Exhibit 10(ae)
SPLIT DOLLAR INSURANCE AGREEMENT
THIS SPLIT DOLLAR INSURANCE AGREEMENT (the "Agreement") is entered into
effective the 17th day of January, 2002, by Xxxxx Supermarkets, Inc., an Indiana
corporation (the "Company"), and Xxx X. Xxxxx, Trustee u/a Xxxxx X. Xxxxx
Irrevocable Trust dated January 16, 2002 ("Owner").
R E C I T A L S:
A. The Owner has acquired a policy of life insurance in the face amount
of Two Million Dollars ($2,000,000) (the "Policy"), issued by Massachusetts
Mutual Life Insurance Company (the "Insurer"), insuring the life of Xxxxx X.
Xxxxx, an employee of the Company (the "Insured"), which Policy is described in
Exhibit A attached hereto and make a part hereof.
B. The Owner desires to maintain life insurance on the life of the
Insured for the beneficiaries and desires that such life insurance have an
equity or cash value feature. The Owner is willing to pay life insurance
premiums equal to the annual cost of current life insurance protection on the
life of the Insured as measured by the lower of the PS-58 rate, set forth in the
then applicable Internal Revenue Service Revenue Ruling, or the Insurer's
current published premium rate of annually renewable term insurance for standard
risks. The Company, in the interests of the Insured as a valuable employee of
the Company and his family, and as an investment of Company assets, desires to
pay the balance of the annual premium due. The only interest of the Company with
respect to the Policy is the payment due to the Company by reason of its
advances of the premiums due with respect to the Policy as hereinafter
described.
C. The Owner is the owner of the Policy and possesses all incidents of
ownership in and to the Policy.
D. In order to secure the recovery of the advances by the Company with
respect to the Policy ("Company Advances") in the event of the termination of
this Agreement, the Company wishes to have a limited collateral assignment of
death benefits payable to the Owner under the policy and cash values accumulated
in favor of the Owner under the policy.
E. The parties intend that by such collateral assignment the Company
shall have only the right to receive recovery of the Company Advances under this
Agreement, with the Owner retaining all other ownership rights in the Policy, as
specified in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Ownership. The Owner shall be the sole and absolute owner of the
Policy and shall have the exclusive right to exercise all ownership rights
granted by the terms of the Policy, including, but not limited to, the rights to
designate beneficiaries, select settlement and dividend options, borrow on the
security of the Policy and to surrender or cancel the Policy. All such rights
may be exercised by the Owner without the Company's consent. With respect to the
exercise of the right to borrow on the security of the Policy, the Owner agrees
that the Owner will not borrow on the security of the Policy in any manner so as
to impair the security of the Company under any collateral assignment executed
in favor of
the Company pursuant to the terms of this Agreement to secure the recovery of
the Company Advances under the applicable provisions of this Agreement. If
requested by the Company, the Owner will produce information verified by the
Insurer showing the amount of indebtedness on the Policy at the time of such
request.
2. Owner's Premium Payment Obligation. Under the terms of this
Agreement the Owner shall pay that amount of the premiums due on the Policy
equal to the annual cost of current life insurance protection on the life of the
Insured as measured by the lower of the PS-58 Rate, as set forth in the then
applicable Internal Revenue Service Revenue Ruling, or the Insurer's current
published premium rate available to all standard risks for initial issue one
year term insurance. In addition to the foregoing payments, the Owner may elect
to pay additional Policy premium amounts by policy loan or other borrowing. Upon
making such election, the Owner shall deliver notice of such election to the
Company on or before the Policy premium due date.
3. Company's Payment Premiums as Investments. The Company for its own
account and as an investment of general Company assets shall pay all Policy
premium amounts not paid by the Owner pursuant to paragraph 2 of this Agreement.
Such payments shall be referred to as the "Company Advances". The Company shall
pay all such amounts of the Policy premiums not paid by the Owner until the
death of the Insured, by reason of the valuable services of the Insured as an
employee of the Company.
