Benefit:___________________
Name:________________________________ % of Benefit:___________________
SECONDARY BENEFICIARY (if all Primary Beneficiaries pre-decease the Insured):
Name:________________________________ % of Benefit:___________________
Name:________________________________ % of Benefit:___________________
Name:________________________________ % of Benefit:___________________
This Beneficiary Designation hereby revokes any prior Beneficiary Designation
which may have been in effect and this Beneficiary Designation is revocable.
___________________________ ________________________________
Date Insured
