ATLANTIC COAST BANK SPLIT DOLLAR LIFE INSURANCE AGREEMENT
ATLANTIC
COAST BANK
This Split Dollar Agreement
(“Agreement”) is entered into effective January 1, 2010, between Atlantic Coast
Bank (“Bank”) and Xxxxxx X. Xxxxxx, Xx. (“Insured”) with respect to certain life
insurance policies (the “Policy” or “Policies”) issued by a duly licensed life
insurance company (the “Insurer”).
The Bank
is the owner of the life insurance Policy or Policies set forth on Schedule A
hereto and the Insured is the 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.
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. The Bank has
purchased each Policy on a single premium basis. 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 Employee.
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. Notwithstanding the foregoing, the Bank shall have
the absolute and sole right to terminate and surrender any or all of the
Policies that are subject to this Agreement.
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 life insurance coverage provided under the Policy.
5.
Division
of Death Proceeds. Upon the death of the Insured, 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:
(a) If
the Insured is employed by the Bank at the time of his death or the Insured has
retired from employment with the Bank after completion of not less than ten (10)
years of service with the Bank measured from the Effective Date, then 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 three hundred percent (300%) of:
(i) if
the Insured is employed by the Bank at the time of death, the Insured’s highest
base annual salary (not including bonus, equity compensation, or any other forms
of compensation) in effect at the Bank at any time during the last ten calendar
years prior to the date of death of the Insured; or
(ii) if
the Insured’s death follows the Insured’s retirement from the Bank after
completion of not less than ten (10) years of service with the Bank measured
from the Effective Date, the Insured’s highest base annual salary (not including
bonus, equity compensation or any other forms of compensation) paid by the Bank
to the Insured during the last ten calendar years prior to the Insured’s
retirement date.
Notwithstanding
the foregoing, the maximum payment due to the Insured’s beneficiary(ies) from
the Insurer under this Agreement and the Policies shall not exceed the amount
set forth on Schedule A. To the extent possible, an equal amount of
each Policy’s proceeds shall be payable to the Insured’s beneficiary(ies) not to
exceed such Policy proceeds. Any amount payable in accordance with
this subsection (a) in excess of a Policy’s proceeds shall thereafter be paid by
any remaining Policy proceeds pro rata.
2
(b) Coverage
under this Agreement for the Insured who terminates employment with the Bank
(for reasons other than death) prior to completion of less than ten (10) years
of service with the Bank measured from the Effective Date (and prior to the
occurrence of a Change in Control, as defined below) will cease on his last day
of employment with the Bank.
(c) The
Bank shall be entitled to the remainder of such Policy proceeds.
6.
Ownership
of the Cash Surrender Value of the Policies.
(a) 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.
(b) The
Bank may pledge or assign the Policy, subject to the terms and conditions of
this Agreement, for the sole purposes of securing a loan from the
Insurer. The amount of such loan, including accumulated interest
thereon, shall not exceed the lesser or (i) the amount of the premiums on the
Policy paid by the Bank, or (ii) the cash surrender value of the Policy (as
defined in the Policy). Interest charges on such loan shall be paid
by the Bank.
7.
Change
in Control of Bank.
(a) If
a Change in Control of the Bank 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 until the Insured’s death, unless this
Agreement is otherwise terminated pursuant to its terms prior to such
time.
(b) “Change
in Control” shall mean: (i) a merger, consolidation, reorganization, liquidation
or similar extraordinary transaction involving the Bank whereby the Bank is not
the surviving entity or an on-going entity; (ii) the ownership, holding or power
to vote more than 25% of the Bank’s (or its holding company’s) outstanding
voting stock by any person other than those persons who are stockholders on the
effective date of this Agreement; (iii) the control of the election of a
majority of the Bank’s (or its holding company’s) directors or trustees, if,
during any three-year period, the composition of the Board of the Bank (or its
holding company) shall change, such that the members of the Board at the
beginning of such period shall no longer constitute a majority of such Board at
the end of such three-year period (provided that any member of the Board
appointed or nominated for election as a member of the Board by a vote of at
least a majority of the members then in office shall be considered to have been
members as of the beginning of such three-year period); (iv) the exercise of a
controlling influence over the management or policies of the Bank by any person
or persons acting as a group within the meaning of Section 13(d) of the
Securities Exchanges Act of 1934; or (v) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank (or its
holding company) or similar transaction in which the Bank (or its holding
company) is not the surviving institution occurs, excluding any transaction in
which Atlantic Coast Federal, MHC, the majority stockholder of the Bank’s
holding company, undergoes a full stock conversion. The term “person”
means an individual other than the Insured and shall also include a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
3
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 shall be discharged from employment with the Bank for cause, as defined
in his employment agreement, or, if there is no employment agreement or the
employment agreement does not have a definition, “cause” shall mean any of the
following that results in an adverse effect on the Bank: the Insured’s personal
dishonesty, incompetence, 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
(2) Surrender,
lapse or other termination of the Policy by the Bank. The Policy (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 as may otherwise be
determined by the Bank in good faith.
(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. The Insured expressly agrees that
this Agreement shall constitute sufficient written notice to the Insured of the
Insured’s option to receive an absolute assignment of the policy as set forth
herein.
(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.
4
11. ERISA
Provisions.
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 90 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 90-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 90-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 60 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 60 days after receipt of the claimant’s written request for review unless
special circumstances require the extension of such 60-day period. If
such extension is necessary, the Bank shall provide the claimant with written
notification of such extension before the expiration of such initial 60-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.
5
(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.
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 State
of Georgia, to the extent not pre-empted by federal law, without regard to
conflict of law provisions.
(e) 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, FedEx (or other
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.
[Signatures
on next page]
6
IN WITNESS WHEREOF, the Bank
and the Insured have executed this Agreement as of the date first set forth
above.
|
ATLANTIC
COAST BANK
|
|||
|
January 1, 2010
|
By:
|
/s/ Xxxxxx X. Xxxxxxx,
Xx.
|
|
|
Date
|
Xxxxxx
X. Xxxxxxx, Xx. President and
|
||
|
Chief
Executive Officer
|
|||
|
INSURED
|
|||
|
January 1, 2010
|
/s/ Xxxxxx X. Xxxxxx,
Xx.
|
||
|
Date
|
Xxxxxx
X. Xxxxxx, Xx.
|
||
7