4. Manner of Payment. On or before the due date of each Policy premium,
or within the grace period provided therein, the Company shall notify the Owner
of the exact amount due from the Owner. The Owner shall pay its required amount
to the Insurer prior to the premium due date, or within the grace period
provided therein. The Company shall then be responsible to pay the balance of
the premium to the Insurer and shall promptly furnish the Owner with evidence of
timely payment. If the Owner fails to make its required payment, the Company, in
its sole discretion, may elect to pay the Owner's portion of the premium
payment and shall be entitled to recover such payment in accordance with the
provisions of this Agreement.
5. Dividends. Dividends on the Policy shall be applied as elected by
the Owner.
6. Payment of Company Death Benefit or Termination Amount.
(a) Death of Insured. Upon the death of the Insured, the
Company shall be entitled to payment by the Insurer from the death
benefit payable under the Policy an amount which shall be equal to the
lesser of the cash surrender value of the Policy immediately prior to
the Insured's death or the Company Advances ("Company Death Benefit").
The Company and the Owner shall take all action necessary under the
terms of the Policy to obtain the Company Death Benefit payable to the
Company.
(b) Other Termination. Upon the termination of this Agreement
prior to the death of the Insured and subject to the following
paragraph 10, the Company shall have the right to receive an amount
equal to the lesser of the cash surrender value of the Policy or the
Company Advances ("Termination Amount"), and after the payment of such
amount, the Company shall have no further interest in the Policy or
under this Agreement.
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(c) Payment to Owner or Third Party. Upon the death of the
Insured, the person, trust or other beneficiary designated in writing
by the Owner, who may be referred to for purposes of administration by
the Insurer as the "Third Party", shall receive all amounts not paid to
the Company under the provisions of paragraph 6(a) of this Agreement.
7. Collateral Assignment. To secure the recovery by the Company of the
Company Death Benefit or the Termination Amount, the Owner shall execute a
limited assignment of amounts payable under the Policy by the Insurer in the
event of the surrender of the Policy or the death of the Insured in favor of the
Company in the form attached hereto as Exhibit B (the "Collateral Assignment").
The Collateral Assignment shall specifically limit the rights of the Company
thereunder to the recovery of the Company Death Benefit or the Termination
Amount in the event of death of the Insured or other termination of this
Agreement.
8. Absolute Limitation on Company Rights. In no event shall the Company
have any right to borrow against the Policy, to surrender or cancel the Policy,
or to assign its interest in the Policy, unless specifically provided otherwise
in this Agreement. The Company shall neither have nor exercise any right as
collateral assignee of the Policy which could in any way defeat or impair the
Owner's right to receive the cash surrender value or the death benefit payable
under the Policy in excess of the amount due the Company hereunder. All
provisions of this Agreement and of the Collateral Assignment shall be construed
so as to carry out such intention.
9. Payments by Insurer and Claims Procedure. The Insurer may pay
benefits under the Policy either by separate checks to the parties or agent
assignees entitled thereto, or by a joint check. If the Insurer pays by joint
check, the Owner and the Company shall divide the benefit as provided herein.
Benefits shall be payable in accordance with the provisions of this
Agreement. Should the Owner or his beneficiary as designated in writing fail to
receive benefits to which Owner or such beneficiary believes he is entitled, a
claim may be filed. Any claim for a benefit under this Agreement shall be filed
by the Owner or beneficiary (claimant) under this Agreement by written
communication which is made by the claimant or the claimant's authorized
representative which is reasonable calculated to bring the claim to the
attention of the Fiduciary under this Agreement.
If a claim for a benefit is wholly or partially denied, a written
notice of the decision shall be furnished to the claimant by the Fiduciary or
his designee within a reasonable period of time after receipt of the claim,
which notice shall notice shall include the following information:
(a) The specific reason or reasons for the denial;
(b) Specific reference to the pertinent provisions of this
Agreement upon which the denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(d) An explanation of the claim review procedures under this
Agreement.
In order that a claimant may appeal a denial of a claim, a claimant or
his duly authorized representative:
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(a) May request a review by written application to the
Fiduciary or his designee not later that 60 days after receipt by the
claimant of written notification of denial of a claim;
(b) May review pertinent documents; and
(c) May submit issues and comments in writing.
