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 Joseph W. Kennedy ("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 Sarbanes-Oxley
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.
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(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
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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
<PAGE>
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
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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.
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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
<PAGE>
7. Extension of Term of Agreement.
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(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
1934 (the "Exchange Act"); 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