A decision on review of a denied claim shall be made not later than 60
days after the Fiduciary's receipt of a request for review, unless special
circumstances require an extension of time for processing, in which case a
decision shall be rendered within a reasonable period of time, but not later
than 120 days after receipt of a request for review. The decision on review
shall be in writing and shall include the specific reason(s) for the decision
and the specific reference(s) to the pertinent provisions of this Agreement on
which the decision is based.
Notwithstanding anything contained in this Agreement to the contrary,
any claim for a death benefit under an insurance policy held subject to this
Agreement shall be filed with the Insurer by the claimant or his authorized
representative on the form or forms prescribed for such purpose by the Insurer.
The Insurer shall have sole authority for determining whether a death claim
shall or shall not be paid, either in whole or in part, in accordance with the
terms of such insurance contract which may have been purchased on the life of
the Insured.
10. Termination During Lifetime of Insured. This Agreement shall
terminate on the surrender or cancellation of the Policy by the Owner, who has
the sole and exclusive right to surrender or cancel. Upon any termination of
this Agreement, the Owner shall have the following rights:
(a) The Owner may surrender the Policy, in which event, if the
net cash surrender proceeds are less than the Company Advances, the
Owner shall have no obligation to pay the difference to the Company.
(b) The Owner may direct the Company to assign its interest
under the Policy and this Agreement to any one or more persons, firms
or entities as shall come within the provisions of Sections
101(a)(2)(A) or 101(a)(2)(B) of the Internal Revenue Code of 1986, as
amended, providing for the exclusion from the gross income of such
assignee the proceeds payable to such assignee as owner of such
assigned Policy upon the death of the Insured, in which event such
assignee shall pay to the Company an amount equal to the lesser of the
cash surrender value of the Policy or the Company Advances.
(c) For sixty (60) days after the date of termination of this
Agreement, the Owner shall have the option of obtaining the release of
the Collateral Assignment to the Company. To obtain such release, the
Owner shall pay to the Company an amount equal to the lesser of the
cash surrender value of the Policy or the Company Advances. Upon
receipt of such amount, the Company shall release the Collateral
Assignment by executing and delivering to the Owner an appropriate
instrument of release.
11. Obligations of Insurer. The Insurer shall be fully discharged from
its obligations under the Policy by payment of the Policy death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall the Insurer be considered a part of
this
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Agreement, or any modification or amendment to this Agreement. No provision of
this Agreement, nor of any modification or amendment hereof, shall in any way be
construed as enlarging, changing, varying, or in any way affecting the
obligations of the Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by the Collateral
Assignment executed by the Owner and filed with the Insurer.
12. Appointment of Fiduciary. The Company is hereby designated as the
named Fiduciary under this Agreement. The Fiduciary shall have authority to
control and manage the operation and administration of this Agreement.
13. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and the Owner and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Specific Enforcement. The Owner shall be entitled to specific
enforcement of all obligations of the Company under this Agreement.
16. Notices. All notices consents or demands required or permitted to
be given under the provisions of this Agreement shall be sent by certified mail
to:
Owner: Xxx X. Xxxxx
Trustee u/a Xxxxx X. Xxxxx Irrevocable Trust
dated January 16, 2002
0000 Xx. Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Company: Xxxxx Supermarkets, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Notice shall be effective when received by the recipient.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF the parties have signed this Agreement effective
this 17th day of January, 2002.
XXXXX SUPERMARKETS, INC.
By: /s/
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/s/ Xxx X. Xxxxx
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XXX X. XXXXX, TRUSTEE U/A
XXXXX X. XXXXX IRREVOCABLE TRUST,
DATED JANUARY 16, 2002
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EXHIBIT A
to
Split Dollar Insurance Agreement, dated January 17, 2002
The following life insurance policy is subject to the attached
Split-Dollar Insurance Agreement:
OWNER: Xxx X. Xxxxx, Trustee u/a Xxxxx X. Xxxxx Irrevocable Trust
dated January 16, 2002
INSURER: Massachusetts Mutual Life Insurance Company
INSURED: Xxxxx X. Xxxxx
POLICY NUMBER: 11 179 827
FACE AMOUNT: $2,000,000
DATE OF ISSUE: January 18, 2002
EXHIBIT A
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LIMITED COLLATERAL ASSIGNMENT
This Assignment is made effective this 17th day of January, 2002, by
the undersigned (herein called "Owner"), to Xxxxx Supermarkets, Inc. (herein
called "Company"), its successors and assigns.
1. The subject of this Assignment is a certain life insurance policy
no. 11 179 827 issued by Massachusetts Mutual Life Insurance Company
(herein called "Insurer"). See Exhibit A of the accompanying Agreement
for Policy particulars.
2. This Policy is subject to a Collateral Assignment Split Dollar
Insurance Agreement, effective January 17, 2002 (herein called
"Agreement"), between the Company and Xxx X. Xxxxx, Trustee u/a Xxxxx
X. Xxxxx Irrevocable Trust dated January 16, 2002.
The Agreement was created to assist with a life insurance program
insuring Xxxxx X. Xxxxx, as an employee benefit of valued key
associates. Such Agreement is hereby incorporated into and made a part
of this Assignment.
3. The Owner hereby assigns, transfers, and sets over to the Company
only the following specific limited rights in the Policy, and subject
to the following terms and provisions:
(a) This Assignment is made, and the Policy is held simply as
collateral security for the premium advances made by the
Company to the Owner under the terms of the Agreement.
(b) The Company shall have only those rights necessary to
secure the Owner's liabilities, existing or future, to the
Company for premium advances made with respect to this Policy
under the terms of the Agreement.
4. The Company shall have no right to obtain from the Insurer any loans
or advances against its interest in the Policy. The Company does not
possess any "incidents of ownership" in the Policy.
5. The Company shall have the right to be repaid to the extent of its
interest:
(a) in the event of the death of the insured on the Policy.
(b) in the event the Policy is lapsed, canceled or surrendered
by the Owner.
(c) in the event of the termination of the Split Dollar
Insurance Agreement.
6. (a) The Company is strictly prohibited:
(1) from surrendering the Policy for cancellation;
(2) from assigning its rights to any person other
than to the Owner or to some other person as the
Owner may direct; and
(3) in general, from taking any action which would
endanger the interest of the Owner or endanger the
payment of the death proceeds in excess of its
interest in the Policy.
7. Except as specifically provided herein, the Owner shall retain and
possess all other incidents of ownership in the Policy, including but
not limited to :
(a) the sole and exclusive right to cancel or surrender the
Policy for its cash surrender value, if any;
(b) the right to designate and change the beneficiary of the
death proceeds on the Policy;
(c) the right to elect and exercise any optional mode of
settlement permitted by the Policy.
However, all rights retained by the Owner shall be subject to the terms
and conditions of the Agreement.
8. The Insurer shall be fully protected in recognizing a request by the
Owner to exercise any right of ownership, whether or not the Company
has notice of such request including but not limited to the right to
surrender the Policy.
9. Upon request, the Company shall forward the Policy to the Insurer
for endorsement of any designation or change of the Policy beneficiary,
or any election of an optional plan for payment of the proceeds. The
Company shall forward the Policy for these purposes without
unreasonable delay.
10. The exercise of any right given herein to the Company, or retained
by the Owner shall be solely at the option of each party respectively,
and shall not require notice or consent of one party to the other.
11. The Company shall release and reassign all of its specific rights
to the Policy transferred by this Assignment upon repayment of the
premium advances without unreasonable delay.
12. The Insurer is not a party to the Split Dollar Insurance Agreement.
IN WITNESS WHEREOF, this Assignment is hereby executed this 17th day of
January, 2002.
/s/ Xxx X. Xxxxx, Trustee
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Owner
Duplicate received and filed at the Home Office of the Company in
Springfield, MA, this ____ day of January, 2002, the Company, however, assuming
no responsibility as to the validity of this assignment.
/s/
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